SCOTTISH Labour’s plans to increase income tax could reduce the expected budget cuts by a third, according to new research published yesterday.

The Resolution Foundation, a think tank specialising in tax and income, said the proposed 1p income tax rise could raise £475 million and offset budget cuts faced by the Scottish government by a third.

Scottish Labour argues that the increase will help counteract austerity and protect public services, but the plans were rejected by Holyrood this week.

Labour MSP Neil Findlay said the SNP’s anti-austerity rhetoric had been “exposed as fraud” this week as nationalist MSPs sided with the Tories to vote down a “progressive tax increase to fund public services while benefiting the lowest-paid workers.”

Resolution Foundation director Torsten Bell praised the plan as “progressive in the sense that the better-off would pay a higher share of their incomes in increased taxes than those on lower incomes.”

He said that, under the proposals, the highest 10 per cent of earners would pay “significantly more, not only in cash terms but as a percentage of their incomes too.”

The top 10 per cent would pay an extra 1.3 per cent of their income in tax, or £1,000, while middle earners would see their pay reduced by £100, equating to 0.4 per cent of their income.

Mr Bell said: “Taken as a whole, the package is progressive,” but he warned: “There is an argument as to whether it is progressive enough.”

He suggested that higher and additional rates could be raised by more than the basic rate of tax.