KEZIA Dugdale is to back an across-the-board income tax increase and say the SNP can abandon savage cuts to public services by raising extra cash instead.

The Scottish Labour leader will today call for Holyrood's existing powers to be used to increase the rate by 1p in a major policy shift. Her party claims this would raise almost £500 million a year and allow Finance Secretary John Swinney to ditch proposals to hit councils with swingeing budget reductions.

Ms Dugdale will also propose a £100 annual payment to low-earners, in a bid to offset the impact of the policy on the poor and counter SNP claims that a blanket tax rise would hit struggling families.

Labour believe that the rise could come into force in April, and will call on Mr Swinney to perform a u-turn over his decision not to use new powers that allow him to set income tax at a higher or lower rate than the rest of the UK in the 2016/17 budget.

However, the Deputy First Minister refused to back the proposal, branding it unfair on low income households. Should he stick to his guns, Labour will go into May's Scottish Parliament elections with the policy to impose higher income tax charges north of the border in its manifesto.

The Liberal Democrats last week also backed a 1p rise, calling for the money raised to be spent exclusively on education, leaving the SNP in the company of the Tories as the only major Holyrood parties that want income tax rates to remain as they are.

Labour insiders said that the policy represented a "grown up choice" and offered an answer to Nicola Sturgeon, who has repeatedly challenged Ms Dugdale to set out how she would avoid public spending cuts.

The party will argue it is offering an honest alternative to voters while attacking the SNP for presenting itself as anti-austerity but proposing a settlement that will mean huge cuts to schools, colleges and councils.

Ms Dugdale, who will today make a major speech in Edinburgh, is expected to say that SNP cuts of between £350m and £500m will be felt in every community in Scotland and warn that the impact will hit schools and nurseries particularly hard.

She is set to add: "Given the choice between using our powers or making cuts to our children’s future, we choose to use our powers. We will tear up this SNP budget that simply manages Tory cuts and instead use the power we have to set the Scottish rate of income tax one pence higher than the rate set by George Osborne.

"We don’t do this because we want to use the powers for their own sake. We do it because there is no other alternative to cutting into our nation’s future.

"This choice we make today on the Scottish rate of income tax would provide a half a billion pounds more to invest in our children’s future. It enables us to stop cuts to schools and other vital public services."

The SNP has previously rejected calls to raise income tax, saying that powers devolved under the 2012 Scotland Bill allow only uniform changes across the three bands - a 1p increase on the top rate must also be applied to the middle and lower rates - meaning changes would hit the poor.

Labour claimed that a £100 annual payment to income tax payers earning under £20,000, administered by local authorities and costing £50m, would see those eligible better off under the Labour plans.

A worker on £25,000 would pay £3 a week more, someone on £40,000 would pay £6 a week more while the First Minister, whose salary is £144,687, would pay £28 a week more in income tax according to Labour.

Willie Rennie, the Scottish Liberal Democrat leader, added: "The financial situation in our nurseries, schools and colleges is dire and it seems everyone apart from the SNP and Conservatives recognise that we need urgent action to save it."

Scottish Conservative finance spokesman Murdo Fraser said that MSPs should be attempting to lower taxes rather than raise them.

Mr Swinney said: "What the Labour Party are doing is using very inflexible powers to punish low income households at a time when low income households need the support that this SNP Government will offer them of taxes remaining as they are and a continued freeze on the council tax."