Official Report 1060KB pdf
The next item of business is a debate on motion S6M-20294, in the name of Craig Hoy, on lowering bills for Scotland’s workers. I invite those members who wish to speak in the debate to press their request-to-speak buttons.
14:53
I wish you a happy new year, Deputy Presiding Officer.
This year, 2026, must be the year in which Scotland’s politicians tackle the cost of living crisis. People across Scotland are under pressure, and many families are struggling to get by. Their bills are rising and everyday costs keep going up. In a matter of weeks, after years of Scottish National Party tax rises and wasteful spending, voters will face a clear choice. The SNP and Labour want people to keep paying more through higher taxes and they want to increase the benefits bill. Reform joins them in wanting to increase Scotland’s soaring social security bill. All of that adds to the pressure on hard-working Scottish families.
However, there is a different way—a commonsense way that focuses on bringing bills down and making work pay. It is an approach that focuses on widening the tax base and not hitting the same people harder each and every year. That is what our motion sets out to do. At its core is the same call that we made in relation to last year’s budget. We are calling for income tax on lower and middle-income workers to be cut by scrapping the Scottish basic and intermediate rates of income tax and replacing them with a single Scottish income tax rate—a flat 19 per cent rate on earnings up to the higher-rate threshold of £44,000.
However, we need to go much further than that to deal with the damaging effects of fiscal drag. In her first budget, Rachel Reeves said that freezing tax thresholds would hurt working people, but, barely 12 months later, she froze them for three years, following in the footsteps of the Scottish National Party.
Today, we propose to reverse that, to lift thresholds in line with inflation and to use a new zero rate to increase the point at which Scots start paying income tax, not just this year but in each of the five years of the next parliamentary session. I will tell members why we must do so. If the thresholds remain at their present levels, most Scottish workers will be paying the higher rate of tax by the end of the decade. A tax that is meant for high earners will be paid by workers on average incomes. Under Labour and the SNP, there will be higher-rate tax for the many, not the few. That is the reality of the SNP’s fiscal policy, which is, of course, aided and abetted by Scottish Labour.
We are talking about the pernicious effects of prolonged fiscal drag, which raises taxes on hundreds of thousands of Scots through the back door. Worse still, those stealth tax raids involve taking money from pay packets to fund billions in extra welfare spending. The benefits bill is set to reach £10 billion by the end of the decade.
When I met Mr McKee and the Cabinet Secretary for Finance and Local Government, Shona Robison rightly asked how we would pay for our proposals. Let me tell the minister how we would do it. In cutting waste in Government, we would go further than the £1 billion that Mr McKee has allegedly identified. We would cut the benefits bill while ensuring that those who are in genuine need would continue to secure proper support. We will set out specifically which benefits we would scale back once we hear from the Scottish Government in next week’s budget, when we will discover just how much more the cabinet secretary is set to snatch from working households to blow on Benefits Street.
Let me be clear to workers and businesses. In recent years, the SNP has made the decision to increase taxes to pay for ever more benefits. It has the cheek to say that those tax increases fall on those with the broadest shoulders, when we all know that teachers and nurses are paying more. As my colleague Russell Findlay said this week, the Government is not asking workers to pay—it is demanding that they do so. They have no choice in the matter. They cannot just turn around and say, “Sorry, Shona—I’ll skip paying your higher taxes this year.” It is a non-negotiable one-way street to ever more tax to pay for ever more welfare.
However, it does not have to be that way, because reducing benefits incentivises work. It puts more money into people’s pockets and generates more in tax receipts, which, in turn, delivers more economic growth.
Before I close, I will return to the frankly laughable SNP amendment that has been put before MSPs today, which says that the Government must
“respect Parliament by outlining its tax policy”
only when it publishes its budget next week. Let us reflect on that SNP culture of respect for this Parliament. What respect did it show when core details of last year’s budget somehow found their way into the mainstream media before Shona Robison had even got to her feet? What respect did it show to this Parliament when, in 2022, Nicola Sturgeon’s vitally important Covid update was reported by the press long before it was announced to Parliament, which the Presiding Officer said was “disappointing” and “disrespectful”?
Just this week, what respect did the Government show to this Parliament when media reports suggested that the Cabinet Secretary for Justice and Home Affairs was safe in her role even before the findings of an official probe had been published? It showed it absolutely no respect whatsoever, so let us take no lectures from a party that repeatedly treats this Parliament and the Scottish people with utter contempt.
The measures in our motion would go a considerable way to closing the corrosive tax differential with the rest of the United Kingdom. They would save average full-time workers more than £600 this year and, by raising thresholds by £1,300 by 2030-31, they would grow the tax base and deliver growth. They prove that the Scottish Conservatives are the only party that is serious about cutting tax and cutting waste, the only party that is serious about cutting the SNP’s bloated benefits bill and the only party that is committed to a fairer deal for Scottish workers.
I move,
That the Parliament calls on the Scottish Government to reduce income tax on working people in Scotland; commits to uprating income tax thresholds in line with inflation in the forthcoming Scottish Budget and in future Scottish Budgets; further commits to removing the Scottish basic rate and intermediate rate of income tax and replacing them with a single Scottish income tax rate of 19 pence on income up to the higher rate threshold, and believes that these fairer measures would begin to reduce the tax differential with the rest of the United Kingdom, put more money into the pockets of working families, and support economic growth by addressing the cumulative effects of current income tax policy.
15:00
Let me begin with a point of consensus. We all want to ease the pressure on household budgets. Across Scotland, people are still feeling the strain of the cost of living crisis. Prices remain high, energy bills are still elevated and household budgets are stretched. Inflation may be easing, but the impact of years of rising prices remains. The Scottish Government understands that reality, and our priority is to support people with fairness and responsibility.
I will focus on three things—the Conservative proposal and its implications, our current income tax policy and the principles behind it, and the practical action that the Scottish Government is taking to support households across the country.
