The Scottish Government has cast aside the concerns of businesses and increased income tax for higher earners.
Finance Secretary Shona Robison confirmed a new 45% band will be introduced for people earning between £75,000 and £125,140 as she unveiled the government's budget for next year.
The top rate of tax, paid by those earning more than £125,000, will also rise from 47% to 48%. And the current threshold for paying the higher band - £43,663 - will be frozen instead of rising by inflation.
Russell Borthwick, chief executive at Aberdeen & Grampian Chamber of Commerce, said: "Business has spoken with one voice calling for serious investment in growing our economy – regrettably that voice has not been heard."
Budget changes at-a-glance
In tax-raising measures described as a triple blow for middle and higher earners, Ms Robison targeted those with “broadest shoulders” as part of moves to plug a £1.5billion hole in finances.
However, her “progressive course” to support public services was criticised by business leaders who said that SNP ministers were increasingly singling out the country’s top talent for tax rises.
Elsewhere in the budget:
- Builders have warned of a supply crisis after the housing budget was slashed by £200million.
- Rail services face being cut by £80million, active travel by £41million and ferries by £5.5million.
- Hospitality bosses reacted furiously as it emerged that a 75% business rates reduction secured in England would not be matched in Scotland.
- The Scottish Fiscal Commission downgraded its forecasts for economic growth for the next five years.
Extra funding will be ploughed into health service and social security benefits, as well as real terms increases in the education and justice budgets. And local authorities will receive £140million in additional funding to help finance a council tax freeze.
Ms Robison said said Holyrood’s block grant funding, derived from UK Government spending decisions, had fallen by 1.2% in real terms since 2022-23.
“Devolution has brought many benefits, but it has also exposed quite how beholden we are to the decisions of Westminster,” she told MSPs.
“We are fighting Westminster austerity with one hand tied behind our back.”
In a letter to the government last week, the Chamber laid out four ‘asks’ ahead of the budget, under four key business themes.
Responding to the budget yesterday, Mr Borthwick said: “We asked for government to create a prosperous business environment – they have responded with a tax grab which will drive talent away.
“We asked for government to double the Just Transition Fund to help grow our tax base and invest in the energy transition – they have responded by cutting annual spending on the fund by 76% from next year.
“We accept that funding is tight – but aspiration costs nothing, which is why this budget will excite very few in Scotland’s business community.”
On City and town centre regeneration, Mr Borthwick said : “While welcoming the funded freeze on business rates poundage, the hospitality sector businesses involved in breathing life back into Aberdeen city centre and the other high streets across our region remain disadvantaged against their English counterparts.
On Creating a prosperous business environment, Mr Borthwick said: “Along with eight other business organisations, we urged the Scottish Government not to impose income tax hikes, which would give the wrong impression at a time when we need to bolster our declining skilled workforce.
“Unfortunately, they’ve gone ahead regardless and introduced a new tax band which sends all the wrong signals and will impact recruitment and retention of the people we need to drive Scotland’s economy. The differential is now very significant indeed.
On supporting a just energy transition, Mr Borthwick said: “The challenge of the energy transition has been exacerbated by the Scottish Government’s needless presumption against oil and gas, which is why we want to see the Just Transition Fund doubled to deliver £1billion of investment over 10 years.
“Instead, annual spending on the fund is reducing to just £12.2million from next year. There is money in here for supporting the offshore wind supply chain, but a real question mark over whether the scale of the funding is enough to make a meaningful difference.”