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Everything You Need To Know About The Scottish Government's Spending Plans

The SNP government has set out its first budget in which it has powers to change income tax rates – but decided not to use them.

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The Scottish government's finance secretary Derek Mackay has unveiled his spending plans for Holyrood over next year. Here are the main points:

Nicola Sturgeon with finance secretary Derek Mackay.
Jane Barlow / PA Wire/PA Images

Nicola Sturgeon with finance secretary Derek Mackay.

  • The SNP government will not use its new powers to change income tax rates.
  • It will not pass on the UK government's tax cut for high earners, meaning some Scots will be taxed higher than people in England.
  • The government claims there will be a real-terms cut of 9% to the funds given to Holyrood by Westminster by 2020.
  • There was £240 million funds increase pledge for local councils, though opponents accused the government of actually cutting over £300 million.
  • The government pledged £340 million of new funding for the NHS.

Here is the Scottish government's draft budget document in full, and below is a bit more detail on some of the key points.

Nicola Sturgeon will not use her new income tax powers:

Jane Barlow / PA Wire/PA Images

As part of the new powers given to Holyrood in the Scotland Act after the independence referendum, the Scottish government was given the power to change income tax rates – but it's chosen not to do so.

The finance minister said: "The Scottish government will not pass on austerity to the household budgets of the lowest income taxpayers. Instead, we will protect low- and middle-income taxpayers at a time of rising inflation by freezing the basic rate of income tax."

However, Mackay confirmed that the Scottish government will not pass on a tax cut for higher earners proposed by the UK government. The 40% band of tax will continue to sit at £43,430 in Scotland, whereas it will be £45,000 in England.

CONFIRMED: Scotland will become the highest taxed part of the UK under the SNP. #ScotBudget

The Scottish Conservatives said this would be unfair on some Scottish taxpayers who will end up paying more in income tax than people earning the same amount of money south of the border.

Tory finance spokesperson Murdo Fraser MSP said: “In not matching the UK increase in the threshold for the 40% rate of income tax, the finance secretary is making Scotland the most expensive part of the UK in which to live, work, and do business."

There's a big rammy over whether local council funds are being slashed or boosted:

Scottish Labour leader Kezia Dugdale
Jonathan Brady / PA Wire/PA Images

Scottish Labour leader Kezia Dugdale

The big argument coming out of the budget debate is whether local councils will be getting more or less money. The Scottish government said it was providing £240 million more, but Scottish Labour accused it of cutting £327 million.

The Scottish government's figure comes from accepting that direct funding to local councils from the government is being cut, while more money is being ploughed directly into local services, plus funds can be directly raised from increases in council tax.

"It's there in black and white" - Kezia Dugdale says #ScotBudget represents a real terms cut of £327m to services

But Scottish Labour has said there's actually a £327 million cut because the overall local government budget will fall by £448 million over the next year, while grants to local authorities will increase by £121 million – equalling a £327 million cut.

The Scottish Conservatives agreed with the £327 million figure, saying: “Local councils face a real terms cut in their grant of more than £300 million. It's taking away with one hand, in order to give a little back with the other."

This debate will rumble on until the budget plans are voted on next year.

The Scottish government claims it's getting less and less money from the UK government:

Theresa May (left) is greeted by Nicola Sturgeon at Bute House in Edinburgh.
Andrew Milligan / PA Wire/PA Images

Theresa May (left) is greeted by Nicola Sturgeon at Bute House in Edinburgh.

The Scottish government said its growth forecast of just 1% of gross domestic product next year was largely down to the uncertainty caused by the UK's vote to leave the European Union, and Westminster budget cuts.

In his budget document, the finance minister claimed there would be almost £3 billion of real-term cuts to Scotland's budget from Westminster by 2020 since the Conservatives took over power in 2010.

Scottish government

"The UK government’s approach to public spending is having a significant detrimental effect in Scotland," said Mackay.

"Between 2010-11 and 2019-20, the Scottish government’s Fiscal Departmental Expenditure Limit (DEL) from HM Treasury will fall by over 9% in real terms – the equivalent of over £2.8 billion – with a share of a further £3.5 billion of as yet unallocated budget reductions in 2019-20 still to come."

Mackay claimed that the UK government abandoning its "austerity programme" would allow the Scottish government to invest more in public services.

The SNP is a minority government, so something will have to change:

Jane Barlow / PA Wire/PA Images

The SNP failed to win a majority in the Scottish election in May, meaning it's become vulnerable to being voted down in Holyrood.

Every opposition party leader has already laid out their problems with the draft budget, so something will have to change before it manages to get past a Holyrood vote.

The Conservatives' Ruth Davidson has criticised the government's refusal to pass on a tax cut to higher earners, Labour's Kezia Dugdale has criticised the perceived local council cuts, and Lib Dem Willie Rennie said there are "miles to travel before we can reach an agreement".

The Scottish Greens co-convener Patrick Harvie is seen as the SNP's most probable ally for crucial votes but he has also been critical of the draft budget, urging the SNP to raise taxes for the highest earners.

"It's clear that there is much to be worked on in this budget if it is to be passed, and Green MSPs will scrutinise the details carefully over the coming days and weeks," said Harvie.

The debate will continue until the budget is finalised in late February.

Jamie Ross is a Scotland reporter for BuzzFeed News and is based in Edinburgh.

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