Scottish Budget: Income tax increased to 21p for those earning over £24,000

Holyrood's Finance Secretary has insisted most Scots will pay less income tax next year, despite increasing charges for higher earners.

Derek Mackay announced a number of changes to income tax in his draft Budget for 2018-19, including increasing the charge to 21p for those earning more than £24,000 a year.

The higher rates of income tax are also being increased, going to 41p and 46p, but Mr Mackay is also bringing in a new "starter rate" of income tax.

As a result of that, combined with the increase in the personal allowance, he said all those people earning up to £33,000 a year would be protected from any increase.

"Those earning more than £33,000 will pay only a proportionate amount more," he told MSPs at Holyrood.

Mr Mackay vowed the changes he announced will make "Scotland's income tax system even fairer and more progressive".

He took the decision to increase income tax for the very top earners - those on a salary of £150,000 a year or more - by 1p after a report from the Scottish Government's chief economist said bringing back the 50p top rate in Scotland alone could see the Scottish Government lose money.

The Finance Secretary said: "I will increase the higher and top rate of tax by 1 percentage point to 41p and 46p respectively.

"This sets the top rate of tax at a level which will generate the most income with the the least risk of losing revenues next year and damaging the economy.

"Had we gone further our modelling indicates that once behavioural effects of forestalling are considered a higher rate could actually reduce income tax revenue next year and that's not a decision any sensible government would take."

He continued: "I will freeze the basic rate at 20p but to make the system more progressive I will introduce a new intermediate grade of 21p.

"The intermediate rate will apply to incomes between £24,000 and the higher rate threshold of £44, 273, which will increase in line with inflation only."

Mr Mackay went on: "To make Scotland's income tax system even fairer and more progressive I've chosen to make one further change. I can announce today that I will introduce a new Scottish starter rate of income tax of 19p.

"This new rate will apply to the first £2,000 of taxable income between £11,850 and £13,830. This new starter rate combined with the increase in the personal allowance will ensure that no one earning less than £33,000 which is 70% of all taxpayers will pay any more in tax than they do now."

Mr Mackay, as had been expected, used his draft Budget to end the 1% pay cap that had been imposed on public sectors - although some will see their salary rise by less than inflation.

The Finance Secretary pledged a "guaranteed minimum pay increase of 3%" for all public sector workers earning £30,000 a year or less.

Those earning over £30,000 will see wages increase by 2%, while for those on a salary of £80,000 a year or more the rise will be capped at £1,600.

"This demonstrates our commitment to closing he gap between the lowest and highest paid," he told MSPs.

The changes were outlined in a Budget package containing £4 billion of infrastructure spending for the coming financial year, and rising to £20 billion over the lifetime of the parliament.

That includes £600 million over the next four years for high speed broadband for Scotland - with Mr Mackay saying this was part of "an ambitious plan to make superfast broadband available to every home and to every business premises in every part of Scotland by 2021".

This Reaching 100 programme will put the country "at the forefront of the digital revolution" he said, adding it was "unmatched anywhere in the UK".

He also pledged an increase in health funding of more than £400 million - double the amount that would have been needed for NHS spending to keep pace with inflation.

This will take spending on the NHS in Scotland to more than £13 billion in 2018-19, he said, with this including £110 million for reforming GP care, £550 million to help integrate health and social care and cash to support the roll out of free personal care to those under 65 with degenerative conditions - the commitment known as "Frank's Law".

In addition to this the Scottish Government is providing almost quarter of a billion pounds for nurseries, as it aims to meet its pledge of doubling the amount of free childcare pre-school youngsters receive to 600 hours a year by the end of the parliament.

The budget also allocates £2.4 billion for enterprise and skills while for councils Mr Mackay said there would be a total increase of core funding of £94 million.

He added that if all 32 local authorities increase council tax by the maximum allowed of 3%, this would raise an extra £77 million "which would secure a real terms increase in local government funding".

"This Budget is a comprehensive package of measures designed to protect all that we hold dear," he told the Scottish Parliament.

"It provides the investments we need to meet the challenges of today and seize the opportunities of tomorrow.

"It uses the powers of this Parliament sensibly and in the interests of the country as a whole."

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