Scotland's tax system could '˜move away' from rest of UK

Labour leader Kezia Dugdale is on the ball at Glasgow University with student Eva Murray, 21. Ms Dugdale said Labour would keep tuition free. Picture: Getty

The First Minister has indicated more tax bands may emerge to reflect different earning levels in Scotland, as Holyrood’s takes full control over income tax rates and bands.

The SNP leader has come under fire from political opponents for not making enough use of the new powers to raise taxes in order to fight austerity.

But she indicated Scotland could be ready to take on a distinct tax regime as she addressed students at an election hustings event in Glasgow last night.

First Minister Nicola Sturgeon with her mother Joan and father Robin campaigning in Irvine. Picture: Getty

“I believe over time we may well see Scotland and the Scottish Parliament moving away from the structure of income tax that prevails in the UK right now,” she said.

She was responding to Greens co-leader Patrick Harvie who backs the creation of a 60p tax rate for high earners and more intermediate bands.

He attacked Ms Sturgeon over her failure to use the new tax powers more fully. “I genuinely was surprised, because I thought this would be where your instincts lay on this issue. I don’t understand why the SNP are not doing something more creative – creating more bands,” he said.

“Why is it progressive to have the same band of income tax on everything between the personal allowance and 40-odd grand?”

Both Labour and the Liberal Democrats have called for a 1p rise income tax across the board with Holyrood’s new powers in order to fight austerity cuts.

This would raise about £450 to £500 million in extra revenues. Labour is also proposing a rise in the higher rate for salaries over £150,00 to 50p from the current 45p UK level.

Ms Sturgeon has rejected both measures, although she will not implement George Osborne’s plan to extend the threshold for paying the higher rate level of 40p from £43,000 to £45,000, effectively a tax cut for middle earners.

By refusing to implement the measure north of the Border, it means Scots will face higher income tax rates than workers south of the Border for the first time since devolution.

The First Minister insisted that Labour and Liberal Democrat plans to raise the basic rate would hit low earners hardest.

“We’ve just come out of a recession where real wages have declined and declined quite considerably,” she said.

“I speak to people in my own constituency and to people all over the country all the time on basic incomes, on low and average incomes who have really tough decisions to make about childcare or feeding kids sometimes. I speak to people who are in work and sometimes over the past few years have had to be reliant on foodbanks.

“I don’t think raising the tax of people on very low incomes is the right thing to do.”

But Labour leader Kezia Dugdale last night insisted that the tax rises are needed to tackle the impact of a new climate of austerity in Scotland as fresh spending reductions begin to bite.

“We’ve just passed a budget in the Scottish Parliament that cut £500m out of schools and vital public services.

“I couldn’t vote for it because of those cuts, so we advocated that instead we use the powers of the Scottish Parliament to put income tax up by one pence.”