MINISTERS are coming under pressure to raise income tax for higher earners while cutting it for those on lower wages as they seek to secure backing from the strategically-placed Scottish Greens, who are demanding an anti-poverty budget next week.
Introducing a "more progressive” tax regime will be a negotiating “red line” for Patrick Harvie’s party when it weighs up whether to support the SNP’s financial plans.
Holyrood will have the power to adjust bands and rates for the first time this year, and the minority Scottish Government needs backing from another party to get its proposals passed. It is most likely to look to its pro-independence ally, rather than one of its opponents on the Unionist benches.
“We still have a huge problem with poverty in Scotland," a source in the Scottish Greens told The National. "We now have control over income tax rates and thresholds so we can give people on lower incomes tax cuts to make it easier for them, while asking those who are earning lots of money to chip in a bit more.”
“It will be up to ministers to say what they are willing to do to protect public services and help those on low incomes, but our party’s position is that a Scottish budget that doesn’t use the new tax powers in a progressive way would be hard to support. The use of new tax powers in a progressive way is critical.”
He added: “We need to get the message through to SNP ministers that life is very hard for people on low incomes and measures are needed to help them.
“We have the powers to introduce a very different tax regime and yet the SNP is talking about not passing on cuts from Westminster. This is not where we should be.”
Asked whether the tax rises for the better-off could be seized on by the Tories in a new anti-independence campaign, the source replied: “During the campaign ahead of the 2014 vote one of the arguments for a Yes was the need to shape a fairer economy and a more progressive tax system in Scotland. Now we do have control over income tax, so why don’t we use it?”
The source refused to indicate at what level of earnings tax cuts and tax rises should be introduced, but in their May manifesto the Greens suggested those earning more than £26,500 would pay more under their plans, while those earning under that amount would pay less.
The Scottish Government’s plans to cut air passenger duty (APD) could be another stumbling block in terms of reaching agreement with the Scottish Greens. Ministers want to reduce it by 50 per cent from April 2018 and eventually abolish the tax altogether. It believes reducing APD will help to boost Scotland’s international connectivity and contribute to sustainable growth.
The move has been supported by the business community but is opposed by the Scottish Greens, who regard it as a tax break for a heavily-polluting industry and for well-off frequent flyers.
The Scottish Greens want to see public services protected, more resources for teaching, cuts to additional support needs staff reversed and more investment in GPs and preventative health measures.
“To fund these measures will require a shift in priorities and potentially a shift in position from the Scottish Government,” said a Scottish Greens spokesman.
“Our position on progressive taxation is well established and obviously there is substantial difference between our position and the SNP’s on income tax, council tax and APD.
“As a minority government they must recognise that they will have to show some movement on tax policy, instead of sticking rigidly to their own manifesto position, and if they do so we are hopeful of finding constructive ways to work together.”
He said the party’s representatives would be calling for ministers to make good on previous commitments to Green MSPs, including introducing a new benefit for young carers and a new vacant land tax.
He added: “Holyrood needs to be bold in these uncertain times, and Greens will seek to find constructive ways to build an anti-poverty budget for 2017.”
Finance Secretary Derek Mackay will set out the draft budget on Thursday next week and MSPs will vote on it in February.
A Scottish Government spokeswoman said: “The Scottish Government is committed to ensuring Scotland is a country that businesses and people want to locate, live, and work in, both through preserving a competitive, progressive tax environment but also providing good-quality public services.
“All devolved tax rates and bands will be announced in the draft budget published later this month.”
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