Derek Brownlee MSP reviews the SNP plans to introduce a Local Income Tax for Scotland and decides that a reformed Council Tax would be a much better way forward.
Although in many ways politics north and south of the border has diverged since devolution, one common theme you will find is the unpopularity of Council Tax rises over the past eleven years.
Both the Lib Dems and SNP have long advocated a Local Income Tax (LIT) as preferable to property taxes, and now with an SNP Government, for the first time in the UK advocates of LIT are being forced to confront the detailed questions about their plans.
In brief, the SNP plans are for a Scotland wide supplement to income tax of 3p on all income except savings and investment income. Councils would have no freedom to vary the rate.
3p sounds quite attractive to many people – much lower than the 6 or 7p more usually floated. There’s a reason for this: the 3p rate has nothing to do with raising the same amount of revenue as the Council Tax, and everything to do with defusing attacks on LIT.
The SNP Government makes three major assumptions to get to a 3p rate. First, that the UK Government, which spends around £400m on Council Tax Benefit in Scotland, would transfer that money to the Scottish Government if Council Tax was abolished.
Second, that until LIT might be implemented (2011 or later), income tax revenues in Scotland grow at around 5% each year.
Third, that an additional annual £280m of efficiency savings can be found from within the Scottish budget by that date to make up the gap.
All of these assumptions look questionable, but there are two other obstacles: under the Scotland Act, a locally set LIT seems to be permitted – but a nationally set one unlikely to be (ideal territory for another fight between the SNP and the UK Government).