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Scottish Labour dump income tax rebate plan ahead of election

The policy was announced on February 2 by the party but it has now been scrapped.

Kezia Dugdale: Scottish Labour only announced the policy a short while ago.
Kezia Dugdale: Scottish Labour only announced the policy a short while ago. PA wire

Scottish Labour has dropped their plans for an income tax rebate for those earning below £20,000.

The party announced the policy less than two months ago on February 2. Under the plans the rebate would have been used from their initial budget after coming to power until April 2017 when Holyrood could change individual income tax thresholds.

Those earning below £20,000 would have received a £100 payment to ensure they did not lose out from the party's plan to raise the 20p tax rate by 1p.

When the policy was announced a document circulated by the party said: “Will lower income workers lose out?

"No. Lower income taxpayers will be the winners from today’s announcement. We propose, from within the revenues raised, to pay all low income workers paying income tax an additional £100 a year. This is far in excess of the, for example, £20 a year which someone earning just above the minimum wage would pay over the course a year.”

The document also stated that the rebate would have been "administered by local authorities".

However STV News understands the party has dropped their proposal as they believe the new personal allowance threshold announced by the Chancellor George Osborne is sufficient to protect low income workers.

Their decision to drop the policy was met with criticism from rival party leaders.

SNP leader Nicola Sturgeon said: “This would be a broken promise from Labour of the worst kind.

"It is bad enough that the Labour party wants to put up taxes on 2.2m basic rate taxpayers including 500,000 pensioners but to fail to offer any protection to those on the lowest earnings would be a true betrayal of Labour’s roots.

"Labour have clearly made promises to taxpayers that they are not willing or able to keep. There is a simple question for Labour, will low income households receive a £100 rebate or will the Labour party take away the boost for low earners that comes from the personal allowance, to pay for Tory austerity."

Scottish Conservative leader Ruth Davidson said: "Kezia Dugdale's plan to tax everyone more, then ask the low paid to queue up a year later for a £100 rebate from the council was so ludicrously ill-thought out that even she has now decided to scrap it."

Scottish Liberal Democrat leader Willie Rennie said: "Thanks to the Liberal Democrats in government the personal allowance rose taking thousands of people out of tax altogether and cutting income tax for everyone else by £825. To pay for our £2.5bn investment in education we are only asking for £25 back from someone earning £15,000. That means they are still £800 better off.

"We're protecting people on lower incomes under our penny for education and I'm pleased Labour has recognised that. Now they need to be clear about what they would do with the money the penny would raise - we've been perfectly clear that we offer a transformational investment in nurseries, schools and colleges. Our fair plan contrasts with the SNPs timidity and the Tories unfair stealth taxes."

A spokesperson for the Scottish Greens said: "This confusion from Labour makes it clear - only the Scottish Greens are proposing changes to income tax which would see those on low and average wages pay less and the highest earners begin to pay their fair share.

"It is disappointing that neither Labour nor the SNP are really taking advantage of the new tax powers coming to Holyrood but Greens know that a better Scotland needs a bolder Holyrood, one which makes full use of the powers it has to reduce inequality and defend public services."

When initially approached by STV News a Scottish Labour spokesperson said: "We actually said at the time that it was a one year fix and that when we came up with a more elegant solution then we would release it...just why SNP get all excited when they don't actually understand our tax policy is a mystery to me."

The party later released a full explanation of their income tax policy.

A Scottish Labour spokesperson said:"Scottish Labour is fighting this election on a pledge to end the cuts in Scotland in order to invest in our public services. We'll do that by raising income tax by a penny and by asking the wealthiest 1% to pay a little more with a 50p tax for those earning more than £150,000. Unlike the SNP we believe the richest 1% should pay their fair share.

"The original payment of £100 was for one year to ensure that those earning under £20,000 would not pay more than today. We always said this was for 2016/17 only. We promised to protect those on low incomes and to make sure those with the broadest shoulders pay the most and that is what our plans do. Under our plans those earning under £20,000 won't pay a penny more than they pay today because of the recent changes being made to the personal allowance. Our decision to increase the top rate, and to maintain the threshold for higher rate tax payers as it is today, means the wealthiest will pay the most to stop the cuts."

On the day the policy was announced Scottish Labour leader Kezia Dugdale described the rebate as "annual" on the party's website.

Kezia Dugdale
Scottish Labour Party

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