SNP may hit families with a cash grab of £300m

SCOTS families could be hit with a £300million cash-grab if the SNP refuses to adopt George Osborne’s plans for a middle-class tax giveaway.

A new report has revealed the financial impact of using Holyrood’s new powers to freeze the salary level at which workers pay the higher 40p rate of income tax.

The Chancellor has promised to increase the threshold from £43,000 to £50,000 by 2020 – and it emerged yesterday he may use next week’s Budget to ‘ accelerate progress’ towards the target.

But the new Scotland Bill means it will be up to MSPs to make their own decision from April 2017 – and the SNP has already ‘ urged caution’ about the idea. Last night, the party vowed to ‘ oppose any move by George Osborne to further reduce the tax burden on the very richest in society in his Budget’.

Labour has been more definite and said it would freeze the threshold at the proposed 2017 level of £43,600.

The report from the Institute for Public Policy Research (IPPR) think-tank reveals Scots in the richest 10 per cent of households would be around £600 worse off per year by 2020-21, compared to their English counterparts, if MSPs refuse to match Mr Osborne’s plan. A rise in line with inflation would see them £130 a year worse off.

The SNP has so far kept voters largely in the dark about its tax proposals, but another option could be to reduce the wage threshold for paying the top 45p rate of income tax, which is currently £150,000.

According to t he I PPR, lowering it to £140,000 would raise an additional £8.5million – forcing the richest families to pay around £500 a year more tax.

Workers in the UK earning more than £121,200 do not receive the tax-free ‘ personal allowance’, which is due to rise to £11,000 in April for most workers – and reach £12,500 by the end of the decade. That remains a ‘ reserved’ issue to Westminster that MSPs will have no control over.

The I PPR r e port s ai d: ‘ Planned UK Government income tax cuts will reduce tax r evenues in Scotland by £600million a year by 2020-21 if matched in Scotland, comprising £300million lost due to an increase in the personal allowance, over which the Scottish Government will have no control, and a further £300million lost if Scotland matches UK Government increases in the higher rate threshold.

‘ If implemented in full in Scotland, these tax cuts would benefit Scottish households, but the biggest winners will be those at the top of the earnings distribution, who will on average gain £590 a year.’

Scottish Conservative finance spokesman Murdo Fraser said:

‘Financial challenge’

‘This report sets out the scale of the f i nancial challenge facing future Scottish governments.

‘Whilst some will be tempted to raise taxes to fill the gap, we need to be aware of the impact of higher taxes in economic growth and the tax base.

‘We need to work smarter to get a bigger bang for our buck in the public sector, rather than defaulting to ever increasing taxation on hard-working families.’

But Cunninghame North Nationalist MSP Kenneth Gibson said: ‘The SNP is committed to progressive taxation and we will oppose any move by George Osborne to further reduce the tax burden on the very richest in society in his Budget.’

Scottish Labour public services spokesman Jackie Baillie said: ‘ The new powers coming to Scotland mean we can take different decisions from the Tory Government on tax.’