Income tax becomes election battleground

Scottish Parliament
By Michael McGlinchey, CA Today

2 February 2016

Parties announce plans to use devolved taxation powers in the run-up to Scottish Parliamentary Elections in May.

Scottish Labour has announced plans to put a penny on the Scottish Rate of Income Tax (SRIT) in a bid to ease council budget cuts.

The announcement comes as campaigning heats up in the Scottish Parliamentary Elections, due to take place on 5 May.

The Scottish Liberal Democrats have proposed a penny income tax rise to fund investment in education and the Conservatives have supported a commission’s call for the creation of a new middle earner tax band.

Scottish Finance Secretary John Swinney said he will set out the Scottish National Party-led government's longer-term intentions on income tax before the end of March.

With the SRIT due to come in on 5 April, Mr Swinney opted to set this at 10p, the same as in the rest of the UK, in his budget statement at the end of last year.

Scottsh Leader Kezia Dugdale is due to call on Mr Swinney to reconsider his draft budget for 2016/17 in a speech in Edinburgh.

Given the choice between using our powers or making cuts to our children's future, we choose to use our powers.

She will say an 11p Scottish rate of income tax would raise almost half a billion pounds each year, enough to avoid reductions in local authority budgets.

The party would also use £50m of the revenues raised to fund a £100 annual payment for taxpayers earning under £20,000, administered by councils.

Mr Swinney is in a stand-off with councils over their funding offer in the budget, with local government body Cosla arguing councils face a "totally unacceptable" £350m of cuts.

Ms Dugdale is expected to say: "Labour cannot support a Scottish National Party budget which asks our children and young people to bear the brunt of the cuts. Given the choice between using our powers or making cuts to our children's future, we choose to use our powers.”

Labour said that under the commitment, which extends across the next parliament, more than one in four workers (810,000) would not lose a penny while around one in five (490,000) would pay less.

Additional powers due to come to Scotland as a result of the post-independence referendum Scotland Bill will allow for variations of both the rates and bands of income tax.

Upper rate of income tax

Scottish Labour has said it will not raise the threshold for the upper rate of income tax and bring back the 50p top rate of tax when these powers come into force in 2017.

Scottish Liberal Democrat leader Willie Rennie said: "I'm pleased that the consensus is growing that action is required for our public services.”

Scottish Conservative finance spokesman Murdo Fraser said: "We believe the rate of income tax should not be higher in Scotland than the rest of the UK. Ideally, when it's affordable, it should be lower.”

A Scottish Government source said: "Around 2.2 million basic rate taxpayers across Scotland - including almost half a million pensioners - would be hit by Labour's tax grab.

"Around 40% of the adult Scottish population don't earn enough to pay any income tax, and the lowest paid would actually lose out, because anyone earning less than £11,000 - mostly women in part-time work - can still pay National Insurance but would not benefit from the proposed £100 rebate.”

Image: Claudio Divizia /Shutterstock.com

Topics

  • Tax
  • Political landscape
  • Business

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