Scotland politics

Scottish budget 2017: What do I need to know?

The Scottish government will set out its spending and taxation plans for the next year in its annual budget on Thursday afternoon.

It is widely expected that Finance Secretary Derek Mackay will use his powers over income tax rates and bands to announce tax hikes for Scotland's middle and high earners to help raise funds for public services.

The move would see many people in Scotland pay more tax than those earning the same salary elsewhere in the UK - so this year's budget could have a real impact on how much money you have in your pocket.

Here is a quick guide to what to look out for.

When is the budget?

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Mr Mackay will outline his draft budget in the Scottish Parliament from 14:00 on Thursday 14 December, before opposition parties are given a chance to respond.

The debate is likely to last for about 90 minutes, and there will, of course, be full live coverage on the BBC news website - and across our radio and television output.

Who is Derek Mackay?

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This will be the second budget drawn up by Mr Mackay, who is effectively the Scottish government's equivalent of the chancellor of the exchequer.

He succeeded John Swinney in the role in May last year, having previously served as transport secretary.

The 40-year-old has been the SNP MSP for Renfrewshire North and West since 2011, and is the party's business convener - meaning he has responsibility for managing its election campaigns.

So what's he going to say about income tax?

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Last month, First Minister Nicola Sturgeon signalled her government's thinking when she said it could be time for those who earned the most to pay a "modest amount more".

BBC Scotland political editor Brian Taylor says Mr Mackay is likely to announce an increase in the 45p additional rate for those earning above £150,000.

And there has been speculation that an extra tax band could be created that would also see those earning above about £30,000 pay more.

The Scottish government's chief economist, Gary Gillespie, said on Tuesday that any move to push the Scottish top rate up from 45p to 50p would carry a risk of losing out on revenue as the highest earners could find ways to avoid paying it.

But his report also noted that smaller changes could reduce that risk.

The Scottish government's recent options paper on income tax set out various proposals that would raise up to an additional £290m - less than 1% of the total Scottish budget, which was about £33bn last year.

But it would be more than enough to offset the £219m real terms cut in the UK government's block grant to Scotland that has been estimated by economists at the Fraser of Allander Institute.

Many Scots already pay slightly more income tax than the rest of the UK after Mr Mackay opted to freeze the thresholds at which rates kick in last year, while they rose elsewhere.

Increasing that gap between Scotland and the rest of the UK further would be politically dangerous - with Mr Mackay facing warnings from business leaders that Scotland cannot afford to be associated with higher taxation.

Expect him to emphasise that Scots get "perks" such as free university tuition fees that are not available south of the border - and that these will need to be paid for if they are to continue.

Read more about Scotland's income tax options here

What else should I look out for?

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Image caption Many public sector workers will be in line for a pay rise

Mr Mackay has said his budget will "invest in public services, protect our economy and deliver greater fairness", as well as putting "more money into our NHS" and supporting business.

The Scottish government has already pledged to lift the public sector pay cap, so expect details on how much of a pay rise workers can look forward to.

There will inevitably be a row over council funding, with local authorities arguing that they need an additional £545m in order to continue providing all of the services that they currently do.

And published alongside Mr Mackay's budget will be the first forecasts from the new Scottish Fiscal Commission, which has been tasked with predicting economic growth and receipts from devolved taxes.

What happens next?

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Image caption Patrick Harvie and the Scottish Greens are seen as being the most likely source of support for Mr Mackay's budget

Talks. Lots of talks.

With the SNP forming a minority government, it needs to secure the support of at least one other party in order to eventually pass its budget, with the final vote due to be held on 19 February.

A deal with the Tories or Labour seems almost unthinkable, which leaves the Scottish Greens and Liberal Democrats as potential suitors - with the Greens seen as being the most likely partners.

It was the pro-independence Greens who rode to Mr Mackay's rescue last year, with a budget deal finally being struck in February after nearly two months of negotiations.

The deal saw the finance secretary agree to a deal totalling £220m of extra spending, including £160m for local authorities.

At the time, Scottish Greens co-convenor Patrick Harvie hailed it as the "the biggest budget compromise in the history of devolution in Scotland".

It is likely he would be looking for concessions on a similar - or even greater - scale this time.