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High earners hit as Swinney freezes business rates

John Swinney: ‘fairer society’

Higher earners took a hit in Deputy First Minister John Swinney’s Budget today but he offered a boost to companies by freezing business rates.

The acting Finance Secretary hiked the higher rate of income tax from 41p to 42p in the pound and increased the top rate from 46p to 47p.

The tax threshold for the top rate was lowered from £150,000 to £125,140, bringing more earners into the highest band in line with the move by the Chancellor for the rest of the UK. Other income tax bands remain unchanged.

In a statement laced with criticism of the UK Government’s “catastrophic” and “damaging” policies, Mr Swinney said he aimed to create a “fairer and more equal” society.

Secondary legislation has been drawn up to increase the second homes element of land and buildings transaction tax, from 4% to 6%.

Mr Swinney said he would be withdrawing the £20m allocated to campaigning for Scottish independence and diverting it to the fuel insecurity fund.

“These are spectacularly difficult times in which to manage the public finances,” Mr Swinney said. “I am wrestling with those challenges right now.”

He said he would increase benefits under the control of the Scottish parliament by the rate of inflation in September.

The hit on higher earners, as forecast by Daily Business on Monday, was delivered as part of a Scottish Budget boosted by additional funds provided by the Chancellor in his Autumn Statement.

Mr Swinney is also allocating £15m in this financial year and £57m in the next to support the long-overdue completion of the two ferries – vessels 801 and 802 – at Ferguson Marine shipyard.

Liz Smith for the Conservatives said: “Can I acknowledge the very tight fiscal circumstances confronting the Cabinet Secretary.

“But I do think it is about time John Swinney stopped blaming the UK Government for every single predicament in which he finds himself, because he has had more money at his disposal than he has been prepared to admit and the Fraser of Allander Institute reminded us that the block grant money from the UK Government more of less covers the inflationary pressures upon him.”

Catherine McWilliam, Nations Director at the Institute of Directors Scotland, said that freezing business rates would provide much-needed certainty on the immediate future for business leaders.

FSB Scotland policy chair, Andrew McRae, said: “We urged the Government to freeze the percentage at which businesses pay their rates, so we’re pleased they’ve listened.

“That said, we had hoped the Scottish Government would have agreed specific relief for those sectors – like retail, hospitality and leisure – who were hardest hit by Covid and are now in the eye of the energy price storm. We’ll continue to make that case.”

David Lonsdale, director of the Scottish Retail Consortium, said: “Freezing the business rate means retailers – Scotland’s biggest private sector employer – avoid a £60 million tax hike.”

Colin Wilkinson, managing director of the Scottish Licensed Trade Association, expressed disappointment at Mr Swinney’s failure to follow the lead of England and Wales by implementing a 75% rates relief package for businesses.

David Alexander, the chief executive of DJ Alexander Scotland, commented: “It probably won’t surprise anyone that John Swinney failed to support the housing market in Scotland in his budget speech today.

“He had an opportunity to equalise Scottish property taxes with England in his budget but instead decided to maintain a widening disparity which can only have the effect of making houses considerably more expensive for first time buyers, those buying for more than £325,001, and those seeking to invest in property or to buy a second home.”

The budget was delivered 50 minutes late after Presiding Officer Alison Johnstone suspended the Holyrood parliament following concern that details of the Scottish Budget had been leaked.

Immediately after First Minister’s Questions Conservative MSP Murdo Fraser was the first to raise a point of order.

“It is a matter of courtesy that major government statements are made firstly to this Chamber and not to the media,” he said.

Ms Johnstone promised to look into the matter but just as John Swinney was about to deliver his statement at 2.25pm she said she was suspending the session for 30 minutes as she had not had sufficient time to conclude her investigation.

The Budget statement began at 3.15pm. Mr Swinney began by saying: “At no stage has anybody been authorised to disclose information in this statement on my behalf at any time.”

Mr Swinney’s package has widened income tax divergence between Scotland and the rest of the UK.

The Chartered Institute of Taxation said some of the key points to note are:

New tax bands

Struan Stevenson, CEO of pro-union business group SBUK, said:  “Today’s Budget puts Scotland on the path to becoming the UK’s least competitive tax environment for starting or running businesses, causing huge source of concern for company leaders.

“Don’t forget, 60 per cent of Scotland’s income tax receipts comes from payers in the top two rates and there’s a risk that business here will increasingly struggle to attract talent from the rest of the UK in vital industries like digital, life sciences and financial services.”

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