More Scots will head to London if the Scottish National Party introduces a new tax band for higher earners, a senior MP warned on Thursday.
Shadow Scottish Secretary Ian Murray stressed the new levy could accelerate a “brain drain” from Scotland.
But Scotland’s First Minister Humza Yousaf is reported to be considering the new tax band for higher earners as he faces a blackhole in his fiscal plans for 2024/25 which some estimates put at £1.5 billion.
The Times reported that the budget gap is at least £500 million bigger than previously expected.
It said that The Scottish Fiscal Commission, which draws up forecasts for the Scottish economy including on tax receipts, output and social security spending, was told in recent days of the higher tax band proposal which could be announced in a Budget next Tuesday.
But Mr Murray told The Standard: “The SNP already have Scots paying the highest tax rates anywhere in the UK, and their failure to grow Scotland’s economy mean they’re looking to increase it even more.
“They need to grow the tax base not milk it with the consequence of more brain drain to London.”
He blamed SNP “mismanagement” for meaning “Scottish talent and entrepreneurs are often drawn to London when we want the brightest and best to stay in Scotland and help us grow here”.
Scottish income tax is more complex than south of the border and means that there is a:
* Personal Allowance which goes up to £12,570 before paying the levy
* Starter rate of 19 per cent for earnings between £12,571 to £14,732
* Basic rate of 20 per cent for income of £14,733 to £25,688
* Intermediate rate of 21 per cent for those on between £25,689 to £43,662
* Higher rate of 42 per cent for earnings between £43,663 to £125,140
* Top rate of 47 per cent for incomes over £125,140
The exact details of Mr Yousaf‘s plan are not known but he is believed to have shown interest in a proposal from Scottish trade unions for a 44 per cent income tax band on earnings between £75,000 and the upper rate threshold of £125,140.
Research suggested this could raise £200 million a year.
A proposal by the IPPR Scotland think tank, for a 45 per cent rate on earnings above £58,285 and below £125,140, was estimated to raise £257 million.
Business chiefs warned the reform could hit jobs.
But the Scottish First Minister faces difficult decisions to protect funding for key public services and stick to a freeze on council tax.
A Scottish Government spokesperson said: “The Budget will be set out on Tuesday by the Deputy First Minister.
“She has been very clear Scotland is facing the most challenging budget settlement since devolution because of sustained high inflation and a UK Government autumnstatement that failed to deliver the investment needed in Scotland's public services.
“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 tocontribute more. This in turn allows us to provide a more comprehensive set of services than in the rest of the UK.”
