Swinney may be ‘forced’ into income tax hike – Daily Business

First Minister John Swinney has given a strong indication that he would raise income tax in order to protect public services if the Chancellor’s decisions this month force a cut in the Scottish budget.

Rachel Reeves is expected to raise income taxes in her 26 November budget which would trigger a reduction in the block grant for Scotland.

The Fraser of Allander Institute has calculated that a 2p rise in the basic rate of tax would lead to a £1 billion shortfall in the budget as the block grant adjustment takes account of revenue that would be raised without the devolved tax power.

Mr Swinney’s government would have to implement a similar rise in income taxes or cut public spending.

In response to Conservative leader Russell Findlay during First Minister’s questions, he said “changing circumstances” may force him to break a manifesto commitment.

While SNP source say the manifesto only declared a pledge not to raise income tax as an “aim”, the party’s critics say a failure to grow the economy has contributed to lower revenues that may have avoided tax rises. It has also been pointed out that Mr Swinney last year urged the UK government to follow his government and raise income taxes to finance public services.

An added concern for Mr Swinney is that raising taxes this time around would mean hitting workers pay packets in April, just a month before the Scottish elections.

Yesterday the First Minister told Mr Findlay that the government has “got to recognise that there’s a changing landscape which has been fuelled by the Chancellor of the Exchequer.

“There’s been a tremendous moving of the ground since then, so I’ve got to look at the changing circumstances.”

Mr Findlay said: “It seems that John Swinney is one of the few people in the UK who supports Labour’s plan to raise taxes.

“Raising taxes would be another hammer blow to workers after years of SNP financial mismanagement. The SNP have increased taxes, driven away aspirational workers, damaged business confidence, and held back Scotland’s economy.

“People deserve a break. They deserve to keep more of their own hard-earned money.  John Swinney should give a cast-iron guarantee that no matter what Rachel Reeves does, the SNP won’t raise bills for workers, businesses or homeowners.”

Mr Swinney has form on raising income taxes. During the months as interim Finance Secretary covering for Kate Forbes during her maternity leave he increased the higher rate of tax from 41p to 42p and the top rate from 46p to 47p. The threshold for the top rate of tax was also lowered from £150,000 to £125,140.