Scottish income tax rate rises will go to NHS

1. Scotland's Deputy First Minister John Swinney confirms that the top two income tax rates will rise by a penny in the pound from April 2023
2. That will take the higher rate from 41p to 42p and the top rate from 46p to 47p. The change is expected to raise an additional £129m in 2023-24
3. Also, the threshold at which people start paying the top tax rate is to drop from its current level of £150,000 to 125,140
4. Scottish Conservative Liz Smith raises concerns that tax rises will dampen much-needed economic growth
5. Scottish Labour's Daniel Johnson says the tax rises will have to go on fixing "some the damage done by 15 years of SNP cuts and failure"
6. The Scottish Budget went ahead despite details of the statement appearing on the BBC Scotland news website
7. Mr Swinney told the chamber that "no one had been authorised to disclose information on my behalf"

Scottish budget: The headlines

Here's a recap of the major announcements in the Scottish budget:

• Everyone earning more than £43,662 in Scotland will have to pay more income tax next year, an extra penny in the pound - taking it to 42p
• Deputy First Minister John Swinney said the top ate of tax will increase from 46p to 47p
• The tax threshold for the top rate will also be lowered from £150,000 to £125,140
• The threshold for the 41p higher rate will remain frozen at £43,663 in Scotland - lower than the £50,271 elsewhere in the UK
• there will be no changes to the rates paid by lower earners

• The changes will raise a total of £553m when taken alongside changes to other taxes including Land and Buildings Transaction Tax (LBTT)
• Councils will have the freedom to raise council tax if they wish
• The deputy first minister also confirmed an extra £550m for local government

• The Scottish Child Payment will remain at the increased level of £25 per child per week, with all other social security benefits under the control of the Scottish government being increased by the rate of inflation in September of 10.1%
• Spending on health and social care in Scotland will increase by £1bn
• funding of £20m that had been set aside for indyref2 on Scottish independence will instead be used to help people at risk of fuel poverty

That brings our live coverage to a close, thank you for being with us today.

What might you be paying in income tax next year?

It pays to look beyond the rates rises

Philip Sim

BBC Scotland political correspondent

Rate rises are the obvious attention-grabbing highlights of John Swinney’s tax announcement.

But thresholds being frozen (and in the case of the top rate, lowered) actually make almost as big of a difference.

That’s the thing which draws more earnings into the different brackets where those rate rises apply.

And with the Scottish higher rate having been frozen for a few years now, quite a gulf has opened between it – at £43,662 – and that south of the border, where it’s £50,271.

That matters because National Insurance Contributions – that other thing that comes off many people’s payslip – drops from 12% to 2% at the UK higher rate threshold, UK-wide.

That means earnings in between those Scottish and rUK thresholds are taxed at an overall rate of 54%, because they’re hit by the higher rate of both taxes.

WATCH AGAIN: The opposition parties react to the budget

Scottish recession 'will last through next year'

Douglas Fraser

Scotland business & economy editor

On a hectic day, the Scottish Fiscal Commission has said the Scottish economy is in the early stages of a recession that will last through next year.

A recession means at least two quarters of falling output across the economy. This one looks to be longer than that. The Bank of England's economists forecast it will continue into 2024.

One way of measuring the impact of recession is how long it takes before we get back to the levels of output before the downturn began.

That now looks like the early months of 2025, and it will be well into 2025 before the Scottish economy recovers to the levels before Covid struck. That is five years when normal growth might otherwise have been expected to grow output by 10%, and prosperity with it.

WATCH AGAIN: What sparked the suspension of parliament?

Holyrood suspended for budget leak probe

If you missed it earlier, there was a dramatic delay in proceedings before John Swinney could deliver his budget statement.

Swinney had been due to speak from 14:30 - but Presiding Officer Alison Johnstone suspended the session for 30 minutes so she could investigate how details of the tax rises had been revealed by the BBC two hours earlier.

Ms Johnstone later allowed Mr Swinney to speak after receiving "categoric assurance" from him and First Minister Nicola Sturgeon that the information had not been shared by the government.

We needed strides, not steps with tax reform - trades union body

The Scottish Trades Union Congress (STUC) has also given a mixed reaction to the budget.

It says it has "made progress" in winning demands from the Scottish government, with taxes raised for those "most able to pay", including second homeowners.

General secretary Roz Foyer welcomed reform of the Small Business Bonus Scheme and said a six-month pilot to scrap peak rail fares was also "a step in the right direction".

