The last day of May saw the first major economic debate of the new Scottish Parliament. The duties of former Finance Secretary, John Swinney, have now been split in two to recognise the added responsibilities that devolved taxes will bring to the job. Keith Brown as Economy Secretary opened the debate providing the SNPs vision of what needs to happen in the Scottish economy in this parliament.
Not many specifics were discussed and the debate provided an opportunity for some maiden speeches. Calls to increase taxes in order to fund improvements to education particularly were made in line with the party manifestos for the recent parliamentary elections.
Ultimately the motion finally approved by the Parliament made only limited reference to tax with an expressed need for, amongst other things, a 'competitive business tax system' to support the requirements for improvements to skills, education, infrastructure and health that will be necessary to improve productivity in Scotland.
What this will mean for Scottish taxpayers will be unveiled in the Scottish Budget later this year, widely expected to be in November, which will be presented by Derek Mackay picking up the other half of Mr Swinney’s former post. However, with no control over corporation tax, options for business taxes will be limited.
Further problems have been highlighted by figures recently published showing a shortfall in the tax raised from land and buildings transaction tax. This, when taken together with analysis of trends in the Scottish property market, have prompted calls across the industry for a rethink - particularly of the impact on the higher end of the market.
The minority SNP government faces a difficult job ahead securing support for its programme given the diversity of views across the other parties, particularly in relation to tax policy. It is broadly in favour of increasing tax rates at the upper end, but has concerns about the possible behavioural effects that might actually reduce the funds available to it. Mr Mackay has a hard few months ahead of him, and we await with interest his first budget.
If you would like to discuss any of the points raised further, please get in touch with Shirley McIntosh or your usual RSM contact.