Budget deal between SNP and Greens could cost higher rate taxpayers another £250 each

A Budget deal between Nicola Sturgeon’s SNP government and the hard-Left Greens could cost Scotland’s higher rate taxpayers a further £250 each, it has emerged.

The Greens, who are seen as the most likely opposition party to do a deal with the minority SNP administration, said they could not currently support the Scottish Budget as it cuts local council funding.

Andy Wightman, the party’s local government spokesman, said he wanted ministers to provide a further £150 million and suggested there could be discussions around income tax “bands and thresholds” to find the extra money.

Derek Mackay, the SNP Finance Minister, admitted there was an “anomaly” with his tax plans, with people earning between £43,525 and £58,500 getting a tax cut next year.

This is because he used his 2018/19 draft Budget, unveiled on Thursday, to increase the salary threshold for the 40p tax rate by inflation to £44,273. Mr Mackay confirmed he would “engage” with the other parties over the issue.

But freezing the threshold at the current level of £43,000 would mean the vast majority of higher earners paying an extra £254 income tax compared to the minister’s original plans.

This would be on top of increases already announced by Mr Mackay, who used his Budget to put a penny on both the higher and top rates, increasing them to 41p and 46p respectively.

He also unveiled an extra 21 per cent income tax band for earnings between £24,000 and £44,000 that will sit between the basic and higher rates.  Overall, 750,000 Scots earning more than £33,000 will see their taxes rise.

The changes also mean will mean 45 per cent of Scottish workers – around 1.1 million people - will pay more income tax than if they earned the same salary in England. The total includes 800,000 basic rate taxpayers whom the SNP promised to protect in last year’s Holyrood election.

Mr Mackay did a Budget deal with the Greens last year which included an extra £160 million for councils compared to his original plans and a pledge to freeze the higher rate tax threshold.

Mr Wightman suggested that a similar funding package for local authorities would be needed this time around, saying they had been forced to "accept crumbs from the table from the Scottish government".

He told BBC Radio Scotland: "We want a real terms increase and that would involve somewhere in the region of £150m as I calculate it this morning".

The Lothians MSP said the Greens would discuss with Mr Mackay where it could find the additional money that would be needed, including the new income tax rates and bands and lifting a three per cent cap on council tax rises.

But he also said the negotiations could look at the "very flawed" small business bonus scheme, which he said led to "lots of people getting tax breaks they don't deserve".

James Kelly, Scottish Labour’s finance spokesman, attacked the “loophole” caused by the higher rate tax threshold increasing. He said: “Derek Mackay’s sham budget is rapidly unravelling .

“The SNP finance secretary has chosen to effectively cut lifeline services by £700million, while giving a tax break to those earning more than double the average salary.”

Mr Mackay said he was willing to compromise on his plans but he was confident he could do a deal to get a parliamentary majority.

He said: “I believe I've compromised already in terms of our tax position and I think I've delivered much in the way of spending that the opposition parties, if they were fair and reasonable, should welcome.”

But the Scottish Tories said Scotland’s public services are on course to lose £2 billion in vital revenue thanks to a “Sturgeon slowdown” in the economy.

Official projections for income tax revenue over the next four years have been downgraded by £2.1 billion since February. Next year’s figure has been cut by £205 million – more than the £164 million Mr Mackay hopes to raise through extra taxes.

Murdo Fraser, the party’s Shadow Finance Minister, said: “The SNP’s Nat tax isn’t just a broken promise, it’s bad economics. Hanging a sign at the border saying higher taxes will drive away jobs and leave Scotland further behind other parts of the UK.”