Nicola Sturgeon was today warned that doing income tax-raising budget deals with Labour, the Liberal Democrats or Green risks forcing Scotland into recession.
The warning was issued by Scottish Conservatives, who pointed out that the Scottish Government’s tax discussion paper concludes that Labour, Lib Dem and Green plans will all have a negative impact on economic growth.
Business leaders also said the First Minister’s plans to raise income tax on those earning £24,000 or more would see one million Scots see a fall in their take-home pay.
This week the Scottish Government document The Role of Income Tax in Scotland’s Budget set out four scenarios, three of which proposed creating a new band and putting a penny on income tax above a new £24,000 threshold.
With Ms Sturgeon’s minority administration needing opposition support to get next month’s budget through Holyrood it also examined the other parties’ plans.
READ MORE: Nicola Sturgeon hints at tax rise for higher earners
The paper concluded that increases in the Scottish Labour and Scottish Liberal Democrats’ proposals would have a negative effect on growth because of the burden borne by lower earners.
The Scottish Green proposal to increase the additional rate to 60p could discourage high earners from remaining in Scotland. This, too, the document said, would have a “negative effect” on the economy.
Conservative finance spokesman Murdo Fraser said: “We have got to focus on stimulating economic growth, because that is how we will pay for our public services. Yet the SNP now seems ready to do a deal with any one of Scotland’s left-wing parties which they know could push it back into recession.”
Liz Cameron, Scottish Chambers of Commerce chief executive, said: “Given the options presented, it is possible that over one million Scots could see a cut in their take-home pay.
“With the well-reported difficulties caused by rises in inflation and the recent decision to raise interest rates by the Bank of England, many households will already be looking at tightening discretionary spending. Therefore, increasing income taxes at a time of already squeezed household incomes may not be the route of enabling economic growth.”
Finance Secretary Derek Mackay’s spokesman said: “The Tories have a cheek to accuse others of undermining economic growth – just this week, the governor of the Bank of England highlighted the negative impact that the uncertainty of Brexit is causing the economy.”