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Tax changes could net £3.7bn a year more for Scotland, STUC says

A new paper for the STUC has proposed short and long-term changes to taxes in Scotland which it says could raise some £3.7 billion extra a year for public services (Jane Barlow/PA)
A new paper for the STUC has proposed short and long-term changes to taxes in Scotland which it says could raise some £3.7 billion extra a year for public services (Jane Barlow/PA)

Scottish ministers are being urged to use tax powers to “make a real difference” by introducing changes that could raise almost £4 billion in additional funding for public services.

The Scottish Trades Union Congress (STUC) has backed a series of short and long-term measures which it claimed could raise more than £3.7 billion extra funding a year if implemented.

With STUC general secretary Roz Foyer insisting the Conservative government at Westminster is set to impose “devastating public sector cuts”, she called on Holyrood ministers to consider the proposals and “step up for Scotland”.

Her plea came as the union organisation published a new paper, produced by Landman economics, ahead of the Scottish Budget on December 19.

This outlined how short-term changes – including reforms to Scotland’s income tax system – combined with other measures such as increasing the land and buildings transactions tax and the Scottish landfill tax by 30% could raise just over £1.1 billion additional funding a year.

It also set out a longer-term package of measures, including replacing the council tax with a property-based system called the proportional property tax, which would see people pay 0.7% of their property’s  value annually, although this would increase to 1.4% for second homes.

Other changes suggested by the STUC include the introduction of a wealth tax – which it suggested could raise £1.4 billion – as well as a frequent flyer levy and a super tax on the use of private jets.

All these could be “fully in place by 2028 if legislated for in 2024”, the paper insisted, saying these combined with the short-term measures could raise just over £3.7 billion a year.

With Deputy First Minister and Scottish Finance Secretary Shona Robison due to unveil her Budget for 2024-25 in just over two weeks’ time, the paper proposed what it insisted was a “very progressive” package of changes for income tax in Scotland.

These would see the higher and top rates on income tax both increase by 1p, to 43% and 48% respectively. In addition to this, the threshold for the higher rate would be reduced from the current level of £43,662 to £40,000.

A new 54% tax band – as backed by groups such as the Poverty Alliance and Oxfam as well as the think tank IPPR Scotland – is also suggested, with this to apply on earnings above £58,000.

The income tax changes “do not affect any Scottish taxpayer with income below £40,000”, the report stressed, adding that they could raise £779 million a year in additional revenue.

Speaking about the overall package of both short and long-term measures, Ms Foyer said the report “makes clear that the Scottish Parliament has the power to make a real difference to our communities and raise over £3.7 billion of additional revenue for our public services”.

STUC general secretary Roz Foyer called on the Scottish Government to ‘choose a different path’ (Jane Barlow/PA)

She said: “The Scottish Government must step up for Scotland. It’s clear that, with one foot out the electoral door, the Tories are hellbent on saddling any future UK Government with devastating public sector cuts.

“We can choose a different path. It’s within the powers of our Parliament – through income, land and additional dwelling taxes – to raise an initial £1.1 billion from April next year.

“Coupled with longer-term wealth, property and aviation taxes, the Scottish Government can raise another £2.6 billion.”

She added: “At a time when workers are suffering the biggest drop in living standards since records began, and our public services need investment more than ever, it would be a chronic dereliction of duty for government ministers to sit back and let workers suffer Tory-inflicted austerity.

“They must rise to the challenge. For the sake of our workers, communities and public services, there is simply no other option.”

A Scottish Government spokesperson said: “We are proud that Scotland already has the most progressive income tax system in the UK, protecting those who earn less and asking those who earn more to contribute more.

“This in turn allows us to provide a more comprehensive set of services than in the rest of the UK.”

The spokesperson said decisions on tax for 2024-25 would “be made as part of this month’s Budget” and added that “longer-term reforms to the council tax system” are being considered by a joint working group set up with the Scottish Government and local authority body Cosla.