I will turn first to the Conservative income tax plans. Russell Findlay recently wrote to the First Minister about those. Our estimates show that Conservative income tax asks would cost the Scottish budget more than £1 billion in 2026-27. That is the difference between maintaining essential public services and making deep cuts to the everyday support that people rely on. We are always willing to work constructively across the chamber, but that requires that proposals are credible, that they add up and that members are honest about what they would mean for services and for the households that depend on them.
If we come forward with fully costed proposals to meet the cost of our tax cuts, will the minister come forward with fully costed proposals to find the £10 billion that the Government intends to pay in welfare by the end of the decade?
If the member read the work that we have already published—the fiscal sustainability delivery plan and the medium-term financial strategy—he would find that the answers to that are clear. Unlike Conservative or Labour United Kingdom Governments, the Scottish Government manages to balance its budget every single year.
Our income tax policy balances the need to raise revenue with investment in health, education and social care. Households in the lower half of the income distribution are on average about £450 a year better off under Scotland’s tax and social security system.
Will the minister take an intervention?
I will if I have time.
There is no extra time available.
I am sorry, but I need to make some progress.
Our approach is fair. We ask those with the broadest shoulders to contribute a little more so that families and public services are protected. In return, people benefit from support that is not available throughout the rest of the UK, including the Scottish child payment, free prescriptions and free access to higher education. Despite the naysayers, Scotland continues to attract positive inward migration from the rest of the UK and sees strong levels of inward investment from abroad.
The Conservative Party claims that its plans can be funded by reducing social security spending and making efficiency savings, but those claims are vague, and people rightly expect clarity. What cuts to social security are the Conservatives proposing? Would they be cuts to support for children, disabled people or pensioners?
The Scottish Government has already identified in the medium-term financial strategy around £1 billion of realistic efficiency savings that can be made over five years while protecting front-line services, which is very important. Any efficiencies that the Conservatives are talking about would be in addition to those savings. The people of Scotland will not see that as being credible without cuts to public services in our hospitals, schools and social care. That is the difference between a workable, well-thought-out plan and something that is, frankly, little more than a slogan.
The Scottish Government is already delivering practical support that matters to households. We provide universal free school meals to more than 230,000 children in primary 1 to primary 5 and in special schools, as well as to eligible pupils beyond that. For families, that is a saving of around £450 per child each year.
We provide free tuition. Students in England face tuition fees of up to £28,600, but that education is free in Scotland.
We provide free prescriptions. Prescriptions are now £9.90 per item south of the border.
There is free bus travel for more than 2 million people in Scotland.
We have removed ScotRail peak fares for good. In doing so, we have helped people with on-going cost of living pressures while tackling the climate emergency by saving existing rail passengers money and encouraging new passengers to leave their cars at home and travel by train.
Our council tax reduction scheme cut bills for more than 450,000 people, which helps households to retain more of their income when every penny counts.
The Scottish child payment, which is one of the most important anti-poverty measures anywhere in the UK, now supports more than 320,000 families with children under 16 and it could lift 40,000 children out of relative poverty during this financial year.
Those are not vague ideas on a page; they are real measures that are already making a difference and they are all funded by a responsible tax policy that protects public services while easing pressure on families.
The Scottish Government’s approach is responsible, progressive and deliverable. It protects services, supports families and is based on what Scotland can realistically afford. The Conservative alternative is none of that. It is expensive, vague and unfunded, leaving a £1 billion gap with no explanation of which services the Conservatives would cut. At a time when households need certainty, Scotland cannot afford unfunded promises. This Government offers a credible, fair and affordable plan for Scotland’s future.
I move amendment S6M-20294.2, to leave out from first “reduce” to end and insert:
“respect Parliament by outlining its tax policy when it publishes its Budget on 13 January 2026, and ensure that the policy is progressive, fair to the people of Scotland, and supports vital public services like Scotland’s NHS, schools, and blue light services.”
15:05
A happy new year to you, Presiding Officer.
People are feeling the burden of higher prices and of wages that barely increased in the 14 years of the Tories. Living standards were lower at the end of the last United Kingdom Parliament than at the beginning—the first time that that has happened since the Napoleonic wars. That is the record of the party opposite.
The cost of living crisis is far from over. Alongside the state of Scotland’s national health service, it is the top issue for the people I speak to in Dundee each week. I therefore welcome the progress that the UK Labour Government has begun to make in tackling the cost of living.
Will the member give way?
Not yet, as I am just beginning.
Six interest rate cuts have brought the average cost of a mortgage down by £1,500. The average wage is up by £1,800, as the minimum wage is bolstered. The most recent UK budget took £158 off energy bills, with warm home discounts delivering £300 off bills for the most in-need households. Inflation is falling and wages are rising.
Those are very welcome steps, which will ease the pressure on hard-pressed households across the country, but we know that there is still much more to do, not least on the subject of today’s debate: the pressure that the SNP’s tax regime is putting on ordinary Scots. The majority of Scots pay more tax than they would elsewhere in the UK. I believe that the minister, in some form of wording, just tried to make a counterclaim to that, as have Shona Robison and John Swinney. Those spurious claims to the contrary are demonstrably false. As Professor Mairi Spowage of the Fraser of Allander Institute has pointed out in recent days, the SNP ministers’ claim
“has turned out not to be true”
in the past two financial years.
Let us be clear: those in Scotland who are paying more and more tax each year are not those with the broadest shoulders, as the SNP has tried to claim and as the minister has just claimed again today in the Parliament. The bulk of additional tax revenue does not come from the ultra-rich; rather, it comes from those who earn just over £40,000. Those are nurses, teachers and police officers who work hard in our overstretched public services. They are shop managers, information technology workers and salespeople who work hard in hard-pressed businesses.
I entirely agree with what Michael Marra has just said, but where does Labour stand when it comes to the huge burden of the national insurance tax on employers? Surely that is increasing the cost of living.
When it comes to the amount of money that has been invested in public services, the UK Labour Government inherited not just an economy that had flatlined for 14 years but public services in acute crisis and a significant black hole in the public finances. In order to address those, money had to be raised, and that money has to come from somewhere. The SNP continually claims from the Scottish Government benches that we can have an infinite amount of money and that it does not matter where that comes from—an additional £130 billion of borrowing, it has claimed, for across the UK. Money to invest in public services has to come from somewhere. We have to make sure that we raise taxes and we take tough decisions about how that can happen.
