Scotland widens higher earner tax gap with rest of UK, raises public pay

EDINBURGH (Reuters) - Scotland's pro-independence devolved government announced tax relief on Wednesday for lower earners and steady pressure on higher earners in 2019/2020, funding higher public spending per head than in the rest of Britain.

Scotland's tax powers mean it can decline to pass on tax relief for higher earners which was approved by Britain's Conservative national government in October.

In this way Scotland's finance secretary Derek Mackay will fund an "inflation-busting" public sector pay rise.

Under Mackay's plans, Scottish public sector pay will rise by 3 percent for those earning less than 36,500 pounds ($46,205) per year, 2 percent for those earning between 36,500 pounds and 80,000 pounds, with a 1,600-pound cap on any increase for those earning more than 80,000 pounds.

"This helps us to make Scotland the kind of country that we want it to be, funds our public services, supports our economic infrastructure and supports those most in need," he said.

Scotland has had powers to set its own income tax rates since 2016 under a law passed to fulfil a promise to voters on the eve of a 2014 independence referendum, when Scots voted to stay in the United Kingdom. The lion's share of its finances are still set by the UK government in London.

Per capita public spending in Scotland was 1,576 pounds more than the British average in 2017/18, partly supported by taxes from other parts of Britain.

By taxing wealthier income brackets more heavily and offering more in terms of public spending, the Edinburgh administration aims to show its economic and political priorities are different from those of Britain's government and boost support for its independence goal.

(Reporting by Elisabeth O'Leary, editing by Mark Heinrich)