The country faces acute economic challenges in the years ahead. The SNP should use its upcoming conference to discuss solutionsby Graeme Roy / October 6, 2017 / Leave a comment
Until recently, the Scottish Parliament’s budget was almost entirely determined by a block grant from Westminster.
But Scotland now has major new tax raising powers. Over £11 billion of income tax was devolved in April 2017; the UK’s stamp duty system for property transactions had already been replaced by a Scottish-only Land and Buildings Transaction Tax; from next April Air Passenger Duty will no longer apply on flights from Scottish airports and will be replaced with a new Air Departure Tax; whilst from April 2019 around half of all VAT revenues raised in Scotland will be assigned to the Scottish Budget.
Soon, half of the Scottish Parliament’s day-to-day discretionary spend will be determined by revenues raised in Scotland. These new powers give the Scottish Parliament much more autonomy to do things differently. With SNP conference round the corner, and with the devolved budget under pressure, it’s worth asking just how much change has been made—and how much more is required.
This year we have seen the new income tax powers used to create a tax differential between Scotland and the rest of the UK. The threshold at which taxpayers start to pay 40 per cent on earnings in Scotland is now £43,000 compared to £45,000 in the rest of the UK—meaning a higher rate taxpayer in Scotland pays £400 more in income tax than someone earning the same living elsewhere in the UK. The upcoming Scottish Budget is likely to be dominated by a debate over how much further Scotland’s politicians are prepared to go on setting a different tax policy relative to the rest of the UK—and this will certainly be debated at Conference also.
We know that Scotland faces considerable public spending restraint in the coming years. Through a combination of ongoing UK fiscal consolidation and a relatively fragile economic environment, overall resources will continue to be squeezed.
“Per capita spending on non-health areas in Scotland is on track to fall 20 per cent from 2010-11 to 2020-21”
Additionally, major new policy commitments to boost investment in the Scottish NHS, double childcare provision, to tackle the attainment gap in education and to unilaterally lift the public sector pay cap, will increase pressure on other public services. In our Scotland’s Budget Report published last month, we highlighted how per…