Kate Forbes has become the bookies’ favourite to succeed Nicola Sturgeon as first minister after becoming the first woman to deliver the Scottish Budget. 

The public finance minister stepped in after Derek Mackay quit as finance secretary over sleazy messages to a 16-year-old schoolboy on social media.

Skye MSP Ms Forbes, 29, only entered Holyrood in 2016 but was praised across the political divide for her steady performance after being given just a few hours’ notice to prepare and has now become the frontrunner to become the next leader. 

Setting out the Government’s draft tax and spending plans for 2020/21, she warned opposition MSPs they would cause a meltdown in Scotland’s fledgling welfare system if they refused to back the budget when it comes to a final vote on March 5. 

She said it included an extra £3bn because the Government becomes financially responsible for new devolved benefits from April, including Personal Independence Payments and Disability Living Allowance.

However if the budget fell, spending would be capped at last year’s £35bn, throwing the system into disarray. 

She said it would also scupper plans to raise NHS funding by £1bn to £15bn and give £500m more to councils. 

She said: “But worst of all, – as a consequence of the further devolution of social security payments – nearly £3bn of vital support will be denied to those in our society who need it the most. Now is not the time for brinkmanship.”

Ms Forbes announced there would be no change in income tax rates, a marginal increase in the thresholds for the lower rates to help the low paid and a freeze for the higher rate thresholds.

The freezing means someone earning £50,000 in Scotland will pay around £1500 more in income tax than their counterparts in England and Wales, the same difference as 2019/20.

The SNP Government said it did not expect this tax gap to widen, based on previous commitments in the UK budget of 2018 and the recent Conservative election manifesto. 

However, if Chancellor Sajid Javid increases the tax thresholds south of the border when he sets his own budget on March 11 that could all change.

Ms Forbes said: “If there is any divergence, it will not be because of decisions made here. It will be because the UK Government is yet again cutting taxes for high earners.” 

Around 56% of Scottish taxpayers will pay less than their counterparts in England and Wales, with those earning above £27,243 in Scotland paying more.

She said: “Scotland continues to have the fairest and most progressive tax system in the UK, with more than half of taxpayers paying less income tax in Scotland than elsewhere in the UK. 

“We will use the resources raised through our tax decisions to support our vital public services, end Scotland’s contribution to climate change, boost our economy and meet our ambitious targets of tackling child poverty.”

Ms Forbes said tackling the climate emergency was a key part of the budget, and announced a series of long-term plans to protect the environment.

These included £1.8bn of investment in low carbon infrastructure to reduce emissions, and more than £250m to restore peatland over the next 10 years.

She said a business rate poundage of 49.8p alongside £744m of rates reliefs would mean 95% of commercial premises are liable for lower rates in Scotland than in the rest of the UK.

Public sector pay is due to rise by 3% for those earning less than £80,000.
She said £1.4bn would be spent supporting  low income households, and £645m invested in delivering 1140 hours of free childcare from August.

The draft budget, which is based on UK government forecasts ahead of its own budget and  assumes £500m extra under the Barnett formula, will now be subject to weeks of horse-trading among the Holyrood parties. 

The Government’s budget advisers, the Scottish Fiscal Commission, also published forecasts of slow economic growth, with Brexit “remaining a risk”. 

It predicted Scottish GDP would grow by just 1% in 2020/21, then 1.1% the next year and 1.2% in 2022/23.

Employment was forecast to remain stable at 2.65m this year, increasing to 2.66m in each of the next three years.

The Commission said the increasing complexity of the Scottish budget, new welfare powers, and the heavier than usual reliance on estimates because of the delayed UK budget, meant it was liable to change through the year. 

Green MSP Patrick Harvie, whose party has helped pass the last three SNP budgets, said: “This budget is timid, not transformative. It lacks the necessary action on the climate emergency and is an abdication of responsibility. The finance minister must change tack.” 
Tory MSP Murdo Fraser said his party could not support the budget as it failed to narrow the tax-gap with England and short-changed the police 

He said: “As it stands, this budget falls well short of where we need it to be. The SNP has to go back to the drawing board.”

Labour’s Rhoda Grant accused the SNP of using “smoke and mirrors” to hide its neglect of public services and failure to use Holyrood’s tax powers.

Scottish LibDem leader Willie Rennie added: “This is a budget that is going to need substantial revisions. We need to see serious efforts to support councils, the police, mental health, nursery education and the environment.” 

Dr Liz Cameron, head of the Scottish Chambers of Commerce, said: “Without knowledge of the taxation and investment policies of the UK government the Scottish Government has rightly gone ahead with committing to a spending plan, albeit with a blindfold on. I would also like to extend my congratulations to the minister as the first woman to have delivered a budget in the UK.

“The Scottish Chambers of Commerce network welcomes the commitment to investing in the National Infrastructure Mission, city and region growth funds. We also congratulate the Scottish Government for its commitment to no further increases in income tax divergence between Scotland and the rest of the UK this year.”

David Lonsdale, director of the Scottish Retail Consortium, said: “The decision to increase the threshold for the lower and starter rates of income tax whilst freezing the tax rate for all workers is a positive decision which will bring some comfort to hard-pressed shop owners.”

Tracy Black, director of CBI Scotland said: “Lowering the poundage rate for some medium-sized firms unfairly caught by the large business supplement is a step in the right direction.

“Increased long-term investment in low carbon infrastructure is welcome and business stands ready to play its role on the road to a net zero economy.

“With access to skills remaining a top business concern, increase in funding for colleges and universities is a vital measure that will help to equip young people with the skills they need to succeed in a world of work that’s rapidly changing.”