Labour urged to go further on Scottish tax powers

Labour should support the devolution of full income tax powers to Scotland, a think tank has said.

The Red Paper Collective, whose members include Labour MSPs Neil Findlay and Elaine Smith, argued the party's current proposals do not go far enough.

Labour has backed giving the Scottish Parliament control of three-quarters of basic rate income tax.

Former Prime Minister Gordon Brown has argued that full tax powers would weaken Scottish Labour at Westminster.

The Red Paper Collective, which will hold a meeting for Labour members and the STUC on Saturday, published its devolution arguments following the first meeting of the Smith Commission.

The commission, chaired by Lord Smith of Kelvin and including representatives of five Scottish political parties, is aiming to reach an agreement on more powers for Scotland.

'Progressive tax'

Scottish Labour's devolution proposals would give Scotland the power to raise 40% of its budget, through increasing the tax-varying powers under the Scotland Act from 10p to 15p - potentially raising an extra £2bn.

However, its plan to devolve three quarters of income tax revenues do not go as far as the other parties, who support handing full powers over income tax to the Scottish Parliament.

Outlining a case for "progressive federalism", the Red Paper Collective said: "We welcome the commitment to more powers for the Scottish Parliament, but stress that what is important is not the powers themselves but how they are used to challenge inequality, to redistribute income and enhance economic and social democracy, above all by increasing the collective influence of working people."

The think tank argued that achieving this "requires that all income tax is devolved to allow the Scottish Parliament more flexibility in creating a progressive tax system, improving public services and increasing redistribution".

The group also called for an extension of borrowing powers and "the power to form publically owned enterprises to rebuild Scotland's industrial base".

It supported retaining the Barnett formula for distributing public spending around the UK - which Labour has also backed - but called for it to be based on need rather than population.

It also backed the creation of a Scottish Health and Safety Executive and control over employment tribunals, which Labour has proposed.

'Crucial powers'

SNP MSP Sandra White said: "Labour's weak devolution proposals simply don't give Scotland the powers we need to make our country a fairer, more prosperous place and leaves far too many crucial powers over the economy and welfare in the hands of the Westminster establishment.

"The fact that even the Tories' proposals for more powers go further than Labour's will be deeply embarrassing, so it comes as no surprise that senior Labour figures are speaking out against Johann Lamont's leadership as the whispering campaign against her continues."

However, Gordon Brown has claimed that devolving all powers over income tax would mean falling into a "Tory trap" over taxation that would cut Scottish MPs' power at Westminster.

He said: "There will always be someone knocking at the door saying Scottish MPs should be taken out of voting on income tax at Westminster, and then the budgets at Westminster will be distorted by having two classes of Members of Parliament voting them.

"It is not in Scotland's interest. Scotland has an interest in the decisions on income tax, indeed all tax that are made in the UK."