However, the personal tax bills that people are paying are considerable. As I have said, people on middle incomes are hard pressed and are struggling to make ends meet.
Will Mr Marra give way?
No thank you, sir.
The public are more likely to accept paying a bit more in tax if they can see improvements in public services. One has to come with the other. However, in Scotland, our NHS is in chaos, with waits of more than 12 hours in accident and emergency departments continuing to rise; our education system is in crisis, with falling attainment and staff on the verge of burnout; and we have an SNP housing emergency with more than 10,000 children stuck in temporary accommodation and house-building rates among the worst in our history. Scots are paying more and getting less in return.
I move amendment S6M-20294.1, to leave out from “calls” to end and insert:
“understands that the Scottish Government’s incompetent approach to the public finances and failure to grow Scotland’s economy are leading to heightened budgetary pressures; further understands that income tax should not be used as a substitute for economic growth and believes that, given the pressure on household finances, income tax rates should not increase in the course of the next parliamentary session; welcomes the UK Labour administration’s Budget, which tackles the cost of living for households across Scotland by cutting costs on energy bills, lifting thousands of children out of poverty, and increasing wages for hard-working people in Scotland, and believes that the Scottish Labour Party’s plan to establish a Scottish treasury with strategic oversight for spending in all Scottish Government departments is essential in order to put an end to waste and ensure that taxpayers’ money is treated with respect.”
15:09
I always welcome the chance to debate the tax system and how to make it fairer, and I am proud of the Green record in achieving that. Our 2016 manifesto proposals became the basis of the five-band income tax system that Scotland adopted. We set the tipping point at which people should start paying a little more tax at roughly the average full-time salary, largely because we thought that people would see that as fair. The system has been tweaked a bit since then, but the six-band system that is now in place continues the same direction of travel, even if we think that it could go further. Although the SNP has relied too much, to my liking, on the argument that most people pay a bit less tax—which I think implies an acceptance of the right-wing framing of tax being a bad thing—it has continued to ensure that Scotland’s income tax system follows a progressive direction, with those who can afford to pay more doing so, because the alternative is cuts to services that fall heaviest on those who have the least.
In the 2025-26 budget, Scotland’s tax changes generated around £1.7 billion extra for public services, so Scottish tax policy unquestionably protects the services that are needed by those who do not enjoy high incomes and makes possible groundbreaking initiatives such as the Scottish child payment.
Let us compare all of that with the Tory plan for £1.1 billion in tax cuts. That is equivalent to the budget of the entire rural affairs, land reform and islands portfolio going in a oner. If the Tories do not want to scrap that, they might say that they prefer cuts to social security, so they could do away with the Scottish child payment—an internationally recognised initiative that is the single most successful measure that we have for cutting child poverty. However, no—sorry, but that would not be enough. It would not even meet half the cost of the Tory black hole.
How about cutting the affordable housing supply programme? That would get us closer. Scrapping that would save £768 million, leaving only a third of a billion of other cuts still to find, and I am sure that the Tories think that leaving people at the mercy of unregulated private landlords would be a reasonable alternative to delivering affordable housing.
However, it is not just the cuts that the Tory plan would rely on that nauseate me. My issue is also about who gets the benefit. From the changes that are set out in the motion alone, we can see that the plan would benefit a young full-time worker on the minimum wage by something like £40 a year. Someone on a wage that is closer to an average income of £25,000 might save something like £100 a year. I am sure that that little bit of extra cash would be welcome to people on those incomes and that, if they were very lucky, their landlord would not just hike the rent and take it straight back off them again. However, let us look at someone on twice that income: £50,000. By my calculation, they would save something like £440 a year, and Craig Hoy suggests that that figure could be up to more than £600 a year. That same £600-a-year saving would go to people on 60, 80 or 100 grand a year under the plan. For someone on such high incomes, 400 quid or 600 quid a year is nothing. They would not even notice the difference.
A case can be made for cutting income tax further for low earners and for people on middle incomes, but it can be made only if we ensure that the high earners and the wealth owners are the ones paying for it. The Tory plan gives high earners the biggest tax cuts and pays for it all by slashing the public services that are most relied on by the least wealthy. That is no surprise from the Conservatives—it is their natural instinct—but it would be bad for our society and bad for our economy, and it would be a fundamentally uncivilised policy.
15:13
I agree with the notion that our current politics is defined by the cost of living and by people’s perception of whether their Government or Governments are on their side—or not, as the case may be. That includes the question of tax policy. This Parliament has had tax-varying powers since its inception, but only since 2017 has the Scottish Government used them, to varying degrees of success and popularity. Over the next few weeks, particularly regarding the approaching budget, the focus will centre on the conversation about tax bands and rates and on the perceived doves and hawks in relation to taxation. However, we are completely missing the other elephant in the room, which we rarely debate: whether the tax differential north of the border actually generates the level of additional revenue that the public are led to believe that it does.
The answer to that question is that it does not. We are not seeing a proportionate net benefit as a result of paying more tax. In this financial year, as other members have mentioned, the Scottish Government expects to generate an additional £1.7 billion in Scottish income tax due to its policy decisions. That is fine—that is its decision. However, the Scottish budget will benefit to the tune of only £616 million. Those are independently verified figures. To put it simply, for every £1 in extra tax that is paid by a Scottish taxpayer, only 36p will be available to the Scottish Government to spend on public services.
The Auditor General has been crystal clear about that disparity. He states why that is the case. I see the minister looking at me strangely. I can hand him the Audit Scotland report, which states that fact. We know that what is generated in revenue does not all come back to the Scottish purse. The reason why it does not is that we have an underperforming tax base, sluggish wage growth and productivity in Scotland, and sluggish overall economic growth compared with other parts of the UK. That is what is creating the funding gap.
I know that the fiscal settlement is complex—probably only a handful of people truly understand how it works—but the Government too often cites the tax intake figure as gospel in order to vindicate its tax policies. Audit Scotland has also criticised the Scottish Government for its complete lack of transparency on the issue.
