Business chiefs warn against budget tax hikes on working Scots

Business leaders have warned that income tax hikes on working Scots would be 'highly dangerous' amid growing speculation the SNP will strike a budget deal with the Greens targeting high earners.

Derek MacKay's budget will come before MSPs on Thursday

MSPs will vote on stage one of the budget tomorrow and the Greens co-leader Patrick Harvie says talks are ongoing with the SNP in an effort to strike a deal - but he has demanded "meaningful" tax increases to combat austerity.

The Greens campaigned on a platform of a 60 pence top rate of tax for high earners and the creation of new middle rates to protect low earners.

Liz Cameron of Scottish Chamber of Commerce said: “Now there appears to be a possibility that Scotland’s politicians may consider even more punitive Scottish tax rises in order to secure the passage of the Budget Bill.

"Such a move could prove to be highly dangerous at a time where Scotland’s economy is growing at a third of the rate of the UK as a whole.”

This is the first year that Holyrood takes control over setting income tax rates and bands under the post- referendum Smith Commission powers. The SNP's current plans will already make Scotland the highest taxed part of the UK because they won't pass on the extension of the 40 pence threshold for middle earners to £45,000.

Ms Cameron added: "Businesses were nervous about the dangerous precedent that would be set through plans to create a differential between Income Tax bandings north and south of the border. Whilst these plans may seem modest in year one, the gap is set to widen over time, creating a further barrier to Scottish business competitiveness, threatening jobs, and damaging Scotland’s attractiveness to inward investors."

She went on: "The Scottish Parliament has a new and enhanced position of responsibility in terms of tax in Scotland. The sooner our politicians realise that supporting economic growth, rather than hiking up taxes, is the route towards increasing revenues and improving investment in key services, the quicker Scotland will prosper.”

The Scottish retail Consortium also appealed for stability on the tax issue.

SRC director David Lonsdale said: “Our politicians will rightly and robustly debate the detail of the Budget’s tax and spending plans. However, especially in the current economic climate, businesses are keen for some semblance of stability and certainty and we therefore hope a collegiate approach will ensure that a Budget can be passed in a timely fashion.”

Mr Harvie has already warned that he will oppose the budget unless it contains "meaningful" tax hikes. The current spending plans will contain £327 million of cuts to direct council budgets with fears that frontline services will be hit hard. Mr MacKay insists other resources will see an additional £240 million for frontline services. The Liberal Democrats were ready to strike a deal without tax rises, but had set out a £400 million spending demand and an agreement now seems unlikely. Labour is also demanding tax increases to tackle austerity.

Tory leader Ruth Davidson objects to the budget plans over the proposal to make Scotland the highest taxed part of the UK and has pledged to oppose it.

A spokesman for the Scottish Greens said: “Discussions between Green MSPs and Scottish Ministers are ongoing, and we are focused on how to raise additional funds fairly to protect council services. Labour walked away from the budget process some time ago, and they know full well only ministers can lodge amendments to the Budget Bill, so negotiation is the only responsible action.”