First-ever income-tax rates vote held by MSPs in Scottish Parliament

MSPs have voted on income-tax rates and bands in Scotland for the first-time ever, with Holyrood opting to freeze the point at which the higher 40p tax rate kicks in.

While the UK Government is to raise the threshold for this to £45,000 in April, it will remain at £43,000 north of the border.

The freeze in the tax threshold was backed as MSPs voted by 61 to 55, with six abstentions, in favour of the Scottish rate resolution for 2017-18 - which has to be passed before MSPs can agree the Scottish Government's Budget on Thursday.

There will be no change in the basic rate of income tax despite Labour and the Liberal Democrats having called for an increase to 21p to raise additional cash for public services.

Labour calls for a reintroduction of a 50p top rate of tax for those earning £150,000 a year or more have also been rejected by the Scottish Government.

While SNP ministers at Holyrood had originally planned to increase the threshold for the 40p tax rate in line with inflation, they later agreed to keep it at £43,000 to secure a deal with six Scottish Green MSPs to back their Budget.

Tory finance spokesman Murdo Fraser branded that a "grubby Budget deal" as he claimed one in seven income-tax payers in Scotland would be worse-off compared to England.

Finance Secretary Derek Mackay told MSPs: "I remain convinced that at this time time these proposals are the best approach to take.

"Now is not the time to add to the burden of low and middle-income taxpayers as Labour would.

"That is why we chose to freeze the basic rate of income tax for 2017-18 and for the course of this Parliament.

"However, now is not the time to be giving away a substantial tax cut as the Tories would.

"So, by asking those higher-earning Scots to forgo a tax cut, additional revenue will be raised to support our vital public services."

Mr Fraser insisted the Scottish Government had made "the wrong choices when it comes to income tax".

He said: "The SNP plans to create a tax differential between Scotland and the rest of the UK which will mean that some 374,000 people in Scotland will pay more tax here than if they lived south of the border."

He said it was the top 14.6% of earners who will be affected, telling MSPs this included train drivers, nurse consultants and some teachers.

The Conservative claimed the tax rises "will hurt" Scotland's economy and public finances in the long run.

Labour's Alex Rowley said the Tories were wrong in their assertion that increasing tax would damage the economy.

The Scottish Labour deputy leader said: "At a time when we need investment in our economy, when we need investment in our country's greatest asset, its people, I would suggest that asking the top 1% of earners to pay a 50p top rate of taxation is not unreasonable."

Scottish Greens' co-convener Patrick Harvie said his party had chosen not to block the SNP's rate resolution because it would endanger extra cash for local services secured in the budget negotiations.

He claimed that the rates were "timid" and "lacking ambition".

"I think it is undeniable that in future, including local government and national level, we are going to have to use all of our tax powers in a more creative way," he said.

Lib Dem leader Willie Rennie argued the Greens had been "duped" into striking a deal with ministers to get their budget through.

He said: "I reject the rate resolution today. I don' t think it is matching the opportunity that this parliament has.

"I also reject the Conservatives' belief that the only way to grow the economy is to have race to the bottom, to have ever lower tax."