Nicola Sturgeon: No income tax change next year

Nicola Sturgeon said the new tax raising powers wont allow the SNP to make progressive changes to income tax rates. Picture: PA

But the First Minister, who has previously backed a 50 pence top rate, opened the way for eventually increasing taxation on higher-earning Scots.

Ms Sturgeon said the new tax-raising powers coming to Holyrood next year will not allow her party to make “progressive” changes to income tax rates.

She warned that the “Calman” powers, which come into effect in April, mean any tax rises – or cuts – would have to be applied across all tax bands. This was at odds with the SNP’s previous approach, she said, in areas such as property tax.

However, the SNP leader said she wanted the extended Smith Commission powers – which would allow MSPs to introduce a higher rate for higher earners – devolved “as quickly as possible”.

“I want a progressive system of income tax,” she said yesterday. “The Scottish Parliament over the next few years will take more power over tax.

“Next year we will get limited power over income tax that will not allow us to make changes on one band of income tax without also making the same changes on all bands of income tax. So it’s a very limited power we will get next year which is why I want to see the additional powers come as quickly as possible.”

Those additional powers are part of the Smith Commission package, which will give Holyrood full control over income tax rates and bands.

Ms Sturgeon said that her government will reveal its plans for income tax following Chancellor George Osborne’s spending review in late November. This is because Mr Osborne’s plans will have knock-on effects for Scotland’s budget.

She told the BBC the SNP government’s stamp duty replacement – the land and buildings transaction tax – saw the creation of a “fair” system.

She said: “It’s taken many people at the bottom end of the property market out of that tax altogether with those at the top end of the property market paying slightly more. That’s an illustration in practice of our progressive approach.”

She added: “Next year in terms of the income tax powers we will get, it will not be legally possible for the Scottish Government, for example, to raise the top rate of income tax without raising the basic rate by the same amount – or indeed cutting it without cutting the basic rate by the same amount. I’m pointing out what those restrictions are so people understand … the inherent inflexibility in that.

“Over the next few years that will change and we will get much more flexibility over the different rates.”

But Scottish Conservative finance spokesman Murdo Fraser voiced concerns that Ms Sturgeon’s approach will mean tax rises for working families.

He said: “Nicola Sturgeon may have attempted to be cagey but the SNP’s intention is clear. It wants to hammer hardworking families in order to raise easy money for the public purse.

“But that’s the wrong tack – government should be rewarding hard work and enterprise, not penalising it.

“If the First Minister focused more on wealth creation and establishing a positive environment for business, she wouldn’t have to increase the tax burden on individuals.”

Scottish Labour spokeswoman Jackie Baillie highlighted the SNP’s pledge to cut air passenger duty by 50 per cent, which her party claims will effectively be a £250 million tax cut for airlines.

Referring to the Scottish Government’s recently announced £25m-a-year education attainment fund, Ms Baillie said: “If Nicola Sturgeon is serious about a progressive tax system then why is she proposing a tax cut ten times bigger than what she will invest in the education of our poorest children?”

Ms Sturgeon also warned that the Scottish Government could block plans to hand more powers to Holyrood if a “fair deal” over funding cannot be agreed with Westminster.

She said it was “a statement of the obvious” that she would “not be prepared to agree to something that is unfair to Scotland”.

MSPs, she said, would only back the Scotland Bill if the accompanying deal on Scotland’s funding was “fair”.

While she said she hoped the Scottish Parliament would be able to give its consent to the legislation by next March, she stated: “Let me make clear that we will only recommend consent if the accompanying fiscal framework is also fair to Scotland.’’

She claimed the Treasury could try to “penalise” Scotland by cutting the grant by a greater amount than Scottish ministers could hope to raise, effectively cutting the Scottish budget.

A Treasury spokesman said: “Treasury ministers and officials are continuing to have a courteous and productive dialogue with officials and ministers from the Scottish Government.”