Tax changes will widen divergence between Scotland and the rest of the UKpublished at 12:39 Greenwich Mean Time 15 December 2022

12:39 GMT 15 December 2022

Glenn Campbell
BBC Scotland Political Editor

Increasing income tax rates for higher earners will be a significant departure from the SNP’s manifesto aim not to alter rates for the duration of this parliament.

The tax threshold for the top rate is also expected to be lowered from £150,000 to something closer to £125,000 - as has already been announced for other parts of the UK by the chancellor.

These changes, overall, are designed to increase the revenue the Scottish government generates to spend on key public services.

Unions and anti-poverty campaigners have demanded tax increases for higher earners, while the Conservatives and some business voices have warned that tax rises could be a drag on economic recovery.

These tax changes will also widen the divergence in tax policy between Scotland and the rest of the UK.

Read more on this breaking news story here

Income tax rates for higher earners are expected to be increased in Scotland for the next financial year.

The BBC understands the deputy first minister, John Swinney, will announce the changes in his budget statement at Holyrood this afternoon.

He is expected to put up the higher rate of tax from 41p to 42p in the pound and to increase the top rate from 46p to 47p.

The tax threshold for the top rate is also expected to be lowered from £150,000 to closer to £125,000.

This change has already been announced for other parts of the UK by the chancellor.

Image source, science photo library

Scottish Labour leader Anas Sarwar says cancer remains “Scotland’s biggest killer” and the government has not met the 62-day standard for treatment for 10 years, and now not even the urgent 31-day standard.

Mr Sarwar says performance is the “worst it’s ever been” and asks the FM when the standards will be met.

Nicola Sturgeon agrees that on the 31-day standard, performance has “dipped very marginally” this quarter, below 95%, and says the government will work with health boards to get that figure back up.

The FM also says a “range of actions” are being taken to improve the 62-day referral rate, but points out that there has been a “significant increase” in the number of people treated compared to the previous quarter, and the same quarter last year.

“We are treating 35% more on the 62-day pathway than 10 years ago and just under 16% more on the 31-day pathway compared to 10 years ago,” she adds.

Ross picks his target carefullypublished at 12:23 Greenwich Mean Time 15 December 2022

12:23 GMT 15 December 2022

Philip Sim
BBC Scotland political correspondent

Leading on education may have been the safest approach for the Conservatives today.

Douglas Ross will have known that a question about health would have sparked a response about nursing strikes down south; one on the economy would surely have prompted a reply about the rather chaotic evolution of Conservative tax policy on Downing Street in recent months.

The exchange was actually ultimately rather similar to those about health, with Nicola Sturgeon saying that “the negative impact of the pandemic cannot be ignored”.

But opposition parties contend that things were already on the slide pre-Covid, and are hoping to hold ministers accountable for something which is a key devolved responsibility – especially given the first minister’s famous quote about education being her “top priority”.

Image source, Getty Images

Douglas Ross continues his education attack on the first minister saying: "She has failed people across Scotland."

The Scottish Tory leader accuses Ms Sturgeon of using "the Covid shield to protect her" and argues the attainment gap has only just returned to the 2016 levels.

He says at least one in five pupils is still not meeting the expected levels for each of the essential core subjects.

The FM hits back: "There are fewer things, if anything, more important than the opportunities we give our children and young people."

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The first minister argues it is poverty that drives the attainment gap and says her government is putting money into the pockets of the poorest families at the same time as the Tory government is taking money out.

She insists: "Progress is being made."

Douglas Ross tells the chamber the first minister has failed on the attainment gap and calls on her to ditch the de facto referendum on Scottlsh independence and make the vote about schools.

Ms Sturgeon points out there are more teachers per head in Scotland than in the rest of the UK and spending is higher.

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The Scottish Conservative leader asks about the first minister's promise on the attainment gap, made seven years ago.

"It was to close the attainment gap over this parliament," replies Nicola Sturgeon. "I think at the time I made that commitment it was referenced as being within a decade.

"I still remain committed to doing that."

Douglas Ross emphasises that Nicola Sturgeon wanted to close the attainment gap, however this week's figures confirm the attainment gap at primary school is even wider than it was three years ago.

The first minister insists recovery is under way and she says we are starting to see improvement.

Scottish Conservative leader Douglas Ross gets to his feet to begin FMQs, with Nicola Sturgeon ready in her seat for the questions.

Philip Sim
BBC Scotland political correspondent

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For once, FMQs isn't the big event of the political day at Holyrood. And despite the fact the budget doesn't follow until later in the day, it is still likely to feature prominently.

The slightly grubby secret of politics is that a big part of it is about getting attention; bluntly, members will give extra consideration to questions that might get them on the telly.

That means leaders may drop in some mentions of tax and spending, despite the fact everyone knows Nicola Sturgeon will wearily reply that they need to wait and hear from John Swinney.