If we ask people in the real world whether they are comfortable paying that wee bit more in tax to fund our precious NHS or to make sure that our teachers are paid well, as others have argued, some might very well say, “Yes, absolutely.” However, I am not so convinced that they would sign up to an alternative tax regime if they knew how little of it benefited the Scottish budget.
Of course, we need to raise the size of the overall tax base—
Will the member take an intervention?
I have less than a minute; otherwise I would have done so.
Of course, we need to raise earnings across the board, because raised earnings will inevitably lead to higher tax intakes. However, here is a sobering statistic: in the year 2023-24, 20 per cent of all Scottish taxpayers paid 66 per cent of all tax. In fact, the top 1 per cent of all taxpayers paid 20 per cent of all tax. That is a sobering reminder that we need to grow the number of high earners. That should not be controversial; it is a necessity.
The Government will argue about our low unemployment rate, which sits at 3.8 per cent—that is great, but it ignores not just how many people are in or out of work but what their earnings are, how well off they feel and, to put it bluntly, their potential to pay tax into the Government coffers.
I am really nervous about how many well-educated, professional young Scots we will lose to the brain drain over the coming years. They are being attracted by glossy ads for the Gold Coast and Canada and by Spain’s flat-rate tax for digital nomads. Our challenge will be to encourage them to remain in Scotland, and if they are not already here, to encourage them to consider coming and making a life here.
We move to the open debate, with speeches of up to four minutes.
15:17
I am pleased to speak in favour of our motion, which calls for lower bills for workers, who are suffering as a result of the cost of living crisis, and for an end to the SNP’s high-tax agenda.
The devolution of extensive taxation powers to the Scottish Government was an opportunity to create a tax system that supports Scottish businesses, incentivises growth and delivers for the Scottish public. However, it seems that the current SNP Government only ever saw those powers as a chance to hike taxes on hard-pressed Scottish workers. Making Scotland the highest-taxed part of the United Kingdom is hardly a legacy that the Scottish Government would have hoped for, but that is exactly what it has created.
Stakeholders such as Scottish Financial Enterprise and the Confederation of British Industry continue to highlight the impact of those taxes on Scottish businesses. The CBI has said that higher Scottish taxes mean that businesses are struggling to compete for highly skilled staff, and that current income tax policy is acting like a “handbrake” on Scotland’s economic growth.
The Institute for Fiscal Studies has called Scotland’s income tax system “unnecessarily complicated”, and that was before the SNP introduced the sixth band to the tax system. IFS analysis also shows that the behavioural changes caused by the tax policy mean that it is unclear how much revenue those changes have raised, and it says that the Government should be open to “reversing course” on its tax policy.
Regardless of what the Scottish Government might say, it is unlikely that it will be changing direction any time soon. Not content with keeping the higher-rate threshold significantly lower than elsewhere in the UK, the SNP raised the higher rate to 41 per cent and then raised it again in 2023. The SNP’s income tax strategy has been a never-ending series of tax rises, with the tax burden creeping up year on year. Scotland is therefore left with a tax system that is too complicated, too damaging to growth and too costly to the taxpayer. The SNP has played this game for many years, and it would be naive to believe that it will stop any time soon.
Our solutions to the problem are clear. We are calling for the SNP to increase income tax thresholds in line with inflation in the forthcoming 2026-27 budget and in future budgets. We also want to see a simpler Scottish income tax system with a single rate of 19 per cent applied up to the higher rate. Those are proportionate and reasonable policies that would bring us towards closing the current tax gap with the rest of the United Kingdom. They would ensure tax cuts—which could be up to £600—for the vast majority of Scottish workers. We should be trying to put more money back into the pockets of hard-pressed Scots and workers in our country to support them.
Our policies would help to undo the damage that the SNP’s high-tax agenda has already done to the Scottish economy. They would also make Scotland an attractive destination for top talent. We should be trying to attract talent, not send it elsewhere, which is what we are doing on a daily basis.
Will the member take an intervention on that point?
The member is in his last minute.
I am in my last minute.
I want Scotland’s tax system to support growth, reward work and deliver lower bills for Scottish workers. As we have already heard, that would be achieved by cutting Government waste, cutting into the unsustainable benefits bill—which every other party in the Parliament wants to increase—and supporting hard-pressed taxpayers and householders.
I therefore support the motion in the name of Craig Hoy. These are sensible, forward-looking and pragmatic policies that we need in order to support our communities, constituents and businesses.
15:21
I am happy to contribute to today’s debate. The last time that I took part in a Tory debate, Mr Hoy happened to be closing it. He said that my speech was one of the worst that he had heard in his time in the Parliament. I look forward to disappointing him again, because, frankly, if that is his assessment, I think that I am on the right track.
It is interesting that we again heard the Tory refrain of “common sense”, as if what they lay out is a commonsense approach. What we did not hear—although I thought that we might, because we often hear it from the Tories—is that the approach that has been taken by the Scottish Government is an ideological approach, as if “ideology” is, in and of itself, a four-letter word. However, the Conservative approach of cutting taxes and disinvesting in public services is also an ideological approach. We should not pretend that it is anything other than such.
It is clear where the Conservative Party gets its inspiration from. The Tory leader in this Parliament was a great supporter of the Truss-Kwarteng budget in 2022. I do not know why he is laughing; maybe he has forgotten. I am happy to remind him that he supported that budget, which was utterly underpinned by Tory ideology. That budget was predicated on assisting with the cost of living, but it saw inflation increase from 2 per cent to 10 per cent and mortgage rates triple overnight. So much for assisting with the cost of living.
To be fair, the Tories accept that their approach to taxation would reduce the amount of revenue that is accrued to the public purse. Indeed, if they do not accept that, they should, because that is what would happen. It happened with the proposals in 2022, which are similar to the ones that the Conservatives are advancing just now. The Fraser of Allander Institute said that those proposals would have generated a potential revenue loss to the public purse in Scotland of approximately £420 million.
