At first, the SNP minister said he was “not going to make any announcements just now… about where we’re going with decisions in the budget.”
But when asked if Scotland had “reached the point where raising taxes any further might be counterproductive,” Mr McKee said that was a “very strong consideration.”
READ MORE
In last year’s budget, the Finance Secretary announced an increase in the top rate of tax from 47p to 48p in the pound.
However, according to the Scottish Fiscal Commission (SFC), behavioural responses offset around 90% of the money raised.
Instead of bringing in £53 million, they estimated that the coffers at St Andrew’s House would take just £8m.
In their forecasts, released alongside the budget, the independent body also said the new 45% band of income tax, introduced on incomes between £75,000 and £125,140, should have raised £147m, but when behavioural changes were taken into consideration, the yield will have dropped by around 59% to just £74m.
Scotland maintains six tax bands compared with three in other parts of the UK.
Currently, anyone earning over £29,000 north of the border pays more income tax than if they live in England, Wales or Northern Ireland.
Last week, Rachel Reeves said tax thresholds south of the border would rise in line with inflation.
There had been some speculation she could freeze rates, leading to what is known as fiscal drag, when people are pushed into higher tax brackets because of rising wages.
The higher rate threshold has remained frozen for the past four Scottish budgets.
Around 650,000 Scots fall into the higher, advanced, or top-rate taxpayer categories, more than double the 320,000 in 2017-18.
READ MORE
During the interview, Mr McKee said there were still questions over the Barnett Consequentials coming to Scotland after the announcements in Rachel Reeves’s budget.
The UK Government say next year’s settlement should be £3.4 billion more, while this year’s budget should be boosted by £1.5bn.
However, Mr McKee said this would need to be used to cover public sector pay deals.
Asked if the extra £3.4bn made the budgeting process easier, he said: “We need to unpick that a bit. Understand what that’s all for.
“There’s £1.5bn extra for this year, but there’s only £70m of that for capital spend, which creates some challenges.
“That’s still a significant reduction on where it was last year.
“On top of that, when you adjust for inflation, there’s another £800m for next year, but most of that is to take the capital spend back to where it was last year.
“So there’s really only an extra £300m next year, on top of what we’ve secured from the UK government this year.”
He was also pushed on the row around whether Westminster will pay for the increased national insurance which employers will now have to pay after Wednesday’s budget.
It is not clear if that money will need to come from the £3.4bn of Barnett Consequentials as Ms Reeves has suggested, or if it will be separate, as Scottish Labour has said.
Mr McKee said: “There are unknowns because we need to wait for the consequentials to be finally calculated. The £500m national insurance hike would knock a significant hole in that as we had to dip into the Scotland reserve money this year to cover something for next year.
“The money that’s come through now allows us to review that and see what the situation is. But because of public sector pay increase, the money that’s coming through now effectively covers those public sector pay increases.”
When asked about it earlier on the programme, Scottish Labour Anas Sarwar said there would be “discussions” between the governments “in order to compensate the public services around the increase in the national insurance.”
“But let me emphasise something, which is the SNP went into this budget asking for £70bn of additional public spending, and they’ve now come out of this budget opposing £40bn of revenue raising measures.
“It is completely economically illiterate. And actually it’s a scale of economic illiteracy that Liz Truss and Russell Findlay would be embarrassed about.
“If they are suggesting we shouldn’t have made the decisions around the National Insurance contributions, where did they want that additional £1.5bn this year and £3.4bn next year to come from? If they have an alternative suggestion, please bring it forward.”
In the interview, Mr McKee also hinted that the SNP could be open to mitigating the cut to the winter fuel payment.
He replied: “That decision that was made by the UK Government earlier in the summer obviously took a significant amount of money out of the pot we had available to provide that payment, with clarification coming through now on these numbers for this year and indeed for next year.”
Pressed again, the SNP minister said: “I’m not going to commit to that on this programme, the Budget will be along in a few weeks and you can find out where we are but it’s absolutely something we’re considering along with all the other things you’ve asked us to spend money on this morning.”