There are other stories around too, of course - the Tories may be tempted to look ahead to next week’s debate on gender reforms or the latest reports on educational attainment, and Labour can rarely resist finding a question about the health services.

But everyone knows there's only one show in town today - so there is likely to be a fiscal flavour to everything that goes in parliament.

We're about to switch our attention to first minister's questions - you can follow it here from 12:00 - so here's a recap of this morning's budget predictions:

• Deputy First Minister John Swinney will outline the Scottish government's budget for next year from 14:25
• Swinney is expected to target the country's higher earners when it unveils its tax and spending plans for next year
• He has said his budget would include "decisive action" to tackle the cost of living crisis
• The plans are likely to include cutting the threshold at which people start paying the top 46 pence rate of income tax from its current level of £150,000
• Meanwhile,the GMB union has voted to reject an improved NHS pay deal from the Scottish government. The union represents NHS ambulance staff, nurses, porters and radiographers
• As ever, FMQs will begin at 12:00 and after that we'll continue the build up to the budget

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Among the most difficult and important calls to be made in this budget will be the public sector pay policy.

It's just been revealed the GMB union has voted to reject an improved NHS pay deal from the Scottish government.

This bad news for the government comes just hours before the budget.

Within the pay policy in this week's budget, John Swinney could offer pay rises if there is a cut in headcount.

There's already an effective recruitment freeze across much of the public sector, and that cut in the workforce was set as a target last May.

John Swinney could also tie pay to reform of contractual conditions, though the SNP has avoided doing much of that in the past, and it looks unlikely he will provoke unions while they are so active.

Most of budget day, however, is about how much money is available, how it's raised, and how it will be spent.

Read more here.

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If you are just joining us, we're building up the Scottish government's budget statement later this afternoon.

Finance Secretary John Swinney is expected to target the country's higher earners when he unveils tax and spending plans for next year.

They could include cutting the threshold at which people start paying the top 46p rate of income tax from its current level of £150,000.

“At the very least, we are going to see freezing of the thresholds,” Yvonne Evans, a senior lecturer in tax law at Dundee University, told the BBC’s Good Morning Scotland programme.

“John Swinney has no control over the personal allowance, so that is set, and I think it’s quite likely he is going to keep the lower bands where they are and the starting point, especially for the higher rate (which starts at £43,663), where it is.

“But he could do more than just keep the bands frozen. The chancellor’s autumn statement changed the top rate from £150,000 down to £125,000. I think it is pretty much guaranteed that Swinney is going to follow suit.”

As we have been reporting, the decisions John Swinney will have to make in his budget later today will be influenced, to a degree, by what Chancellor Jeremy Hunt announced on future income tax brackets in his Autumn Statement.

Most people in the UK can earn up to £12,570a year without paying income tax on it. This is called the personal allowance and is set by the UK government.

The personal allowance and the main National Insurance thresholds have been frozen for a further two years, until April 2028.

Since 2017/18 people in Scotland have been paying income tax at rates set by the Scottish government, rather than Westminster.

More people in England, Wales and Northern Ireland will move into the highest tax bracket from April, under changes outlined by Mr Hunt in November.

So what can John Swinney do?published at 11:19 Greenwich Mean Time 15 December 2022

11:19 GMT 15 December 2022

James Cook
Scotland Editor, BBC News

The Scottish government’s powers are limited — crucially, it cannot borrow money — but they have expanded since the opening of the Scottish Parliament in 1999 and now include control over some benefits and taxation, including income tax.

My colleague Douglas Fraser has examined the options relating to tax (prepare for rises) and spending (brace for cuts) in this budget, here.

Whatever happens, the cost of living crisis will continue to bite and so will the debate about whether Scotland is best placed to deal with the immense challenges of our times as part of the UK or as an independent nation.

An inflation monster is stalking the landpublished at 11:13 Greenwich Mean Time 15 December 2022

11:13 GMT 15 December 2022

James Cook
Scotland Editor, BBC News

Along with Labour, the SNP has been highly critical of the Tories’ see-saw economics but one measure enacted by Mr Hunt in the Autumn Statement actually helps Mr Swinney, rather a lot.

Because of the way the Scottish government’s overall pot of cash is allocated, with most of it coming in the form of what’s known as a block grant from London, Mr Hunt’s decision to increase spending on health and education in England in 2023/24 and 2024/25 means more money from Westminster for Scotland’s budget in those years.

Mr Swinney can spend this money as he sees fit, although he is almost certain to prioritise the NHS.

That “extra” money only goes so far, though. Why? Because an inflation monster is stalking the land.

According to Mr Swinney, it has gobbled up £1.7bn of his potential budget for 2023/24. The independent Fraser of Allander Institute at Strathclyde University reckons the hole left by rising prices is actually closer to £1bn.