Despite that, we will still hear calls from the Conservative Party for increased expenditure in many areas. Mr Harvie made that point just yesterday during the Citizen Participation and Public Petitions Committee debate on investment in swimming pools and swimming infrastructure, when we heard calls for more investment in that area. Just this week, we heard a call from the Tories for increased investment in legal aid. They have also said that more money should be put into the Scottish veterans fund, and we have heard them talk about creating a new affordable transition fund. All of those are perfectly legitimate proposals to advance, but they cannot be taken seriously or credibly if, at the same time, the Tories seek to cut taxes.
I turn to Alexander Stewart’s point about our having the highest taxes in the UK. In that respect, I slightly disagree with Mr Harvie, as I consider that there is nothing wrong with our making the point that most income tax payers in Scotland pay less in income tax than is paid by taxpayers in the rest of the UK. Further, I note that that is a very narrow analysis of tax liability. We know that the average band D council tax bill this year is £1,543 in Scotland but £2,280 in England. So much for Scotland being the highest taxed part of the UK.
We should focus on assisting people with the cost of living crisis. I am proud and pleased that we have a Scottish Government that is doing just that, with its investment in abolishing peak rail fares, its continued commitment to free prescriptions and free eye appointments, and its commitment to funding childcare hours, which would otherwise cost more than £6,000 per eligible child per year. I am proud of, and stand behind, that record.
On a point of order, Presiding Officer.
Jamie Hepburn has just said that more than half of taxpayers in Scotland pay less income tax than is paid elsewhere in the United Kingdom. Mairi Spowage of the Fraser of Allander Institute has said that that claim has been false for the past two financial years. Will Mr Hepburn therefore use this opportunity to apologise for misleading the chamber and correct the Official Report? Perhaps if he does that, Government front-bench members, up to and including the First Minister, will stop using that spurious claim.
Mr Ross will be aware that that is not a point of order. It is up to members to determine in what way they seek to contribute—[Interruption.] I say to members and Mr Findlay that I am speaking. I am addressing the apparent point of order that was made by Mr Findlay’s colleague. I would expect some respect to be shown to the chair and that Mr Findlay might manage to listen to my response to his colleague without interrupting.
As I was saying, it is up to members to determine how they deal with their contributions in debates. On making corrections, all members are aware of the procedures and how to do that.
15:27
The Parliament is designed to stand up for working people in Scotland. However, since the SNP took office, working people have been told—not asked, but told—to pay more, work harder and accept less in return. That is not fairness; it is failure.
Our motion is simple. We are calling on the Scottish Government
“to reduce income tax on working people”,
to uprate
“income tax thresholds in line with inflation in the forthcoming Scottish budget and in future Scottish Budgets”,
and to simplify a system that has become punitive, confusing and deeply unfair. We also believe that the Scottish basic rate and intermediate rate of income tax should be replaced with a
“single Scottish income tax rate of 19 pence on income up to the higher rate threshold”.
I do not think that those are radical demands. They are measures that are designed to put more money back into the pockets of everyday, ordinary, working Scots, to reduce the growing tax gap between Scotland and the rest of the United Kingdom and to begin repairing the damage that has been done by years of SNP income tax policy.
Middle earners—the nurses who care for us, the police officers who keep our communities safe and the teachers who are shaping our children’s futures—are all paying more in tax than they would pay anywhere else in the rest of the UK. What do they receive in return? They get fewer services, longer waiting times, crumbling infrastructure and a childcare system that still presents a huge financial barrier for many families.
We have heard from Jamie Hepburn, the minister and others today about all the free policies that are offered in Scotland, but, of course, they did not mention that those free policies are paid for by taxpayers up and down the country. That is the SNP’s record: higher taxes, lower value and broken promises.
That is the whole point: tax pays for those free things, which people would not get if we did what the Conservative Party wants us to do and reduced tax rates.
Well, they are not free then, are they?
That is the approach of the SNP and other political parties to taxation in this country. Their policy is, “If it moves, we’re going to tax it,” but they must know that that punishes ambition and penalises progression. It hits hardest those who are trying to move up the career ladder, take on extra responsibility or secure a better future for their family. The SNP tells us to wait for the budget for clarity, but, as colleagues have conveyed, nothing prevents the SNP from putting out those messages before the budget. A different approach to the taxation system would be welcomed.
For working parents, the situation is even more stark. Too many families are forced to make impossible choices when it comes to childcare in this country—they have to reduce hours, turn down promotions or leave the workforce altogether. They have to choose what they can do, because they do not have the additional money in their pocket to be able to make those decisions of their own free will. For many younger people in this country, the dream of becoming a home owner or parent is made more difficult because of the choices that are made in this chamber.
I know that I am in my last couple of minutes—
It is seconds.
Sorry. In my last couple of seconds, I want to say that it is time for a different approach—one that backs working people, that recognises the real pressures that they face and that puts fairness, growth and opportunity back at the heart of Scotland’s tax system.
15:31
Nobody likes paying income tax, or any tax, but I believe that those with the broadest shoulders, including MSPs, should pay a bit more to enable Scotland to spend more on the things that matter most to people—better schools, lower crime rates, affordable housing, falling NHS waiting lists, lifting children out of poverty, and lower unemployment. What we pay in income tax is important, primarily because it is the Scottish Government’s main source of revenue, after the block grant, for funding public services such as health, local government and education.
Will Mr MacDonald take an intervention?
No—I have only four minutes.
The Tory party’s proposal would remove up to £1 billion from the Scottish budget. Currently, Scottish employees who are on the national living wage pay lower income tax than those elsewhere in the UK, as do people earning the real living wage. Individuals who earn the median gross pay in Scotland, which is higher than the UK median pay, are asked for an additional £94 per year, or £8 per month, and those at the top of the intermediate rate pay an extra £11 per month. That is based on the tax calculator that is provided by His Majesty’s Revenue and Customs.
