The Scottish Parliament‘s new powers have been confirmed and a fiscal framework based on “no financial detriment” to the Scottish or the UK Governments has been agreed.
So how will these new powers translate into policy changes?
Already the political parties are beginning to set out their stall. Scottish Labour and the Liberal Democrats proposed a 1p increase in the current Scottish Rate of Income Tax for 2016/17 to offset the Scottish Government’s £350m council cuts. And once Scotland secures full control of income tax for financial year 2017/18, Labour proposes a 50p top rate for those earning over £150,000. The Scottish Conservatives’ Independent Commission for Fair Taxation in Scotland has mooted a 30p ‘aspirational’ band.
The SNP’s position may be more creative. Expect adjustments to bands and changes to thresholds rather than proposals for a tax increase. First Minister Nicola Sturgeon is only too aware of the problems arising from a significant differential in income tax rates north and south of the border and is likely to proceed cautiously.
So, for the first time since the establishment of the Scottish Parliament, voters will have a choice at the May election between differing taxation proposals: possibly lower taxation under the Conservatives; increased taxation under Labour and Liberal Democrats; and potentially no change proposed by the SNP.
The new social security powers offer the potential for radical change. Scotland will abolish the Bedroom Tax, will look to make Universal Credit more flexible and will do more to support long-term disabled Scots and carers.
The Commission on Local Tax Reform’s recent report made a series of suggestions about broadening the local tax base, though stopped short of making specific recommendations. Nicola Sturgeon is proposing that the council tax remains, but is made more progressive, and that local councils should be entitled to retain a portion of the national income tax raised locally. The amount retained would increase if councils grew the local economy. A local sales tax and tourism tax floated by the Commission may not to see the light of day.
The SNP government will outline their thinking on local taxation and social security within the next two weeks, and on income tax prior to Parliament’s dissolution on 23 March.