Labour eye Holyrood tax rise for richest Scots

Scottish Labour leader Johann Lamont. Picture: Robert Perry

Scottish Labour leader Johann Lamont said her party’s proposal to give Holyrood more power over income tax would let a Labour first minister narrow the gap between rich and poor.

In an interview with Scotland on Sunday, Lamont was asked whether more Holyrood control over income tax would allow a Labour-led administration to redistribute wealth and have higher taxes for top earners.

She said: “Yes it would. I believe so. It’s an agenda of having powers for a purpose.”

Lamont was speaking before Labour unveils the findings of its Devolution Commission on Tuesday. The commission is expected to recommend giving Holyrood the ability to vary the rate of Scottish income tax in each tax band.

Lamont indicated she would follow the approach taken by UK Labour leader Ed Miliband, who has been a fierce critic of George Osborne’s 2012 move to cut the tax rate for those paid more than £150,000 from 50p to 45p.

Miliband has promised to restore the 50p rate and has launched a high pay commission aimed at curbing excessive boardroom salaries.

Earlier this month, Lamont used First Minister’s Questions at Holyrood to attack Alex Salmond for failing to back a 50p income tax rate.

“Alex Salmond has refused to reduce the top rate of tax in an independent Scotland,” she told Scotland on Sunday.

“It’s linked to the pooling of resources across the UK and it could mean the redistribution of wealth to meet the needs of public services.

“Ed Miliband has already said a Labour government at Westminster would reverse the 45p rate of tax and have a fairer system.

“It’s about testing if there’s a consensus for policies in Scotland and we’ll have a robust conversation with the electorate.”

Lamont suggested Labour wanted to promote the tax and redistribution policy as an alternative to the SNP’s plans to slash corporation tax in a independent Scotland.

Her remarks illustrate the divide between the Better Together parties when it comes to taxation policy.

On Friday, David Cameron said he favoured more devolution of taxes in the event of a No vote – a move that would allow Tory MSPs to campaign for tax-cuts in Scotland.

Although the pro-Union parties appear to be making some effort to coalesce around a vision of a more powerful Holyrood should Scotland reject independence, there remain ideological differences over how those powers should be used.

Labour’s Devolution Commission is expected to make Holyrood responsible for 40 per cent of the money it spends, compared with 12 per cent at present. The package will be considered by Labour delegates at the party conference in Perth on Friday.

Former prime minister Gordon Brown recently called for more tax-raising powers to be devolved when he said there should be a “partnership of equals” between Scotland and the rest of the UK.

Tomorrow will see another important contribution to the independence debate when the Scottish Trades Union Congress (STUC) publishes its proposals to strengthen devolution if Scotland votes No.

The STUC is expected to recommend that two-thirds of expenditure by the Scottish Parliament should be raised in Scotland and that Holyrood should be given new borrowing powers.

In common with Labour, it is expected to suggest some devolution of welfare – in particular housing benefit.

At the end of a week that saw a poll show Labour trailing the SNP by 12 percentage points, Lamont claimed that a progressive tax policy could help turn round the party’s fortunes.

Despite the poll suggesting that Alex Salmond was in line to be re-elected First Minister by a similar landslide to that which saw the SNP trounce Labour in 2011, Lamont claimed to be “on course” to mount a credible challenge.

Last night, her income tax plans were attacked by the SNP MSP for East Kilbride Linda Fabiani, who said: “The inescapable fact is that power over income tax alone falls far short of the full tool set that people in Scotland need and want in order to build a fairer, more prosperous country.”

Lamont also said Labour would continue its controversial review of free universal services such as NHS prescriptions and university tuition in the run-up to the next election.

The Labour MSP for Glasgow Pollok insisted she would not move away from the “something for nothing” stance she set out when launching the potential shake-up of Labour’s policy on public services 18 months ago.

Lamont said: “We’re trying to have a debate in public that the SNP is having in private.”

Tartan Tax: a history

WHEN a former Tory minister, the former Secretary of State for Scotland, coined the phrase ‘the Tartan Tax’ it was not a term of endearment. As an opponent of devolution he was against what the Labour government, elected in 1997, described as the ‘Scottish Variable Rate’, a mechanism by which the new Scottish Parliament would have the power to either raise or lower the rate of income tax by as much as three pence in the pound. Had they chose to lower rather than raise it the minister’s phrase would have been rendered redundant.

The SVR was a compromise as the UK government wished to keep taxation as a reserved matter but the notion of a Scottish Parliament with tax-raising – or lowering – powers was embraced by the electorate when they voted positively for what was the second question on the Scottish Parliament referendum in 1998. As a result SVR was set out in the Scotland Act 1998.

Yet for the next 15 years the SVR or Tartan Tax was a power available to, but never used by, the Scottish Parliament. However when the Calman Commission was set up in 2007 to examine the performance of the parliament, one of its tasks was to improve the “financial accountability of the Scottish Parliament”. The Commission, led by Professor Sir Kenneth Calman, chancellor of Glasgow University, reported in June 2009 that the Scottish Parliament should be prompted to utilise its tax-raising – or lowering – powers.

Their recommendation was that the UK government reduce income tax rates in Scotland by ten pence in the pound, subtract this figure from the block grant, and so leave the Scottish Parliament with the decision of whether or not to then raise income tax rates by ten pence, so as to achieve the status quo or, alternatively, raise them higher or lower.

This was accepted by the UK government and will come into force in 2016 as part of the new Scotland Act. In 2014 the UK government announced that by 2015 the Scottish Parliament will also get direct access to capital funds and will be able to issue bonds.

While on Friday, at the Scottish Conservative Party conference, David Cameron announced that if voters reject independence in September, then even more powers will be transferred to the Scottish Parliament over and above those that will come into force in 2016.