Scottish Budget: Use existing powers to tax wealth and carbon to fund public services, demand campaigners

Nicola Sturgeon should introduce a wealth tax to ensure public services and households do not suffer from further cuts to the Scottish budget, poverty campaigners have demanded.

The budget, which will be set out by interim finance secretary John Swinney next week, is likely to outline a mixture of spending cuts and tax hikes to balance what has rapidly become a perilous financial situation for Scotland’s devolved finances as belts are tightened in Westminster and across the country.

However, both he and Ms Sturgeon have been told to use the existing powers available to them under devolution to maximise the amount of revenue available for next year’s budget. This could include a wealth tax and increased taxation of carbon polluters to help tackle failing climate change targets.

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SNP ministers should also “kick-start” the long-awaited and often promised reform of council tax in Scotland, promised in successive elections by the party, but never delivered, campaigners have said. They claim this move alongside assessments of new taxes could generate “as much revenue as possible”.

The money raised by such a radical increase in taxation could be used to minimise the impact of inflation on the Scottish Exchequer, increase funding to vital local services, and provide the financial flexibility required to increase support on those suffering most from the cost-of-living crisis and child poverty, the joint statement has outlined.

The Scottish Government defended its record on tax and said it would set out its tax plans for the next financial year at the budget.

However, anything short of significant reform will disappoint campaigners, with the calls for major tax increases coming from the Poverty Alliance, the Child Poverty Action Group (CPAG) Scotland, Oxfam, the Scottish Women’s Budget Group, One Parent Families Scotland and think-tank the Institute for Public Policy Research (IPPR).

Jamie Livingstone, head of Oxfam Scotland, said the coming budget “must be a turning point on tax”. He challenged the Scottish Government to not “shy away” from taxing higher earners.

Deputy First Minister John Swinney will set out the Scottish budget next week.

“Too many governments shy away from taxing high incomes and wealth, while making polluters pay, to reduce inequality and ensure a fair contribution by those who can most afford it – the Scottish Government cannot be one of them,” he said.

“It should make the common-sense choice to use existing devolved taxes to minimise the damage to next year’s Scottish Budget, so it can boost help to those in poverty. But deeper tax reform is long overdue – and can no longer be delayed. The Scottish Government must kick-start the urgent reforms we need to tax wealth and carbon so that we can tackle inequality, invest in care and deliver climate justice.”

Individually, Oxfam Scotland said tax rates could be increased with thresholds frozen to generate additional revenue, and also suggested new tax bands to improve the progressivity of the tax system. They also called on the First Minister to immediately consult on a ‘net wealth tax’ in Scotland, which would take into account all forms of wealth.

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Philip Whyte, the director of IPPR Scotland, warned families faced a “ticking time bomb” of financial insecurity amid soaring inflation and rising energy costs. He called on ministers to use devolved powers now to “boost household incomes now” and set the groundwork for future tax innovation.

“The Scottish Government has set itself a number of laudable and progressive ambitions – not least its stretching targets to tackle climate change and child poverty. Those are vital priorities and will need significant long-term investment to deliver. It is only right that those with the broadest shoulders bear the greatest responsibility.

“Given the ticking bomb of financial insecurity facing households, the Scottish Government must use its powers to boost household incomes now, while setting the groundwork for more fundamental tax reform to deliver on its long-term ambitions.”

Peter Kelly, director of The Poverty Alliance, said Scotland’s tax system had not kept pace with the growing inequality within Scotland. He said: “It’s time for the Scottish Government to use our tax powers in a progressive way, to raise the investment we need for the just and compassionate society that people believe in. Failing to meet that challenge will result in more cuts to the services that we all need, but that are an essential lifeline for those who need it most. We simply can’t allow that to happen.”

The Child Poverty Action Group also said Scotland could help end child poverty with reforms, while the Scottish Women’s Budget Group warned women would be disproportionately impacted by cuts to key public services.

A Scottish Government spokesperson said: “The Scottish Government has already delivered the fairest and most progressive tax system in the UK while raising extra revenue to invest in public services and Scotland’s economy. Proposals on tax policy for 2023/24 will be published as part of the Scottish Budget on December 15.”

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