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Holyrood to hold historic income tax vote MSPs vote to set income tax rates and bands for first time
(about 20 hours later)
Holyrood is to make history by voting to set separate Scottish income tax rates and bands for the first time. Holyrood has made history by voting to set separate Scottish income tax rates and bands for the first time.
The SNP and Greens have agreed a deal which will see the basic rate, paid by most taxpayers, left alone.The SNP and Greens have agreed a deal which will see the basic rate, paid by most taxpayers, left alone.
But the threshold for paying the 40p rate will start at £43,000 in Scotland instead of the £45,000. But the threshold for paying the 40p rate will start at £43,000 in Scotland instead of the £45,000 elsewhere.
In a separate move, Finance Secretary Derek Mackay is also due to announce further support to help firms deal with controversial business rate changes. In a separate move, Finance Secretary Derek Mackay also announced extra support for firms affected by business rate rises.
A political row has developed over a revaluation of business rates, and the Scottish government said Mr Mackay would use a proposed parliamentary statement to outline "a further package of support".
The income tax changes will mean people earning more than £43,000 in Scotland will pay up to £400 more than those on the same salary elsewhere in the UK.The income tax changes will mean people earning more than £43,000 in Scotland will pay up to £400 more than those on the same salary elsewhere in the UK.
The minority SNP administration had initially planned to raise the threshold for the 40p rate only in line with inflation, instead of increasing it to £45,000 as the UK government has done.The minority SNP administration had initially planned to raise the threshold for the 40p rate only in line with inflation, instead of increasing it to £45,000 as the UK government has done.
But in striking a deal with the Scottish Greens to get its budget plans through parliament, the proposed rise was scrapped and the threshold was instead frozen at £43,000.But in striking a deal with the Scottish Greens to get its budget plans through parliament, the proposed rise was scrapped and the threshold was instead frozen at £43,000.
The Scottish Conservatives warned the move will damage Scotland by making it the "highest taxed part of the UK", while Labour and the Liberal Democrats - who both favoured limited tax increases to protect services - accused the government of being too timid with its new income tax powers.The Scottish Conservatives warned the move will damage Scotland by making it the "highest taxed part of the UK", while Labour and the Liberal Democrats - who both favoured limited tax increases to protect services - accused the government of being too timid with its new income tax powers.
The Greens said they would abstain in the income tax vote despite its agreement to support the Scottish government's budget. The Greens said they would abstain in the income tax vote to allow the proposals to pass, despite them accusing the government "showing none of the ambition that is needed" on tax.
The party supports a 60p rate on income tax for those earning more than £150,000 and has accused the SNP of "showing none of the ambition that is needed" with its tax plans. The party supports a 60p rate on income tax for those earning more than £150,000, but has also said it does not want to see the budget fall as it would lead to "far more damaging cuts to local services".
But it has also said it does not want to see the budget fall as it would lead to "far more damaging cuts to local services".
'Fair taxation''Fair taxation'
Speaking ahead of the vote in the Scottish Parliament, Finance Secretary Derek Mackay insisted the government had got the balance right in its "constructive deal" with the Greens. Speaking in the chamber ahead of the vote, Mr Mackay told MSPs it was a "historic day".
He added: "Some are saying we are raising too much, some are saying we are not raising enough - I think we've got that balance just right. He said: "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.
"On our income tax policies, 99% of people will be paying no more on their current level of income. Where there is divergence at the top 10% of income earners the difference between what you pay in Scotland and England is less than the cost of a prescription charge per week, so I think we've got the balance right. "This is serious business, and the Scottish people are looking to us to act responsibly to secure the best outcome possible for them.
"I think people essentially support the approach we are taking in Scotland, which is fair taxation and sound investment in our public services." "I remain convinced that our income tax proposal strikes the correct balance between protecting low and middle income taxpayers, but still raising additional revenue. And what all 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."
Scottish Conservative MSP Dean Lockhart said Scotland's employment rate was now falling as a result of its growth rate being about a third of that for the UK over the past 18 months. Scottish Conservative MSP Murdo Fraser criticised the "grubby budget deal stitched up with the Greens that increased the tax differential", saying there "is no-one as magical as Mr Mackay at producing money from no-where to get him out of a budget hole."
He added: "The SNP's plans to set tax rates higher than the rest of the UK will only worsen this growing divide we are seeing, deterring investment and reducing new jobs. His colleague Dean Lockhart said the SNP had "marched to the left to join their comrades in the Greens", and were "keeping the pro-independence vote together".
"Our message to the SNP today is clear: it needs to mind the gap. Higher taxes in Scotland means lower growth, which will deliver less cash for government to spend on our vital public services."
Scottish Labour, which has called for the top rate of income tax to be increased from 45p to 50p, claimed that the deal between the SNP and Greens would "destroy any remaining illusion they are progressive".Scottish Labour, which has called for the top rate of income tax to be increased from 45p to 50p, claimed that the deal between the SNP and Greens would "destroy any remaining illusion they are progressive".
'Timidity and timorousness' MSP Daniel Johnson agreed that it was a "historic day", but said the Scottish government was guilty of a "historic missed opportunity", and were simply "passing on Tory tax plans with a little bit of a tweak".
The party's deputy leader, Alex Rowley, said: "Propped-up by the Greens, whose pretence at being a progressive party is now blown, the SNP will plough on with cuts to local services such as local schools and community care while refusing to ask the richest 1% to pay their fair share. He added that the SNP had chosen not to use its own tax raising powers, but wanted to take credit for forcing councils to raise local levies, which he said was "ludicrous".
"In this historic vote, Scottish Labour will demand the SNP and the Greens do the right thing and invest in our public services." Rennie vs Harvie
The Scottish Liberal Democrats want income tax rates to be increased by 1p, which the party says would raise £500m for education. Greens co-convener Patrick Harvie spoke out against the SNP "dogged refusal" to embrace bolder tax plans - but he said that did not justify blocking "a historic budget deal".
Its leader, Willie Rennie, said: "To grow a strong economy we need to grow people's skills and invest in people. That's why we reject the Conservative race to the bottom and the timidity and timorousness of this SNP/Green alliance budget." He became embroiled in a row with Lib Dem leader Willie Rennie, who said the Greens should "own" their backing for the budget deal instead of "skulking behind an abstention".
Scottish Greens co-convenor Patrick Harvie said his party was "determined to protect the extra £160m we secured for local services across Scotland, reversing many of the most damaging cuts which would have resulted from the SNP's spending plans." Mr Rennie said Mr Harvie "should be embarrassed" by the deal, saying: "This is not greener and bolder. This is grey and timid."
He added: "We will therefore not block the rate resolution from passing, though it clearly shows none of the ambition that's needed. Mr Harvie replied claiming that the deal was the biggest budget concession ever won from a Scottish government, noting that the Lib Dems had failed to get "a penny" out of Mr Mackay in their talks.
"It's dismaying that the SNP has failed to take more serious steps in the direction of fairer taxes and we remain convinced that the point of devolving these powers is to allow better choices to be made in Scotland." The Lib Dem leader, who wants income tax rates to be increased by 1p to raise funds for education, shot back that Mr Mackay had not found any new money for the deal, claiming Mr Harvie had been "duped by the finance secretary".
In the final set of votes, the Greens abstained, leaving the motion to pass by 61 votes to 55.
The stage three debate and final vote on the budget will take place on Thursday, with the Greens again committed to backing the government.