“However, we needed strides, not steps," she added. "We cannot pretend this is the radical, redistributive budget working people in Scotland needed – it isn’t."

Ms Foyer said the STUC would continue to demand the government goes further with wealth and property taxes.

The budget has "left the door open" for public sector workers to negotiate the inflation level pay rises they so desperately need", she added.

What are the Scottish government's income tax proposals?

If you are just joining us, the biggest talking point today has been the Scottish government's proposed details for income tax rates and bands from April 2023

Here they are.

BBC

A bit of good news, but licence trade 'bitterly disappointed overall'

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Colin Wilkinson, the head of the Scottish Licence Trade Association (SLTA), tells BBC Scotland's Drivetime: "We are very relieved that the UBR (uniform business rate) is going to be frozen for the forthcoming year. But there is bitter disappointment amongst our members and the industry in general that the deputy first minister did not follow the lead of England and Wales by implementing a 75% rates relief package for businesses in the retail, hospitality and leisure sectors."

Mr Wilkinson adds: "So a bit of good news but overall bitterly dissappointed."

Small businesses group welcomes some aspects of the budget

Colin Borland from the Federation of Small Businesses Scotland tells Radio Scotland's Drivetime programme that some of the budget is better than he expected.

Mr Borland says the freeze in the poundage rate is "most welcome" and it gives businesses "a degree of breathing room".

He says the Small Business Bonus Scheme has been an absolute lifeline and its reform is being pored over by experts.

The Transitional Rates Relief Scheme will be used to spread the financial burden over a couple of years.

A more progressive path on income tax

Douglas Fraser

Scotland business & economy editor

John Swinney is making much of choosing a more progressive path on income tax: loading more of the burden on to those who can best afford it.

As a result of this budget, the Scottish Fiscal Commission estimates £129m will be raised next year, and he is linking that to the NHS - always a popular choice - as 'a penny for patient care'.

Those with a long memory will recall the SNP's 'penny for Scotland' campaign in the first Scottish Parliament election, nearly 24 years ago. Having failed to prepare the ground for it, that did not go well. But these were very different times.

Taking into account other changes in the five years since almost all income tax powers were devolved to the Scottish Parliament, the SFC calculates that the extra funds raised by choices made by Scottish ministers means an extra tax bill on Scots of around £1bn next year, rising to more than £1.5bn within five years.

Mr Swinney's increased tax on buying a second home is also aimed at those with broader shoulders, but will have an impact on the private rental market, where some landlords are selling up because of increased mortgage and other costs.

The winners from these budget choices include those who receive the Scottish Child Payment, which was already announced and is remaining at £25 per week. The SFC reckons that a more generous welfare system in Scotland has cost £400m during this year, doubling to £800m next year, and rising to £1.4bn by 2027-28.

That is the cost of commitments that go beyond the sums being transferred from the Department of Work and Pensions, and it means a squeeze on other budgets.

One of the biggest winners from the budget choices was business. While the freezing of income tax thresholds means a stealth tax at every level of tax-paying, there has been a more welcome freeze on the level at which business rates are charged, giving away more than £300m that would have been collected if bills had risen with inflation.

Scottish budget: The headlines

If you're just joining us, here's a recap of the major announcements in today's Scottish budget:

• Everyone earning more than £43,662 in Scotland will have to pay more income tax next year
• Deputy First Minister John Swinney said the higher rate of tax will increase from 41p to 42p in the pound, and the top rate from 46p to 47p.
• The tax threshold for the top rate will also be lowered from £150,000 to £125,140
• The threshold for the 41p higher rate will remain frozen at £43,663 in Scotland - lower than the £50,271 elsewhere in the UK
• there will be no changes to the rates paid by lower earners
• the changes will raise a total of £553m next year when taken alongside changes to other taxes including Land and Buildings Transaction Tax (LBTT)
• The second homes tax part of LBTT will rise from 4% to 6%

• The deputy first minister also confirmed an extra £550m for local government
• The Scottish Child Payment will remain at the increased level of £25 per child per week, with all other social security benefits under the control of the Scottish government being increased by the rate of inflation in September of 10.1%
• Spending on health and social care in Scotland will increase by £1bn
• funding of £20m that had been set aside for indyref2 on Scottish independence will instead be used to help people at risk of fuel poverty
• Presiding Officer Alison Johnstone suspended the session for 30 minutes ahead of the budget statement so she could investigate how some details of the tax rises had been revealed by the BBC two hours earlier
• Johnstone later allowed John Swinney to speak after receiving "categoric assurance" from him and First Minister Nicola Sturgeon that the information had not been shared by the government

Extra cash for justice will be 'gobbled up by record levels of inflation'

David Cowan

BBC Scotland

In a series of hearings at the Scottish Parliament, criminal justice organisations have painted a gloomy picture of a future dominated by cuts, deteriorating services and thwarted ambitions.