What do Scots receive in return? Public transport users who are aged under 22 and over 60 are receiving free bus travel, which in Edinburgh is a saving of £68 per month. For people who commute by train, the removal of peak fares has reduced the cost substantially, by up to 48 per cent, which is not available elsewhere. The council tax for band E properties in Scotland is around £700 per annum less than that for similar band E properties south of the border, which saves £61 per month. Water bills are lower than those in England and Wales, and the SNP record on affordable house building means that Scotland’s average rate of affordable housing delivery per head has been around 47 per cent higher than that in England and 73 per cent higher than that in Wales.
Then there are the interventions to tackle poverty, starting with the baby box, which 360,000 families have enjoyed since the scheme started and which provides the support needed to give children the best start in life. The Scottish child payment supports more than 320,000 children under 16 across Scotland, which is the only part of the UK where child poverty is falling. There are no student fees here, which supports many in our most marginalised communities to get out of poverty through further and higher education.
The cost of living increase has been made worse through food inflation, which has increased since Brexit and continues to rise faster than the inflation caused by the policies of Johnson and Truss. Then there is the job tax on employers that Labour introduced, which impacted employers’ ability to give meaningful pay rises. As I said, the proposals in the Tory motion would be likely to cut the Scottish budget by up to £1 billion at a time when Tory MSPs are always asking to spend more money on whatever happens to be their pet project of the month.
If the Tory party wanted to alleviate the tax burden on Scottish workers, it could have done so when it was in Government at Westminster by unfreezing the personal allowance, but it did not, and Jeremy Hunt extended that freeze up to April 2028. This motion is nothing more than a Tory election gimmick that cannot be fulfilled without massive cuts to the current levels of services for our communities.
15:35
I will start on a point of consensus with the minister. I appreciate that we have the opportunity to debate the economy and tax. Unfortunately, such opportunities come all too infrequently in this place. To the extent that the economy is discussed here, it is done simply to point at other places and seek excuses, despite the fact that many of the levers that we have to impact the economy—concerning the skills system, the planning system, transport and infrastructure—are held here.
That approach has demonstrated that this place has not lived up to its potential. Economic growth has barely been mentioned. If we had economic growth, many of the difficulties that we have talked about would be alleviated. Our difficulties with public expenditure and the choices that we have to make would become significantly easier, but this Government has let Scotland down and not lived up to this country’s economic potential. It is a fact that economic performance has lagged for the past decade. That is not a point of conjecture or a subjective opinion; we know that it is true because of income tax devolution.
Since 2016, our economic growth per head has been lower than that in the rest of the UK. We know that because of the way in which the fiscal formula works. Jamie Greene said that the formula is complicated and that not many people understand how it works in detail, but they do not need to. The simple point is that the formula assigns income tax based on wage growth. When wage growth is faster in Scotland, we get more money to spend; when it is lower than in the rest of the UK, we get less money to spend. According to the Scottish Fiscal Commission, it is a fact that we have £1 billion less to spend, because economic growth has been slower in Scotland than in the rest of the UK since 2016. That is the cost of economic failure under the SNP’s Administration over the past 10 years. It is not an opinion; it is an inescapable fact.
Not only has the SNP failed with regard to economic growth; it has failed in its administration of the tax system. SNP members are clearly in denial of the Fraser of Allander Institute’s opinions when it comes to the tax burden with regard to income tax. However, the issue is not only whether Scots pay more on average but how the income tax system works in Scotland. We should highlight teachers, police and nurses, not only because of the excellent work that they do and their dedication but because they pay a 50 per cent marginal tax rate. If people earn between £43,662 and £50,270 a year, they pay a higher marginal tax rate than people in the rest of the UK who earn more than they do, which is a disgrace. That we think that teachers, police constables and nurses should pay a higher marginal rate than people who earn almost £100,000 a year is a scandal. It is a sign of economic and fiscal incompetence on the part of the SNP, but it does not have to be like that.
Other parts of the UK have higher rates of growth than Scotland despite having fewer economic powers. It is a fact that Greater Manchester has experienced a higher rate of growth than Scotland by more than 1 percentage point per year, and its gross domestic product per head is now higher than that of Scotland. A decade and a half ago, the GDP per head in Manchester was lower than that in Scotland, so it has had a superior economic performance with fewer economic powers. That is the difference that focusing on the economy can make.
Scotland is being let down under the SNP. In May, Scotland faces a choice between a Government that seeks to simply narrate problems and point in a direction and a party that seeks to confront problems, come up with solutions and make lives better for Scots.
15:39
The Conservative Party has continually told us that its focus in today’s debate is on tackling the cost of living. However, it is inevitable that, if we rolled back and reversed progressive changes to income tax, the biggest benefit would go to those on the highest incomes. The Conservatives say that they want to tackle the cost of living, but they would give the biggest benefit to those on the highest incomes.
Will Mr Harvie take an intervention?
With a four-minute speech, I do not have time to take an intervention.
The Conservatives want to fund their policy by cutting social security. Social security addresses the cost of living for those who face the worst challenges. Let us remind ourselves that most people who need support from the social security system are working—they are in working households. I know that there are people on the right who like to pretend that there is a hard and fast division between those who contribute to the economy and those who take from it, but that is spurious nonsense. The Conservatives’ plan would devastate the public services that help people to cope with the cost of living.
The truth is that, even during this really difficult session of the Scottish Parliament and during the incredibly challenging period since Tory austerity was introduced, progress has been made on effective ways of cutting the cost of living. For example, in recent years, the Greens have cut public transport costs for buses, trains and ferries, and we could do so much more. We will set out plans for expanding free bus travel to under-30s.
We can cut rents. Extractive and exploitative rent levels are one of the biggest and most unnecessary costs that a great many people are landed with, but the Conservatives do not want to control rents; they want to let them continue to spiral.
As for giving households the benefit of cheap, clean energy, instead of leaving people dependent on high and volatile fossil fuel prices, the Conservatives want to rip up climate legislation and abandon the opportunities from that cheap, clean energy.
We can do so much more on all those effective ways of tackling the cost of living, but they all need investment, which is why they all depend on a progressive tax system.
