Scottish government may consider income tax rise after £107m budget cut

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John Swinney, the Scottish finance secretary, has said he may consider raising income tax rates next year after the Treasury cut Holyrood’s funding by a further £107m.

The cut is about £70m less than was forecast last week when George Osborne, the UK chancellor, announced swingeing cuts across Whitehall.

The final figure was announced on Monday an hour before Swinney met Osborne to present a new Scottish government analysis which concluded that the Treasury could increase overall UK spending by £93bn and still keep within the chancellor’s fiscal rules.

“In the face of strong opposition and no mandate for austerity in Scotland, the chancellor plans to plough ahead and slash the Scottish budget this year,” Swinney said. “The cut of £107m is substantially lower than the UK government’s original estimate, but this still too bitter a pill to swallow. I made it clear today that it is completely unacceptable for reductions to be imposed in this financial year to the budget that has already been agreed by the Scottish parliament.”

Swinney is likely to look for underspends and short-term efficiency savings to find the extra £107m, and hinted that it was unlikely that Scottish income tax rates would rise next year. But his admission that he could consider increases will raise the stakes in a battle over public funding brewing between the Tories and the Scottish National party.

Under the 2012 Scotland Act the Scottish parliament will get new powers to setincome tax rates, but for now Holyrood will only be allowed to raise or cut rates by the same amount in each band. That prevents the Scottish government from cutting only lower income tax rates, altering bands or raising higher rates, or imposing a new 50p top rate as promised by the SNP and Labour at the general election.

The Scotland bill that had its second reading in the Commons on Monday would empower Holyrood to change all rates and bands above the basic rate, possibly starting in April 2017 or April 2018.

Powered by Guardian.co.ukThis article was written by Severin Carrell Scotland correspondent, for theguardian.com on Monday 8th June 2015 19.58 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010