With tomorrow’s election looming, and all parties gearing up for a final push, one key area of focus will be the economic outlook for Scotland.
The increased tax powers coming in to force from April 2017 mean the tax policies of the main parties will be scrutinised by voters in a way they have not been before.
For background, you can read our blogs on the increased income tax powers of the Scottish Parliament and the Smith Commission.
So, what are the main talking points around the coming tax powers?
- The SNP pledged to keep the same rates and bands of income tax as currently in force in the UK, but will not pass on the increased £45,000 threshold for the higher rate, instead restricting any rises in the threshold to RPI. They will ask the Council of Economic Advisors to consider annually the impact of raising the additional rate to 50p from 2018/19 onwards. The Scottish Conservatives have proposed to mirror the income tax rates across the rest of the UK, stating they will ensure Scotland’s income tax rates will not be higher than the rest of the UK.
- The Scottish Liberal Democrats have proposed to set income tax rates one percentage point higher across the board than those set by the UK Government (e.g., rates of 21%, 41% and 46%).
- Scottish Labour adopt a similar approach, proposing an increase in the basic rate and higher rate by one percentage point, and raising the additional rate from 45% to 50%.
- The Scottish Greens propose a new band structure with a lower rate of 18% (£11,500 – £19,000) and a middle rate of 22% (£19,000 – £43,000), a higher rate of 43% (£43,000 – £150,000) and an additional rate of 60% (£150,000 +).
Air Passenger Duty (APD)
Another hot topic is the planned devolution of APD to Scotland in April 2018.
- Under the proposals put forward by the SNP, APD is to be cut by 50% from April 2018 with a view to abolishing it completely with a view to boosting Scottish tourism.
- The other parties disagree, citing lost revenue and the potential environmental impact of cheaper air travel.
- The Scottish Conservatives suggest reforming APD to make it more progressive.
- The Liberal Democrats, Scottish Greens and Scottish Labour would retain APD in its current form, with Scottish Labour suggesting that receipts could be used to assist first time buyers.
With an imminent referendum on the EU approaching and public pressure to reduce the deficit, there is no doubt the next four years will be a challenging time for any party in Holyrood.