Derek Mackay could start lifting 40,000 children out of poverty by freezing tax bills for the better off in next week’s Scottish Budget, a leading think-tank has calculated.
The IPPR said the Finance Secretary could raise up to £210 million extra for benefits if he left the threshold for the higher rate of income tax alone for three years.
The higher rate and the threshold for paying it are 41p and £43,430 in Scotland, but 40p and £45,000 south of the Border, so middle-class Scots pay more than their English peers.
Chancellor Philip Hammond has said the threshold in England and Wales will rise to £50,000 in April, but it is set to increase by no more than inflation in Scotland, widening the cross-border tax gap.
Mr Mackay told a Newspaper yesterday he would not raise the Scottish threshold to the English level in 2019/20, and Wednesday’s draft Budget was not the time to give tax breaks to higher earners.
The IPPR said he should go further, and hold the higher rate threshold steady until 2021/22.
It said that if the £210m generated was used for social security top-ups, it could take 40,000 Scots children out of relative poverty, around one in six of the 230,000 children involved.
It said the money could be used to offset the two-child benefit limit, end the benefit cap, and top up child benefit by £20 a month.
Rachel Statham, an economic analyst at IPPR Scotland, said: “If tax bands go up with inflation, higher earners in Scotland could receive a tax cut over three times larger than someone earning minimum wage.
“At a time when public finances are under considerable strain, Scotland can’t afford this.
“By freezing the point at which earners begin to pay the 41p rate, we could raise additional tax revenue.”
Labour MSP James Kelly said: “This is a hugely significant report. The SNP must deliver a progressive tax system that meets the needs of communities.”
John Dickie, of the Child Poverty Action Group, said: “With UK government benefit cuts driving more and more families into hardship the Scottish Parliament must use every tool in its toolbox to protect Scotland’s children.
“This new analysis demonstrates the kinds of impact that can be made now. MSPs must work together as a matter of urgency to ensure the forthcoming budget boosts family incomes and fulfils its potential to lift tens of thousands of children out of poverty.”
A Government spokesman said: “We are investing over £125m this year to mitigate against the worst of welfare cuts and to support those on low incomes, but Universal Credit, and the benefits it replaces, remain reserved to the UK Government so we have no powers to scrap the two-child limit or lift the benefit cap.”
Source : HeraldScotland