Scottish budget passed after deal with Green party

The Scottish Budget was approved by 67 votes to 58 with Finance Secretary Derek Mackay getting backing from Green MSPs, after he agreed to boost to local government funding and implement an alternative system to council tax

The deal on the Scottish Budget was reached on 31 January after days of negotiations with the SNP minority government, which focused on the Green Party’s demands for a rise in government funding and a change to council tax.

The Scottish government agreed to consult, in 2019, on the principles of a locally determined tourist tax, prior to introducing legislation to permit local authorities to introduce a transient visitor levy and to bring forward a three-year funding settlement for local government from 2020-21 budget onwards.

Both the Scottish Government and the Greens supported the recommendation of the Commission on Local Tax Reform that the present council tax system must end. To make progress the Scottish government will convene cross-party talks on a replacement for council tax with a view to publishing legislation by the end of the current parliament.

In addition, the Scottish parliament will increase the single use carrier bag levy from 5p to a minimum of 10p ‘at the earliest opportunity and aim to introduce legislation before the end of 2019-20’.

In a letter to the Scottish Greens co-convenor, Patrick Harvie, Mackay said: ‘I am offering the proposals in exchange for the support of the Scottish Greens on Stage 1, Stage 2 and Stage 3 of the Budget Bill, as well as support for the Local Government Finance Order, and your role in ensuring that the Scottish Rate Resolution and Non-Domestic Rates orders pass successfully through parliament. 

‘In addition your support will be required for any necessary legislation to deliver the proposals.’

The Scottish Greens MSPs voted in favour ‘of the budget at Stage 1, in favour of amendments to implement these changes at Stage 2, and in favour of the budget at Stage 3 if those amendments pass.’

The Scottish Budget, announced on 12 December 2018, included key measures such as increasing the starter and basic rate income tax bands by inflation, effectively maintaining the current rates of income tax for the coming year for the majority of taxpayers.

However, the higher rate threshold, which is paid by the top 15% of taxpayers in Scotland, will be frozen at £43,430 for the new tax year starting in April 2019, compared with the higher threshold of £50,000 from the 2019/20 tax year in the rest of the UK.

The tax changes mean that a higher rate taxpayer earning £50,000 would pay an additional £1,544 in tax compared with taxpayers resident in the rest of the UK.

On the Scottish equivalent of stamp duty land tax (SDLT), Mackay increased the additional dwelling supplement for land and buildings transaction tax (LBBT) from 3% to 4% for the purchase of an additional property.

The lower rate of non-residential LBTT will be reduced from 3% to 1%, while the upper rate will increase from 4.5% to 5%. The starting threshold of the upper rate will be increased to apply for properties valued in excess of £250,000.

Report by Amy Austin

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