Kezia Dugdale to unveil income tax increase proposal

Scottish Labour will propose using new Holyrood powers to increase income tax by one pence in a bid to avoid cuts to council budgets.

Leader Kezia Dugdale will pile pressure on Finance Secretary John Swinney to reconsider his draft budget for 2016/17 in a speech in Edinburgh.

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 £50 million of the revenues raised to fund a £100 annual payment for taxpayers earning under £20,000, administered by councils.

The Scottish Liberal Democrats have also proposed a 1p income tax rise to fund investment in education, with both parties now challenging the SNP to use the tax powers coming to the Scottish Parliament.

With the Scottish rate of income tax due to come in on April 6, Mr Swinney has opted to set this at 10p, the same as in the rest of the UK.

He is currently locked in a stand-off with councils over their funding offer in the budget, with local government body Cosla arguing councils face a totally unacceptable'' £350 million of cuts.

Ms Dugdale is expected to say: The cuts the SNP have decided to inflict will be felt in every community in Scotland. The hundreds of millions of pounds taken from local services are cuts to things that we all rely on.

But the worst thing about the SNP's choice is that they will make cuts to education. These cuts will disadvantage children, hold back business and harm our economy.

Labour cannot support an SNP 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.

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 one pence higher than the rate set by George Osborne. This will provide an extra half a billion pounds a year to invest in the future.''

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

A person on a salary of around £30,000 a year would pay less than £4 a week extra while someone on the same £144,687 wage as First Minister Nicola Sturgeon would pay an extra £28 a week.

The party said the progressive'' nature of the policy was backed up by experts including the Scottish Parliament Information Centre and David Eiser of Stirling University.

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

Mr Swinney has said he will set out the Scottish Government's longer-term intentions on income tax before the end of March.

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

The question is - will the SNP continue to talk left, and walk right? This week's budget is the time for them to show once and for all whether they are progressive or conservative.''

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.

It's clear other parties in Scotland want to punish hard-working people rather than ease the burden of tax on them.''

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.

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.

The SNP Government is committed to fair and progressive taxation, and that principle will be at the heart of our plans for a third term in office.''

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