Holyrood to rule out income tax increases despite new powers

SCOTTISH FINANCE SECRETARY John Swinney is expected to rule out an increase in income tax next year north of the border, despite Holyrood gaining new powers in the next financial year.

The tax powers are available after their inclusion in the 2012 Scotland Act, which was passed under the previous UK coalition government. Further devolved powers proposed by the Smith Commission are currently under scrutiny at Westminster, but those will not come into force until 2017 at the earliest.

The draft Budget in Scotland is typically presented in September, but it was delayed this year to take account of the Westminster Spending Review and Autumn Statement in November.

Under the 2012 law, Holyrood will gain a new power over income tax from April 2016. As part of the arrangement, the Treasury will deduct from the Scottish block grant a sum equivalent to the product of 10p worth of income tax north of the border.

MSPs then have to set a Scottish Rate of Income Tax (SRIT) to fill the gap.

They can levy more, to raise more cash; they can cut tax, at both the standard and upper rates, and take the hit on public spending; or they can reinstate the 10p rate.

The BBC reports understood that Swinney (pictured) will opt for the 10p rate. Government strategists will emphasise that a 10p Scottish rate of income tax adds up to no change overall and the tax bills faced by individuals will not change.

Swinney is known to prefer a “progressive” approach to tax, levying more from higher earners. The new powers, however, do not allow for that.

Powers currently under consideration in Westminster could, however, make that possible.

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