John Swinney: Shedding jobs is better than 1p tax increase

Finance Secretary John Swinney. Picture: Getty

Local government has seen a £350 million reduction in revenue but this has been mitigated by Scottish Government investment in health and social care integration, he said.

However, once this investment is factored in, councils remain £100m worse off and some local authorities have warned they may have to slash jobs.

Edinburgh had to add £15m to the tens of millions it already had to save following Mr Swinney’s budget.

Labour and the Liberal Democrats have proposed a one per cent rise in the Scottish rate of income tax to raise an extra £475m for public funds. Mr Swinney said this “would have to be raised by putting a burden on low-income families”.

A new report by the Resolution Foundation, written by former Labour policy director and Treasury adviser Torsten Bell, said the overall impact of the one per cent rise is progressive.

It stated: “The richest ten per cent of households lose around £1000 while 15 per cent of households in the bottom half of the distribution actually gain from the policy and the majority are unaffected.”

Mr Swinney acknowledged low-income households would be better off if they received Labour’s proposed £100 rebate.But he said this rebate is “a complete mirage and cannot be delivered”.

He said: “There was a reduction in revenue expenditure of £350m in the local government grant and aid.

“Once you put into the equation the £250m that the Scottish Government is investing in the integration of social care – social care being one of the largest elements of local authority expenditure in Scotland – there is a reduction in local authority budgets of £100m, which equates to less than one per cent of total local authority expenditure.”

He added: “Over the years we have seen a reduction in public sector employment – and I regret that fact very much.

“But what I have got to do is make a balance between whether or not we will be prepared to increase the tax bill for low-income households and put additional pressure on hard-pressed individuals, or ask local authorities to try to secure one per cent changes in the way in which they are delivering public services.”

He said some people on the national living wage earning £13,000 would see a five per cent increase in tax but someone earning £200,000 would see the tax they pay increase by 2.6 per cent.

Scottish Lib Dem leader Willie Rennie said: “This respected think tank is making it crystal clear to the SNP.

“Increasing income tax by one penny is progressive, with those on the highest incomes bearing the greatest burden.”