Scottish rate resolution: Finance Secretary's statement

Cabinet Secretary for Finance and the Constitution Derek Mackay MSP delivers a speech on Scotland's income tax rates to Parliament.

This is a historic day, a day when the Scottish Parliament votes to set all rates and bands for income tax in Scotland for the first time in over 300 years.

These powers expand on the limited income tax rate setting powers we had last year and allow the Scottish Government to make better decisions to support the people, and economy, of Scotland.

It is important that Parliament understands that, in doing so, if we fail to set these rates, we will put at risk the collection of £11.9 billion in Scottish income tax.

So, let's be clear, this is serious business and the Scottish people are looking to us to act responsibly to secure the best outcome possible for them.

Parliament should also be aware that I have written to the Presiding Officer about the procedural connection between the motion for the Scottish Rate Resolution and the Budget Bill. The effect of Rule 9.16.7 of the Standing Orders means that Stage 3 of the Bill cannot begin until the Scottish Rate Resolution motion is agreed by Parliament.

No party won a majority mandate at the Scottish Parliament election; however, the greatest proportion of the electorate supported the Scottish Government's vision for the next five years – and so while I have to seek support to get the 2017 to 2018 budget approved, I have been determined to stay true to our income tax proposals, not only because I believe they are supported by a vast number of the Scottish electorate, but also because I believe they deliver the best outcome for the Scottish people at this time.

The vision – the social contract

The clear vision we set out for income tax last March remains as stated: to protect low and middle income tax payers, while asking those who earn the most in Scotland to forgo a significant tax cut at a time of continued UK Government austerity. As a result of constructive budget negotiations with the Scottish Green Party the amended income tax proposals in today's resolution stay true to this principle.

Today I am asking the Scottish Parliament to agree to a Scottish Rate resolution for the tax year 2017 to 2018 which:

  • freezes all income tax rates;
  • maintains the higher rate threshold at £43,000;
  • protects those on low and middle incomes;
  • ensures 99% of taxpayers will pay no more compared to 2016 and 2017 on the same income; and that
  • brings in an additional £107 million to be invested in public services in 2017 and 2018.

That is an additional £107 million which supports a Budget that will, if passed on Thursday:

  • protect our NHS with record investment;
  • deliver a living wage for social care workers;
  • continue free tuition;
  • expand early years provision and efforts on energy efficiency;
  • increase house building, and
  • support local services.

I remain convinced that, at this time, these proposals are the best approach to take.

Responsible use of powers

This Government will always be mindful of the impact that taxes may have on individuals. Tax powers are not a political toy. They have an impact on individuals and we must consider that carefully.

We are a government that recognises the importance of growing the economy while raising sufficient revenue to fund further investment in vital public services.

Future revenues for the Scottish Government will be driven both by our policy choices and by the relative growth per capita in our tax receipts. That is just one of the reasons why we continue to invest in Scotland's economy and its workforce to improve prospects for economic and employment growth, and why we will not back income tax decisions that would cause any impediment to this.

Tax should be progressive, and this is why it would not have been right to give a significant tax cut to the highest Scottish earners at a time of Tory austerity.

However, income tax policy should not undermine its own aims and – especially at this time – should deliver the revenue it sets out to raise. This is why we did not seek to raise the additional rate of tax.

Both UK and international evidence suggests that a higher Scottish additional rate than that in the rest of the UK could significantly undermine Scottish income tax revenues. The First Minister has directed the Council of Economic Advisers to keep this policy under review.

However, we also recognise that those earning the lowest incomes – around 40% of Scots – do not pay any income tax, and so the income tax system cannot help them directly. Instead we are delivering alternative policies to support those on the lowest incomes.

For example, the council tax system in Scotland will be fairer.

  • The rates paid by those in the four highest council tax bands (E, F, G and H) will be adjusted in a move that will generate £111 million a year, while protecting those on low incomes in these bands.
  • The reforms will also provide additional support to families on low incomes across all council tax bands by extending the relief available to households with children.
  • This will benefit up to 77,000 low income families by an average of £173 per year, supporting an estimated 140,000 children.

Our Land and Buildings Transaction Tax is more proportionate to the house price, and means that the tax is fairer as it is based more closely on the buyer's ability to pay.

  • Over 90% of home buyers will pay less in tax compared to UK Stamp Duty, or will pay no tax at all.

And, beyond the tax system, we remain absolutely committed to the Living Wage.

  • As such, in 2016 Scotland remained the best performing of all four UK countries with the highest proportion of employees paid the Living Wage or more (79.9%).


There has rightly been significant debate over how this Parliament uses our new income tax powers. Significant debate has, however, led to little consensus.

The Conservatives have reverted to an anti-devolution position. Others want to experiment with every tax lever in an almost careless and reckless fashion.

These extreme positions do not serve the Scottish taxpayer.

My position is that, at a time when the UK Government has cut the Scottish discretionary block grant by 7.4% in real terms since 2010 and 2011, and remains committed to imposing austerity at a UK level, now is not the time to add to the burden of low and middle income taxpayers as Labour would. That is why we chose to freeze the basic rate of income tax for 2017 to 2018 and for the course of this Parliament.

However, now is not the time to be giving away a substantial tax cut as the Tories would. So by asking those higher earning Scots to forgo a tax cut, additional revenue will be raised to support vital public services at this time.

For less than the cost of a weekly prescription in England, living in Scotland ensures access to an NHS that is properly funded, gives families access to increasing amounts of free childcare, means young people pay no tuition fees, that there is no prescription tax on ill health, and that our older generation are able to benefit from free personal care for the elderly.

Furthermore, were we to match the proposals of the rest of the UK, as the Conservatives suggest, the Scottish budget would lose this additional £107 million, leaving the question: where instead would this money come from, or what public service would the Conservatives cut?

Others in this chamber suggest we need to impose a far greater tax burden on the people of Scotland. However, the budget I am proposing already delivers:

  • above inflation investment in the NHS;
  • protection of public services that are free at the point of use, including free prescriptions;
  • the support our policy of free personal care provides;
  • free higher education;
  • no business rates for 100,000 small businesses; as well as
  • additional investment in reducing the attainment gap and the doubling of free childcare.

I remain convinced that our income tax proposal strikes the correct balance between protecting low and middle income taxpayers, but still raising additional revenue. What the other parties must consider at this time is that if we as a Parliament fail to pass a Scottish rate resolution then the consequences for Scotland's budget would be severe.

This motion protects those on lower incomes, delivers additional funding for public service and makes economic sense at this point in time. This should be a position supported by all those with Scotland's interests at heart right across the Chamber.

I move the motion in my name.



Phone: 0300 244 4000

The Scottish Government St Andrew's House Regent Road Edinburgh EH1 3DG

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