Only days after appearing to rule out a new 50p top rate, the first minister said she was open to introducing the far higher rate for the wealthiest Scots within two years, but only if tax avoidance could be tackled.
Sturgeon has faced intense criticism from Kezia Dugdale, the Scottish Labour leader, and Willie Rennie, Scotland’s Liberal Democrat leader, after she ruled out increasing or changing Scottish income taxes to prevent deeper cuts in public spending from April next year.
Speaking on Wednesday during the last session of first minister’s questions before May’s Holyrood elections, Sturgeon had said there was clear evidence a 50p rate would make high earning executives flee Scotland.
She told MSPs it could be considered “in light of experience”, but addressing “the people of Scotland”, she had added: “It would not be radical. It would be reckless. It would not be daring. It would be daft.”
But in a marked change of tone during a BBC Scotland leader’s debate, the first of the election campaign, Sturgeon insisted she had only rejected a 50p top rate for 2017/18, the first year of that tax power being available. “I haven’t ruled it out for the rest of the parliament,” the Scottish National party leader said.
Labour and the Lib Dems insist Holyrood’s existing but limited powers could be used to immediately add 1p to the basic rate of income tax in Scotland, to fund about £500m in extra public spending – a policy rejected by the SNP. Dugdale said Sturgeon’s tax proposals means the SNP is passing on deeper Conservative cuts in Scottish funding.
Referring to the first minister’s radical stance on tax during last year’s general election campaign, Dugdale said: “She has made her name as this great socialist, this great crusader against austerity, who won’t introduce a 50p top rate because she’s scared [of tax evasion].”
Patrick Harvie, the Scottish Green party leader who is hoping to take leftwing pro-independence votes from the SNP, was equally critical of the SNP’s refusal to increase taxes on wealth and income.
“I don’t want a sign on the border saying ‘Scotland, the country that trashes its public services’,” Harvie told the BBC audience.
Earlier this week, Sturgeon offered higher earning Scots paying the 40% rate a modest tax cut in 2017, raising the threshold from £43,000 to £43,387, based on inflation. The Scottish government’s own data shows this would mean those earning £52,000 or more paying £177 less tax next April.
Arguing that this rate was still £300 a year more than new tax rates for the rest of the UK, she left the additional 45p rate at £150,000, a move which will bring in more higher earners as their salaries grow. Low earners would slowly see the personal allowance to £12,750 by 2021, £250 more than George Osborne, the chancellor, plans for the rest of the UK.
The first minister insisted that she had rejected a 50p top rate because Scottish government analysis suggested it would lead to a flight out of Scotland by business executives. If only 6% of Scotland’s 17,000 additional rate tax payers left Scotland, a 50p rate would raise nothing extra at all; if 7% left, Holyrood would lose £30m in revenues.
Dugdale taunted Sturgeon in Holyrood earlier this week that tax avoidance was now far more difficult because of stricter HM Revenue and Customs rules, accusing her of using it as an excuse for inaction. Sturgeon said that her government’s council for economic advisers would consider the risks of executive flight each year, to see whether a 50p could be introduced.
Ruth Davidson, the Scottish Conservative leader, insisted that adding to Scotland’s tax burden would send a bad signal to businesses. She had initially called for deeper tax cuts than in the rest of the UK, but abandoned that strategy after the chancellor warned of heavier spending cuts.
“We don’t think people in Scotland should have to pay more than the rest of the UK,” Davidson told the audience. She said only the Tories were capable of properly holding the SNP to account. “There’s a vacancy in this country and that vacancy is for a strong opposition which will stand up to the SNP,.”
This article was written by Severin Carrell Scotland editor, for theguardian.com on Thursday 24th March 2016 21.29 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010