Scottish Labour's 1p tax plans '˜could have raised £1bn'

Scottish Labour's plans to put a penny on income tax and create a 50p top rate could have raised more than £1billion extra revenue in past two years, new analysis shows.

Former Scottish Labour leader Kezia Dugdale championed the proposed 1p tax rise at Holyrood. Picture: Lisa Ferguson

The party’s attempts to amend Scottish Government tax policy at budgets in 2016/17 and 2017/18 were rejected at Holyrood.

Analysis confirmed by the Scottish Parliament Information Centre (SPICe) indicates the Scottish Government could have gained £1.075 billion from the changes.

Labour’s attempt to add an extra penny to all tax bands during the 2016/17 budget could have brought in an extra £475 million.

The party altered its policy for the following budget to put 1p on the basic and higher rates of income tax and to restore the 50p top rate for those earning more than £150,000 a year, which could have boosted revenue by £600 million.

SPICe highlighted the figures do not account for any behavioural responses that might occur following a change in taxes or benefits and the Scottish Government has warned increasing the top rate of tax could lead to an exodus of higher earners.

• READ MORE: FMQs: SNP warned tax hikes will damage Scotland’s reputation

Nicola Sturgeon committed a discussion on “responsible and progressive use of our tax powers” in announcing her legislative programme for the coming year on Tuesday, after facing criticism for failing to take a more radical approach with the new tax powers.

The Conservatives have accused her of opening the door for tax rises in Scotland but Labour claims she should adopt their tax policies as the only solution to Tory austerity.

Interim Scottish Labour leader, Alex Rowley, said: “Research confirmed by independent experts shows that the SNP voting against those amendments has cost the Scottish budget more than £1 billion in additional tax revenue.

“If Nicola Sturgeon is serious about tax then she needs to recognise that it is only Labour’s tax policies which end Tory austerity and which allow us to invest instead to give people the support they need from public services.”

At the latest budget the minority SNP administration made a deal with the Greens to pass its tax plans.

Through the agreement, councils secured an additional £160 million of funds while the threshold for the 40p rate of income tax in Scotland was frozen at £43,000, unlike the increase to £45,000 elsewhere in the UK.

A Scottish Government spokeswoman said: “Income tax rates for 2017/18 protect lower income taxpayers but also generate extra revenue to invest in public services.

“We will always set tax rates responsibly and with the interests of households, businesses, wider society and the economy firmly at heart. We will not simply transfer the burden of austerity on to the shoulders of those who can least afford it.”

She said that where it has had the power, the government has “helped protect family budgets and ensured that the people of Scotland benefit from a wide provision of quality public services”.