Nicola Sturgeon was coming under pressure tonight to scrap a series of planned tax rises following Philip Hammond’s decision to announce a series of giveaways for the rest of the UK.
The chancellor’s announcement of two big tax cuts for the rest of the UK – stamp duty for most first time buyers and freeing more workers from income tax – has turned the focus on the Scottish government’s plans.
Ms Sturgeon has made it clear she wants to use the Holyrood budget next month to raise taxes in order to spend more on public services.
But the first minister faced demands tonight that she step away from those increases now that Mr Hammond’s budget has reinforced Scotland’s position as the highest taxed part of the UK.
In his budget statement, Mr Hammond confirmed that he will scrap the requirement for the police and fire service in Scotland to pay VAT.
Police Scotland and the Scottish Fire and Rescue Service have had to pay VAT since they were created in April 2013, and are the only such services required to do so.
Mr Hammond also announced tax breaks for oil and gas companies to help revive the beleaguered North Sea industry. He froze duty on spirits, after lobbying from the whisky industry, and he promised investment in a new deal for the borderlands project, which is designed to help revitalise the economies of the Borders and Dumfries and Galloway.
The chancellor claimed that the budget would deliver an extra £2 billion for Scotland in so-called Barnett consequentials – the money Scotland gets from extra spending announcements for England.
Mr Hammond’s surprise announcement was the change to stamp duty, scrapping it entirely for all first-time buyers of properties worth £300,000 or less in England, Wales and Northern Ireland.
In Scotland, stamp duty has been replaced with Land and Buildings Transaction Tax which kicks in at purchases of more than £145,000.
Ministers in Scotland have no plans to scrap the tax, which means that many property purchases in Scotland will now be substantially than they are in the rest of the UK.
Mr Hammond also announced a rise in the threshold for the higher rate of income tax, to £46,350.
Ms Sturgeon has already refused to pass on last year’s rise, to £45,000, leaving all Scots who earn more than £43,000 paying more than their counterparts in the rest of the UK.
Ruth Davidson, the Scottish Conservative leader, said: “With income tax and stamp duty being cut south of the border, there is a growing tax gap between people in Scotland and elsewhere in the UK.
“The SNP can’t keep hitting Scots in the pocket, and need to hold off further tax rises in the Holyrood budget next month. The case for raiding the pay packets of ordinary Scottish families has collapsed.
“The chancellor has delivered for Scotland. As we look ahead to the Scottish budget next month, it’s now vital that the SNP government follows suit.”
The Scottish government hit back, claiming that the £2 billion figure announced by the chancellor as new money for Scotland was merely “smoke and mirrors”.
Scottish ministers argued that more than half (£1.1 billion) came with strings attached which meant they would have to pay the money back.
Derek Mackay, Scotland’s finance minister, said: “The reality of today’s budget is that Scotland continues to be hit by UK austerity and the decision to leave the EU. Compared with the £1bn awarded to the DUP, the funding settlement for Scotland unveiled today is disappointing.
“I have consistently argued for a better settlement for Scotland, and this budget does not reflect that.”