MSPs in the criminal justice committee were scrutinising the Scottish government's Resource Spending Review framework, which proposed a four-year flat cash settlement for the sector until 2027.

The police warned of having to fund pay rises by cutting their numbers.

The fire service said stations might close. Rehabilitation work in prisons could suffer.

The courts backlog would build and the prosecution service would have to plough on with less people.

John Swinney has now announced funding increases for the justice system and prosecution service which would have been generous not so long ago.

Instead, the extra cash will be gobbled up by record levels of inflation and savings will have to be made. Some of those dire warnings could become a reality.

WATCH AGAIN: Opposition parties voice their budget views

How do income tax rates now look across the UK?

We've been reporting how everyone in Scotland earning more than £43,662 in Scotland will have to pay more income tax next year, following today's budget announcements.

Here's how that looks in a UK context.

BBC

'This budget must deliver for those in most need' - Labour

Labour's Daniel Johnson says "this government has a delivery problem", highlighting the £500m left unspent because it couldn't get Covid support grants "out the door".

He adds this year the emergency budget saw a cut to building energy efficiency due to a lack of demand, "it beggars belief"

"This budget must deliver for those in most need."

He turns to social care pay and asks what the cost in delayed discharges is for the NHS, due to staff leaving.

Johnson says Scottish growth has lagged behind UK growth and the government has failed to deliver a growth plan.

'Stop blaming the UK government', Tories tell Swinney

Liz Smith of the Scottish Conservatives says that despite the “very tight fiscal circumstances”, it is about time Swinney “stopped blaming the UK government for every single predicament he finds himself in”.

She says he has had more money at his disposal than he is prepared to admit, including a record block grant for the current financial year which "more or less covered the inflationary pressures upon him”.

“If you raise taxes, Mr Swinney, the public wants to know why they see only cuts and a deterioration in the delivery of public services,” says the Tory MSP.

Widening the tax gap for higher and middle earners compared to the rest of the UK risks “undermining the potential for economic growth this country so desperately needs”, she adds.

Fiscal commision forecasts a 'shallow recession' in the coming year

Philip Sim

BBC Scotland political correspondent

The Scottish Fiscal Commission has published a new set of forecasts alongside John Swinney’s budget.

The body is forecasting a “shallow recession” in the coming year, with the economy not recovering to pre-pandemic levels until 2025.

It also says high inflation – predicted to peak at 11.1% - has contributed to “the greatest fall in the real value of disposable income per person since records began in 1998”.

The group also expects a fall in house prices over the next two years due to rising interest rates, with prices not recovering to 2022 levels until 2027.

All of that means a fall in living standards – and the SFC says it “intensifies the cost of living crisis for households and businesses”.

'We have chosen to reject the path of austerity'

In concluding his statement, Swinney says this budget is taking place “at a time of enormous challenge and difficulty for people and business due to volatility in the economy and the corrosive effect of inflation”.

Many people are “suffering real and enduring hardship,” he says.

Amid the challenges of adapting to net zero and severe constraints in public finances, the government has taken “distinctive decisions to the greatest extent we believe possible at this time”, the deputy first minister adds.

We have chosen to reject the path of austerity. We have chosen a progressive path instead. To invest in our people, to invest in our economy and to invest in our public services.”

John SwinneyDeputy first minister

£20m originally for indyref2 switched to Fuel Insecurity Fund

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The deputy first minister says the government believes the £20m previously earmarked for an independence referendum is necessary to ensure the people of Scotland can exercise their democratic right to self government.

Swinney insists there is a clear mandate for indyref2 and when it is possible the government will provide money to make it happen.

"However, at this moment I must make full use of the resources available to me."

He says he will use the cash for indyref2 to extend the Fuel Insecurity Fund into next year.

"A further £20m to address another failure of the United Kingdom and its policies."