Before I finish, I want to say something about the Labour amendment. I know that Daniel Johnson and others want to focus on growth. He is aware that the Greens are the only party that disagrees with the fundamentals of that. We are often alone in arguing that growth-focused policies sometimes fail to achieve progressive distribution in their outcomes. That is why history shows that there can be periods of growth—even booming growth—while poverty increases.
Even if we set aside that argument, the Labour Party’s failure to support Scotland’s move to more progressive taxation is striking. At first, Labour gradually accepted it, but without any enthusiasm. More recently, it has actively opposed changes to make income tax more progressive.
Will Mr Harvie take an intervention?
Mr Harvie is in his last minute.
I do not have time to take an intervention.
Just like the Conservatives, Labour often calls for more public spending, but, when the Greens do that, we at least match our calls for spending and investment with serious, deliverable and workable proposals for the tax policies that would be needed to raise the revenue to make the spending commitments possible.
Mr Marra must surely be aware of the problems that Labour has created for itself at the UK level. Ruling out changes to major taxes, alongside Labour’s fiscal rules and self-imposed constraints, has left the Chancellor of the Exchequer with a choice of which promises to break. The idea that, without knowing future economic circumstances or UK tax changes, the Scottish Government could rule out tax changes until 2031 is extraordinary.
We need to maintain the commitment to progressive taxation if we want to provide investment in public services and real cost of living support for people.
15:43
Having listened to the speeches from SNP members, I am more convinced than ever that they simply do not understand the mess that they have made of Scotland’s finances, let alone have a plan to fix it. They have wasted more than £7 billion of taxpayers’ money on ferries that do not sail, roads that do not get dualled and schools that do not get built. Their incompetent handling of our infrastructure has resulted in £1.3 billion of additional costs and 67 years of delays to vital projects. They have targeted middle earners—our nurses, teachers and police officers—with tax hikes to cover for their incompetence, and they have failed to be honest with the public about the complete and utter mess that they have made of Scotland’s public finances.
Jamie Hepburn’s contribution was rightly critical of the Liz Truss unfunded budget that crashed the economy. That was £45 billion of unfunded spending. However, would he be at all critical of the £95 billion of spending demands that have come from front-bench members of his party or of the SNP’s opposition to the £45 billion of revenue raisers? That is a £140 billion fiscal adjustment. That is the kind of incredible position that the SNP is taking on the public finances.
In contrast, since the general election, Labour has delivered £10.3 billion of additional funding for Scotland. Lord only knows where we would be without it. What we will see next week is that any room for manoeuvre has been eliminated by the SNP’s incompetence.
Will Michael Marra take an intervention?
No thank you, sir.
We are all staring down a £1.6 billion black hole as we go into next week’s budget. Added to the SNP’s wasteful and incompetent approach, its abject failure to grow Scotland’s economy, as Daniel Johnson set out, has cost the budget dearly—more than £1 billion this financial year alone, owing to what the Scottish Fiscal Commission has termed the “economic performance gap”—and there are real consequences in relation to public services. Patrick Harvie is not alone in his opposition to economic growth; that is shared by the Government. If we had a Government that was focused on growth, or that at least understood how to grow the economy, Scotland should have that money to spend. After years of chaotic short-term budgets from SNP Governments, they simply cannot be trusted with the public money. For Scotland’s sake, we should all hope that this is the last budget that the SNP delivers.
After three consecutive years of emergency cuts budgets under the Government because it could not balance the books, the SNP says that next Tuesday’s budget will have all the answers. However, if the SNP cannot be trusted with our money, how can we trust a word that Government ministers say on any of this? Why should we believe them?
In his speech, Daniel Johnson set out quite well the issue of people who earn just over £40,000 and pay a higher marginal tax rate than people who are far richer than them. Members on the SNP and Green benches, including Mr Harvie, should rightly question whether that is progressive.
It will fall to the next Scottish Government to fix the mess that the SNP has made; to spend taxpayers’ money wisely; to account for every penny to ensure that the SNP’s culture of waste comes to an end once and for all; and to rebuild the public finances, public services, our NHS, our schools and our local services. That is the choice that Scotland can take in May with a Scottish Labour Government.
15:47
At a time when public finances are under pressure, it is more important than ever that we engage in constructive, serious, evidence-based debates about our nation’s priorities. I am not sure how much of that we have had this afternoon.
The debate comes down to a clear choice: a responsible approach to tax and spending versus proposals that lack any semblance of clarity or a credible path to funding. I mentioned in my opening remarks that there must be an expectation that any party that proposes major tax cuts must be prepared to explain how they would fund them, but there has been an absolute absence of that this afternoon.
We will!
The Conservatives are shouting, “We will!”, but they have not.
We all remember the turmoil caused by the Liz Truss mini-budget, with its promises of tax cuts without a clear plan to pay for them. Jamie Hepburn reminded us of that. I ask anyone who has taken part in the debate to consider whether they have heard a credible plan from the Conservative party to fund a £1 billion reduction to the Scottish budget next year. Patrick Harvie, among others, highlighted clear examples—in relation to the housing budget, the Scottish child payment and others—that would not even cover that £1 billion cut.
An area of consensus is the recognition of the importance of doing what we can to support household finances at a time when budgets are tight and demands on services continue to grow. The importance of the cost of living situation was a point that Jamie Greene made correctly—I think that it was the only correct point that he made. I do not know whether he was suggesting that it would not cost us £1.7 billion if the Scottish Government cut taxes to the same level as the UK Government, because of course it would. There is also the fact that, although people are leaving Scotland, more people are coming into Scotland from the rest of the UK than are leaving to go down south.
I want to mention Meghan Gallacher’s points. There is now some clarity on where the Tories would save that money. They are against free things: free tuition, free prescriptions, free bus travel for 2 million Scots and the free baby box. Getting clarity on that has not been unhelpful.
