Ministers mock SNP's 'third gaffe' on tax rates

Labour yesterday trained its big guns on the Scottish Nationalists' 'third major gaffe' of the devolution election campaign, after the party's economic spokesman outlined policies that would raise top tax rates to 50p in the pound and could create a separate Scottish currency on the road to full independence.

With Labour struggling to reassert its dominant position in Scotland ahead of the Edinburgh parliament elections on May 6, the Chancellor, Gordon Brown, and Donald Dewar, the Scottish Secretary, leapt on remarks made by John Swinney, the SNP's Treasury spokesman.

Mr Swinney had argued that a policy of higher taxes on the better-off raised by lifting the cap on national insurance contributions (NICs) above ?24,000 would allow an SNP government to cut corporation tax for business.

But the Chancellor rattled off a series of adverse effects that Mr Swinney's policies would have on business, as well as taxpayers and pensioners. He claimed that the SNP had made its third campaign blunder in as many weeks after the party's leader, Alex Salmond, first said he would rescind the budget's 1p cut in the standard rate of income tax, and then called the Nato air strikes on Serbia 'unpardonable folly'.

Although ministers see it differently because they are also spending more on public services and are keen not to be outflanked on the left, their attack on the SNP is similar to the Conservatives' 'tax attacks' on Labour in 1992 and to 'Tartan Tax' jibes in the 1997 campaign, complete with supporting quotes from the Confederation of British Industry and other anxious business leaders. 'They have let the cat out of the bag,' said Mr Brown.

Last night, the SNP insisted that Mr Swinney had done no more than restate the party's long-standing commitment to progressive taxation, including an NICs policy advocated by Mr Brown and the former Labour leader, John Smith, before Labour's economic rethink from 1993 to 1995. 'This is a pathetic attack by Gordon Brown, totally devoid of content,' said an SNP spokesman in Edinburgh.

Labour has been on the offensive since the first 'tax gaffe' row opened up a clear lead over the SNP in the race to control the Holyrood parliament, according to two opinion polls. One ICM poll gave Labour a 13 per cent lead over the SNP and put the party close to an overall majority in the Scottish Parliament.

Labour recorded 45 per cent to the SNP's 31 per cent on the first vote, and 42 per cent to the SNP's 32 per cent on the second. It was closely followed by an opinion poll in Scotland which gave the nationalists 33 per cent, 11 per cent behind Labour. Both polls showed the Liberal Democrats and Conservatives battling it out for third place with 12 per cent and 11 per cent respectively.

Behind the sniping over tax rates lies the SNP's hunch that Scottish voters will readily pay what it describes as, on average, 30p a week 'the price of a bag of crisps' to raise ?230 million yearly for better schools and hospitals.

The new parliament will have tax-varying powers, but Labour says it will not be using them in the first four-year term, when Mr Dewar, soon to quit the Blair cabinet, is expected to become Scottish prime minister, leading an administration possibly in a Lib-Lab coalition.

At Westminster yesterday, Mr Brown and Mr Dewar mocked the apparent uncertainty in SNP policy after Mr Swinney told the Bridge News that he had no fixed views on government borrowing, on foreign exchange or how an SNP-led Scotland would handle its currency if it won an independence referendum possibly in 2000 and sought to enter the EU single currency zone.

Amid discussions about Scotland's share of national debt, and its commitment to a stable tax regime for North Sea oil, it emerged that the pledge to lift the NICs ceiling would effectively raise the top rate of tax for the better-off from 40p to 50p in the pound.

The hunch is voters will pay the price of a bag of crisps to raise ?230m