JOHN Swinney has given a strong hint of painful tax changes when he sets out the Scottish Budget today, saying he will use his powers to the “maximum extent that is responsible”.

The Deputy First Minister also said the devolution settlement had left him unable to borrow to cope with inflation and the cost-of-living crisis, implying tax hikes are his default option. 

Mr Swinney, who is covering for Finance Secretary Kate Forbes while she is on maternity leave, will set out his tax and spending plans for 2023/24 at Holyrood this afternoon.

He has already warned that double-digit inflation and related public sector pay demands have made the backdrop the worst since the advent of the Scottish Parliament in 1999.

The UK Autumn Statement recently gave him around £1 billion extra, which economists think will offset inflation. However, he faces other pressures, including rising benefit bills and MSPs warning of drastic consequences for public services from real-terms cuts.

Ms Forbes last year froze the thresholds for the higher and top rates of income tax, and let the lower thresholds increase by inflation.

But a greater range of freezes – or threshold cuts – are expected this year, including Msr Swinney copying the Chancellor’s cut of the top rate threshold from £150,000 to £125,140.

The SNP’s join government deal with the Scottish Greens means the tax figures set out today will be rubber-stamped by MSPs in the New Year, not tweaked through horse trading.

Mr Swinney said his three priorities would be “eradicating child poverty, strengthening public services and moving towards a net-zero economy”.
He said: “Our Budget goals are mutually beneficial and represent a distinctive approach to the economic challenges we face. 

“The Scottish Budget will take further steps to address inequality and eradicate child poverty. 

“It will encourage a just transition to net zero, creating wealth and opportunity across the country. And it will be the catalyst for reforms necessary to ensure our first-class public services remain sustainable in the face of the challenges to come.

“I would like to go even further but the cost-of-living crisis has also laid bare the fiscal constraints of devolution, as we cannot borrow to support day-to-day expenditure when times are hard to assist us through these difficult days. 

“It is clear that businesses and households are paying a steep price for the economic mismanagement of the UK Government. The cost-of-living crisis requires decisive action. 

“In setting this Budget, the Scottish Government will use its limited powers to the maximum extent that is responsible, to meet the challenges faced by the people of Scotland.”

Edinburgh has repeatedly urged London to revise the fiscal framework behind Holyrood’s budget to let the Parliament borrow freely, instead of operating within tightly capped limits. 

However, Chancellor Jeremy Hunt gave the idea short shrift last week, saying Scots didn’t want “endless wrangling over the constitution”.

The Scottish Tories said the Scottish Government should fully pass on £1.2bn of Barnett funding formula consequentials from recent UK Government spending decisions and divert the £20 million earmarked for an independence referendum next year into public services instead.

Scottish Labour MSP Daniel Johnson said the Budget must end the “scandal” of 23,000 low-paid workers in the public sector and ensure they no longer earn less than the living wage.

He also called for a freeze on water charges through a £100 rebate, help for homeowners facing repossession, and the cancellation of school meal debt.

He said: “With Scotland’s finances in turmoil due to Tory and SNP incompetence, the need for a budget that delivers on the priorities of the people of Scotland has never been greater.

“Scottish Labour is clear – the priority for this budget must be tackling the cost of living crisis by targeting support to those most in need and ending the scandal of poverty pay across the public sector.

“Every penny of spending in this budget must deliver value for money for the people of Scotland - on Thursday the Deputy First Minister must set out clearly how he will reduce waste and end spending to fix mistakes made by SNP ministers.

“Labour wants to get our economy growing so that we can improve wages and living standards across our country – Scotland cannot afford another year of missed opportunities or SNP spin.”

The Scottish Liberal Democrats demanded investment in energy efficiency, social care and support for those with long Covid.

Leader Alex Cole-Hamilton said: “The Government should ditch their billion-pound bureaucratic take over of local care services and spend the money on the frontline. They should also repurpose the £20m set aside for a referendum that everyone knows is not going to happen next year.

“Given that the Scottish Government insist on using your money to try to break up the UK, striking a deal will not be easy but nevertheless we owe it to the people of Scotland to try to improve this budget.”

Green MSP Ross Greer said “people and planet” would be key to the Budget.
He said: “Between soaring prices and sky-high inflation, the Westminster government has caused huge damage to household budgets and unleashed chaos on our economy while leaving the Scottish Government to pick up the pieces.

“Today’s Scottish Budget will make real our commitments on climate and nature. It will stand in stark contrast to the climate vandalism and economic pain being inflicted by the Tories.

“With Scottish Greens in government, we have worked to ensure that this is a progressive package that delivers for the communities who have been hammered by years of Downing Street’s cruelty and incompetence. 

“So people and planet will be at the core of this Budget, which will build on the progress we have made since the Scottish Greens joined the government 18 months ago, and take further steps on our journey to a fairer, greener society.

“Whether it is free bus travel for everyone under 22, the winter rent freeze, or the huge increase and expansion of the Scottish Child Payment, it is the Scottish Government, where Greens are at the table, that is the only administration in the UK making these vital changes.”

Scotland’s biggest teaching union, the EIS, urged the Scottish Government to give adequate funding for a new pay settlement for striking teachers.

The profession has been locked in a dispute in recent months, with further strike action planned for early in the new year.

The PCS civil service union said today’s Budget must give its members the pay they needed and deserved – 
or they would exercise their overwhelming mandate to take  industrial action.