Willie Rennie, leader of the Scottish Lib Dems, said the increase should come into force from 1 April to raise £475m each year and fund “the biggest investment in education since devolution” in 1999.
Rennie said the tax rise, which would still see bills fall slightly for the lowest earners due to increases in the basic personal allowance, was urgently needed. “A Scottish education was once the envy of the world,” he said. “It has fallen hard and fast. But we have the plan that will put it right back up there.”
With less than 100 days before May’s Scottish parliamentary elections, and with opinion polls suggesting they languish fifth behind the Scottish Greens, the Lib Dems are the only mainstream Scottish party calling for taxes to rise immediately.
The four other parties at Holyrood – including the Greens – are refusing to use the limited tax powers coming into effect in April because Holyrood would have to cut or increase each income tax band by the same amount, preventing it from having targeted rates.
Taxation is set to dominate this year’s election campaigns. The other parties are waiting for enhanced powers coming into force in April 2017 that will allow Holyrood to vary each band above the 10p starting rate in either direction, and to introduce new tax bands.
Scottish Labour has promised to reintroduce the 50% top rate while the Scottish Conservatives are studying plans to cut the number paying the 40% higher rate by introducing a new 30% band for the so-called “squeezed middle”.
On Wednesday Rennie will tell Holyrood the tax should go up in the new Scottish budget, but it is unclear whether HM Revenue and Customs (HMRC) would have time to implement the 1p tax rise by 1 April.
HMRC has already struggled to accurately identify every Scottish domiciled taxpayer liable to pay the new Scottish rate.
A rise in April has already been ruled out by John Swinney, the Scottish finance secretary.
The Scottish Lib Dems will make the tax rise central to their May election campaign. The party calculates that the lowest earners would receive slightly lower bills thanks to changes at Westminster level to the personal allowance set in train by the previous Tory-Lib Dem government. But all other taxpayers would lose out.
The party gave the example of a care worker earning £14,000 a year. Their new personal allowance threshold – the rate at which they start paying income tax – would be £11,000 from April, so a 1p rise would see them gain £4.17 a month.
A secretary earning £20,000 would pay 83p more per month since the 1p rise would wipe out the gains from the higher personal rate. Earners above £20,000 would lose more, with those earning more than £150,000 a year paying an extra £166.67, or 0.9%, of their monthly salary.
The extra £475m in revenues would be spent on paying a pupil premium for every child from a poorer background; increasing early learning and childcare; reversing Scottish government cuts to college funding and stopping cuts to school budgets through council funding cuts.
The Scottish Tories dismissed Rennie’s proposal. John Lamont, the party’s chief whip, said it reminded him of the ill-fated “penny for Scotland” policy favoured by Alex Salmond, then the Scottish National party leader, in the first Scottish parliament election in 1999.
That policy, which used the original, but never implemented, power to vary Scottish income tax by 3p in the pound, is widely credited for losing the SNP substantial numbers of votes.
“This announcement shows that Lib Dems have decided to join forces with a chaotic Labour party in lurching to the left on tax,” Lamont said. “They want to make Scotland the highest taxed part of the United Kingdom. It is unfair, utterly unnecessary and bad for Scotland.”
This article was written by Severin Carrell Scotland editor, for theguardian.com on Wednesday 27th January 2016 13.56 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010