Stalemate after Holyrood taxation debate

The Tories are unhappy with SNP plans not to implement a UK government tax cut for high earners

A Scottish parliament debate about tax has ended in stalemate after no party was able to win a majority of votes.

MSPs were talking tax ahead of the government's draft budget on Thursday.

The Tories put forward a motion opposing the SNP's plans, which would not replicate a UK government tax cut for high earners.

Amendments from all parties, including one from Finance Secretary Derek Mackay were rejected in a series of votes, before the motion itself also fell.

As a minority government, the SNP would need to win support from at least one party to back its budget.

However, there was no consensus on show at Holyrood following the tax debate.

There will be a formal vote on the government's tax proposals prior to the final vote on the budget in February, so both the tax plans and the budget itself will need to win backing.

• Look back on the finance debate on Holyrood Live

• Scotland's budget: what to expect

Mr Mackay will set out his first budget on Thursday, and is expected to use new powers to draw a distinction between the tax regimes in Scotland and the rest of the UK.

This is because the Scottish government does not plan to replicate a tax cut for higher earners proposed by the UK government, via the raising of the threshold for the higher rate.

While the UK government plans to up the threshold for the 40p tax rate to £45,000 and eventually £50,000, the SNP has pledged to raise it by no more than the rate of inflation. This means some Scots will pay more tax than those earning the same amount south of the border.

The Tories said this would "make Scotland the highest-taxed part of the UK" - and, citing a report from chartered accountancy firm Johnston Carmichael, warn it may force firms to top up salaries of high earners affected by the changes.

Murdo Fraser said the SNP's tax plans were "utterly self-defeating"

Finance spokesman Murdo Fraser said: "The reality of the SNP's tax grab is that firms may end up having to pay high quality staff a 'Scottish supplement' simply to persuade them to stay and work here.

"What kind of message does that send out?

"As Johnston Carmichael make clear, if these costs get too high, many firms will conclude that they're better off moving to a part of the UK that actually welcomes employers - not one that punishes them.

"It is utterly self-defeating. The SNP claim the high moral ground, yet if enacted their policies will only end up starving our schools and hospitals of the tax revenues they need to survive."

'Fair and progressive'

Mr Fraser's motion for the Holyrood debate read "that the parliament believes business and families in Scotland should not be taxed more than those elsewhere in the UK".

He said the SNP had "lurched to the left" under Nicola Sturgeon, and said the SNP "has 24 hours to think again".

Mr Mackay put forward an amendment, arguing that powers were devolved so they could be used.

The finance secretary said: "The purpose of the devolution of powers over income tax is to allow Scotland to make its own decisions on tax rates. Powers over personal and business taxation should be used in a fair and progressive way that supports a sustainable economy."

He told MSPs: "The Tories are showing their true colours today. Not the tax position, but their position on devolution in Scotland. They have revered to type - do as Westminster does.

Derek Mackay argued the Tories were "reverting to type", against devolution

"They have reverted to type - London-controlled, tax cuts for the rich, abandon universal services and talk Scotland down. If divergence on tax is coming, it's because we want a different way for Scotland, and I'll be proud to propose that budget tomorrow."

Other opposition parties lodged amendments promoting their own tax policies, with Labour, the Lib Dems and the Greens all backing more radical schemes.

Labour's Kezia Dugdale said parliament should agree to a 50p top rate of tax for those earning over £150,000 a year, "so that the richest 1% pay their fair share to help stop the cuts and invest in public services".

She said Holyrood had "substantial powers" which meant it could make "different choices" to those made at Westminster, but said the Scottish government was guilty of just "tinkering around the edges".

Ms Dugdale said this meant any cuts to services resulting from Mr Mackay's budget would not be "trickling down" from the UK government, but would be "SNP cuts".

The leader of Holyrood's other opposition parties submitted amendments of their own

Lib Dem leader Willie Rennie also backed a tax increase, with his amendment reading: "Investing in skills is the best way to strengthen the economy, and calls for a modest penny on income tax for this purpose, raising £500 million to transform Scottish education."

He said Scottish education needed a "boost" in order to get back to being the best again, having been ranked "average" in recent international scores.

And Patrick Harvie from the Scottish Greens put forward an amendment saying "the SNP's manifesto proposals on tax make no significant changes to current income tax rates and thresholds", saying Holyrood should "support a tax system that will challenge inequalities in wealth and income".

He said it was "absurd" for the Tories to oppose there being different tax rates in Scotland and the rest of the UK, saying they were effectively arguing against the devolution of tax powers.

In the final votes, none of the amendments were passed, with Mr Mackay's falling by 61 votes to 60 before the others were all also defeated.

The motion itself was subsequently also rejected, by a vote of 92 to 29.