Scottish Labour calls for Scottish income tax rise – BBC News

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Image caption Scottish Labour leader Kezia Dugdale said the lowest-paid workers would receive a 100 top-up under its income tax plan

Labour has called for an immediate 1p increase in Scottish income tax rates.

The party said the move would raise about 500m every year, which it said would be enough to avoid cuts to education and other local services.

Holyrood will be given limited powers over income tax rates from April, with more flexible powers later due to be devolved under the Scotland Bill.

The Scottish government has said it will not alter income tax rates until these greater powers come into force.

But that will not be until next year at the earliest.

Under the more limited powers, which have been devolved under the Scotland Act 2012, any changes in income tax rates would need to be replicated across all bands.

The Scottish government has argued that this would mean the least well-off would be hit hardest by any increase.

In his draft budget, which was unveiled in December, Finance Secretary John Swinney said he would be keeping income tax rates in Scotland the same as the rest of the UK in 2016/17.

He said he hoped the greater flexibility in setting income tax rates offered by the Scotland Bill proposals would allow the the Scottish government to introduce a “more progressive” tax regime in the future.

Minimum wage

But Scottish Labour said its plan for a 1p rise in income tax across all bands from April would be offset by taxpayers earning less than 20,000 receiving a 100 annual boost to their income through a payment scheme.

This 100 payment, which would be administered by councils, would be “far in excess” of the additional 20 which someone earning just above the minimum wage would pay in income tax over the course a year, the party said.

Labour said someone on a salary of about 30,000 a year would pay less than 4 a week extra under its plan.

But someone on the same 144,687 wage as the first minister would pay an extra 28 a week (1,447 a year), it said.

What is the Scottish Rate of Income Tax?

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  • From April of this year, the UK rate of income tax will be reduced by 10p in the pound in Scotland, across the 20% band, the 40% band and the 45% band
  • It will then be up to the Scottish Parliament to set its own rate to replace the 10p that has been taken out
  • This rate could be exactly the same as the rest of the UK, or it could be higher or lower
  • In his draft budget, John Swinney set the Scottish Rate of Income Tax at 10p – meaning it will remain the same as the rest of the UK
  • Both Scottish Labour and the Scottish Liberal Democrats have proposed an 11p rate – meaning all bands in Scotland would be 1p higher than elsewhere in the UK
  • Under the Scotland Bill proposals which are currently going through the UK Parliament, Holyrood would be given greater control over income tax rates and bands
  • This would allow the Scottish government to create new tax bands, and to raise the rate of tax paid by higher earners without also raising it for lower paid workers
  • But the Scotland Bill will not come into force until next year at the earliest

Read more here

Scottish Labour’s proposal would mean that income tax rates in Scotland would be higher than elsewhere in the UK.

Leader Kezia Dugdale, said: “Given the choice between using our powers or making cuts to our children’s future, we choose to use our powers.

“We will tear up this SNP budget that simply manages Tory cuts and instead use the power we have to set the Scottish rate of income tax 1p higher than the rate set by George Osborne. This will provide an extra half a billion pounds a year to invest in the future.

“We don’t do this because we want to use the powers for their own sake. We do it because there is no other alternative to cutting into our nation’s future.”

Mr Swinney’s draft budget is due to be debated at Holyrood on Wednesday.

Commenting on Labour’s plans, 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 per cent 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.

“In addition, these proposals would create an unfair distortion in the system as someone earning just under 11,000 wouldn’t get the 100 hand-out while someone earning 11,000 would.

“Labour’s plans for administering the 100 rebate appear to be uncosted but would clearly run into the tens of millions of pounds.”

Last week, the Scottish Liberal Democrats also proposed increasing income tax rates by 1p to raise extra funds for schools.

But the Scottish Conservatives have said that taxes in Scotland should be no higher than the rest of the UK – and lower when affordable.

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