Proposal branded greatest blunder since devolution

SNP plans for local income tax hammered

By Tim Pauling

Published:

Scottish Government plans for a local income tax have received a massive blow after being condemned by business leaders, unions, students and economists.

The public consultation to replace the council tax with a system deemed fairer by ministers ends today.

The strong opposition is putting the SNP under increasing pressure to drop its flagship policy.

If it presses ahead, it will have a hard time justifying its position with large sections of the private and public sectors.

Finance Secretary John Swinney officially launched the proposal in March for a tax set at 3p in the pound. He said it would be fairer than the council tax because it would be based on the ability to pay.

The plan is opposed by some of the most influential organisations in Scotland.

CBI Scotland director Iain MacMillan said it would “send out the wrong message” to investors and make Scotland the highest-taxed area in the UK.

Tom Miers, executive director of the Policy Institute, said it would be “the greatest blunder since devolution”, being bad for government and the economy.

Earlier this week, the Federation of Small Businesses said it made “bad business sense” and could harm Scotland’s competitive edge with England.

The income tax is also opposed by the Institute of Directors, the Institute of Chartered Accountants of Scotland and the Chartered Institute of Public Finance and Accountancy.

Other critics are public-sector union Unison, the STUC, the National Union of Students, Edinburgh Chamber of Commerce and Glasgow City Council.

There have also been claims the tax might be unconstitutional and leave a “black hole” in council finances.

Labour finance spokesman Iain Gray said the evidence showed the tax would be bad for hard-working families, the economy and local services.

“It is absolutely clear from those organisations that have published their submissions or commented publicly that this consultation exercise is a damning indictment of the SNP’s proposals,” he said.

“If the word consultation means anything at all, then Alex Salmond should listen to what he is being told and dump his unpopular plan to make Scotland the highest-taxed part of the UK.

“Even Alex Salmond cannot be arrogant enough to believe that he is right when organisations as diverse as CBI Scotland, the Institute of Chartered Accountants and the STUC say he is wrong.”

Tory finance spokesman Derek Brownlee said: “Hopefully, the fact that no one seems to have a good word for it will give the government the political cover it needs to walk away from it.”

CBI assistant director David Lonsdale said: “The administration has rightly put great store by the needs of the economy, so hopefully they will think again about LIT.”

The Liberal Democrats, who support a local income tax, said they awaited the outcome of the consultation with interest.

A government spokesman said: “Research consistently shows that the public are clearly in favour of a local income tax over the council tax, but clearly we will study carefully and in detail all of the responses to the consultation.

“Four out of five households in Scotland would be better or no worse off under a local income tax.

“Our proposal to replace the regressive council tax with a fair 3p local income tax based on ability to pay contains key advantages for Scottish business and builds on support we are providing through the Small Business Bonus Scheme.

“In assessing the responses, we will address genuine points of concern and seek to allay any unsubstantiated fears. We are confident that our final proposals will deliver the public’s expectations for a fair local income tax.

“It remains for those who reject our proposals to explain why they continue to support a council tax that hits hardest those least able to afford it.”