Daniel Johnson talked about facts, so I have pulled up in front of me the data that I have on the economic growth rate of Scotland versus the UK’s, which is the latest available three-month-on-three-month growth rates. In October 2025, Scotland’s growth rate was 0.2 per cent, whereas the UK’s was -0.1 per cent, but perhaps that was a one-off. However, we then see that, in September last year, Scotland’s growth rate was 0.2 per cent and the UK’s was 0.1 per cent—the rate in Scotland was double. The month before, in August 2025, Scotland’s growth rate was 0.5 per cent, which was more than double that of the UK’s at 0.2 per cent. In July 2025, Scotland’s growth rate was 0.5 per cent, which was more than double the UK rate of 0.2 per cent. I also note that Scotland’s unemployment rate is consistently significantly lower than that of the rest of the UK.
Will the minister give way?
Does Daniel Johnson have some numbers?
The minister asks whether I have some numbers. Has he consulted the Scottish Fiscal Commission? How do the facts that he provided relate to 2016, which is the year that income tax devolution is baselined against?
I am talking about 2025 and not 2016. I have given him the numbers. If he is going to come to the debate, he should bring the numbers in order to have a proper debate about them.
Ultimately, governing is about making real decisions and not gestures. It is about balancing the need to raise revenues and fund essential services with the impact that that has on taxpayers and households. We have always been clear about the need for cross-party engagement on tax and spending. Credible and realistic alternatives are always welcome when put forward with honesty and transparency. I hope that we will see some of that in the discussions that we have in the chamber on this year’s budget, but I am sad to say that we have not seen much of it this afternoon.
I ask the Parliament to recognise the importance of credibility in the tax proposals that are made by any other party in the chamber, and to support the Government’s amendment ahead of our tax and spending plans being set out next week, on 13 January.
15:52
This afternoon’s debate has shown not only why the tax issue is so critical to the forthcoming Scottish budget—I commend Daniel Johnson and Jamie Greene for their speeches in that regard, because that issue matters—but the clear blue water between the political parties. That is as it should be, because, aside from our general agreement about Adam Smith’s principles of taxation, there is a much wider debate to be had about what we expect the tax system to do for our country. That debate could hardly be more important, given the fiscal situation that we find ourselves in.
I say to Mr Hepburn that it would be very helpful if we could all acknowledge the true facts about the extent of the tax burden.
The SNP gives us three defence lines when it comes to its tax policy. First, it tells us that it is progressive. I have to tell Ivan McKee that it is no different from many other tax systems around the world.
Secondly, it tells us that, in return for paying higher taxes in Scotland, we get far more benefits, such as the Scottish child payment, free university tuition and free prescriptions. The trouble is that the total funding for those so-called free benefits—which, of course, are not free at all—is, as the Scottish Fiscal Commission has pointed out time after time, completely unsustainable for Scottish taxpayers, not just now but over the long term. Worse still, the Scottish public sees no improvement in its public services.
The third plea, which we heard again from the First Minister just on Monday, is that Scotland would be far better off if it was independent. That is just plain nonsense, as every credible economic analyst tells us. If Brexit was so bad for the Scottish economy, as the SNP keeps telling us is the case, the SNP should recall its independent adviser, Mark Blyth, saying that independence would be “Brexit times 10”. That neatly sums up what the economic situation would be with independence.
The SNP’s huge problem is that its long-term adherence to its current tax policy has not yielded the results that Scotland needs or that the SNP predicted. Higher tax rates have deterred economic growth and have acted as a disincentive to middle and higher earners, and our revenue has been less than it should have been had we had better earnings and employment growth, as happened in the rest of the UK.
Will Liz Smith take an intervention?
Of course I will.
I just took the time to read out the past four months of data—and I could have gone on—showing that Scotland had higher economic growth than the rest of the UK. Has Liz Smith not looked at that data?
Liz Smith has very much looked at that data, but she has looked at it in the round, and she has seen a whole lot of other economic statistics that are not really something that Mr McKee would like to talk about.
It is two decades since John Swinney was Cabinet Secretary for Finance and Sustainable Growth, when he made several speeches about his concern over the weak pattern of growth in the Scottish economy. At the Finance and Public Administration Committee in February 2023, he flagged up to me that he thought that economic inactivity is the biggest challenge that the Scottish economy faces. He told us that he wanted the focus to be on entrepreneurship, supporting business and the SNP’s ambition to deliver a smaller and more effective Government for Scotland.
That was then and this is now. With regard to supporting businesses over the past two decades, it has been a dismal picture for the Scottish Government, which has witnessed a progressively higher tax burden being imposed on hard-working Scots over many years without the requisite improvement in public services or widening of the tax base. Unbelievably, three budgets ago, it saw an 8.3 per cent real-terms cut in the economy portfolio and real-terms cuts in the enterprise, trade and investment budgets, and it failed to pass on business rates relief in full.
Last year, the Deputy First Minister said that we should not overworry, as inward investment was strong and Scottish Enterprise was working very hard to stimulate growth in the business sector. In the same speech, however, she implied that the difficult choices of Government had had less success when it came to the skills agenda. I agree with her about that. That issue is writ large in the minds of our colleges and universities, which have for years been grappling with pernicious underfunding and financial models that are simply not fit for purpose.
Regarding John Swinney’s promise in 2007 to ensure that Scotland had a smaller and more effective Government, the facts speak for themselves. The tentacles of the state in Scotland, particularly with regard to social policy, have only ever increased. The size of the state has burgeoned through the growth of quangos and a leviathan and unreformed public sector—and we all know what has happened to the number of civil servants.
The forthcoming budget, just like its immediate predecessors, seems set to be stubbornly fixed on the so-called social contract, which cannot be paid for and which, as every economic forecaster tells us, is the main reason for a deeper fiscal hole, because of the exponential rise in the benefits bill. Ministers know from the Scottish Fiscal Commission, the Auditor General for Scotland, the Fraser of Allander Institute and several other bodies that there is a concern about a lack of consistency in the Scottish Government over fiscal strategy and how it should make its spending commitments.
The Scottish Government lacks fiscal credibility, its tax policies are punitive and disincentivising, and there is no coherent strategy across the Government. It lacks the necessary policies to create the growth that we so desperately seek and to achieve what John Swinney said in 2007 was his overriding objective.
That concludes the debate on lowering bills for Scotland’s workers.
Previous
Portfolio Question TimeNext
Non-domestic Rates