As it happens the cash coming from Westminster as a consequence of spending on public services south of the border amounts to £1bn in 2023/24 and £800m in 2024/25. So after taking inflation into account there is essentially no extra money at all. It could be worse but it’s far from ideal.

We're in a messpublished at 11:07 Greenwich Mean Time 15 December 2022

11:07 GMT 15 December 2022

In the first in a series of live posts, BBC News Scotland Editor James Cook looks at the "bleak backdrop" to today's budget

James Cook
Scotland Editor, BBC News

Let’s face it. We’re in a mess.

Inflation is running at 10.7%. Many families are struggling to afford food, clothes and heating. Higher interest rates are pushing up the cost of mortgages and rents.

Public services are under unprecedented pressure — which means, brutally, more patients dying as they wait for treatment, and poorer pupils struggling to keep up with their richer peers.

Workers are asking for pay rises to help them cope with the cost of living crisis, receiving them in some cases and going on strike in others.

That is the bleak backdrop to the budget. Scotland’s acting finance secretary John Swinney can’t solve all of it. Perhaps he can’t solve any of it. But he must try.

His decisions will be informed by the recent experience of the Conservative government at Westminster which first tried slashing taxes to boost growth under Liz Truss and Kwasi Kwarteng and then hiking them to protect public services under Rishi Sunak and Jeremy Hunt.

Scottish Conservative finance spokeswoman Liz Smith has told BBC Scotland she expects too see tax rises, given the "very difficult fiscal circumstances".

She added: "What I'm much more worried about is the differential between Scotland and the rest of the UK.

"It is absolutely essential that Scotland is an attractive place to work and live and invest, and if we see a widening of those differentials that affects that attractiveness."

Scottish Labour called on the government to use its tax powers, as well as cutting internal spending on advisers and spin doctors, in order to funnel more cash to households.

The party's finance spokesman Daniel Johnson said: "The government will have to look at using its powers flexibly and to the maximum extent it can, and I can't say they always have in previous years."

The Liberal Democrats are calling for extra funding for insulation and energy efficiency, long Covid support and social care.

So many competing interests for money - and that's just in healthpublished at 10:50 Greenwich Mean Time 15 December 2022

10:50 GMT 15 December 2022

Lisa Summers
BBC Scotland Health Correspondent

Health and social care receives by far the biggest share of the Scottish budget - £18bn last year - but the Audit Scotland public spending watchdog has consistently warned it is financially unsustainable.

There are so many competing interests for the money, from energy to heating 1,500 buildings to policy commitments such as funding a new National Care Service.

The cost of medicines and drugs last year was £2.7bn and there are ever-growing numbers of patients needing treatment.

But the highest spend is on staff at £8.6bn for 2020/2021 - £1bn more than the previous year.

With the need to recruit even more staff to meet demand, the question for this budget will be what has to give to pay for it?

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Hospitality bodies are calling for direct action from the Scottish government to help businesses cope with winter pressures.

Leon Thompson, executive director of UK Hospitality Scotland, told the BBC’s Good Morning Scotland programme John Swinney must match UK Chancellor Jeremy Hunt’s pledge on business rates relief.

“We need a number of measures which will help our businesses to survive and then be in position to help drive economic recovery for Scotland,” Mr Thompson said.

The Scottish government says it recognises "the enormous pressures facing businesses during the current crisis” and has been “engaging directly, and through key business organisations, to best understand their needs."

John Swinney will outline the Scottish government's tax and spending plans for the year ahead this afternoon.

He will tell MSPs how devolved tax revenues and the block grant from the UK government will be spent in 2023/24.

It follows a series of UK-wide spending cuts and tax rises announced by Chancellor Jeremy Hunt in November - some of which applied in Scotland.

What does the Scottish government have the power to change in terms of tax and spend, and how could it affect you? Click here to find out which taxes can be changed by Holyrood.

• Why more Scots pay higher income tax

Will Scotland take a more progressive approach?published at 10:28 Greenwich Mean Time 15 December 2022

10:28 GMT 15 December 2022

Douglas Fraser
Scotland business & economy editor

At Westminster, Chancellor Jeremy Hunt is freezing income tax thresholds while holding the rates steady. That is a substantial stealth tax on earners as their pay goes through these thresholds, and with inflation, many people are doing just that.

Not to freeze thresholds in Scotland would be a tax giveaway, relative to England at least. It would be difficult financially not to follow the Chancellor in doing that, and politically it would be odd not to take that more progressive approach.

For higher earners, Scotland already has a higher tax rate than the rest of the UK, by 1p in the pound. Mr Swinney could choose to raise that further. But higher tax, while household budgets are being squeezed by inflation, could harm efforts to return the economy to growth.