City blasts local income tax plan as unworkable

CITY leaders today warned against introducing a local income tax in the Capital after branding it unworkable.

The campaign for a local income tax to replace the controversial council tax has gathered momentum with both the SNP and the Lib Dems trumpeting the policy in the run-up to the General Election next month.

But city officials and councillors fear that the ditching of council tax would spark major problems.

The council claimed today there would be "significant" set-up and operating costs with the new tax and insisted the new regime would be less accountable and more complex. City chiefs have instead called on the Scottish Executive to reform council tax and allocate local authorities a greater share of business rates.

The opposition to the local income tax by the Labour-led administration is especially significant as the Lib Dems are expected to make gains and may hold the balance of power in council following the next round of local government elections in 2007.

The council’s concerns have emerged in a submission to the Local Government Finance Review Committee, which is reviewing different options for local taxes before making recommendations to the Scottish Executive.

Councillor Maureen Child, the city’s finance leader, said today : "It is simply not viable to consider replacing council tax with a local income tax which would be complex, unstable and unpredictable as well as having significant administrative implications for employers, many of whom are already calling upon government to reduce the burden of red tape.

"Our preferred taxation combination is a system of reformed council tax supplemented by retaining a greater proportion of business rates."

The city council would also require large cash reserves to cover any major fluctuations in the income tax during a recession, added Cllr Child.

Councillor Iain Whyte, the city’s Tory group leader, said: "A local income tax would be extremely damaging to hard- working families and especially couples who could end up paying considerably more."

But Councillor Fred Mackintosh, spokesman for the city’s Lib Dems, stood by the local income tax policy: "In the 1970s, a royal commission approved a local income tax as workable. If we keep the council tax, we are likely to have massive increases in council tax due to revaluation because of the hot property market. Every year, you have to put council tax up. A local income tax is fair."

Under the Lib Dem proposals, the cash would be collected as part of the national income tax system by the Inland Revenue and then distributed to local councils.

The Lib Dems claim the typical family would be better off by 450 a year, although they admit a couple earning between 40,000-50,000 a year would be worse off.

The Local Government Finance Review Committee, led by chairman Sir Peter Burt, is expected to report to Ministers in summer 2006. A spokeswoman for the Scottish Executive said: "We await the recommendations from the committee."


Labour: Would reform council tax bands so people in the most expensive properties paid more. The manifesto promises measures to make it easier for pensioners and the low-paid to claim council tax benefit.

SNP: Would abolish the council tax and replace it with a progressive local income tax base, which they say would result in most people paying less and half of pensioners paying nothing at all.

Lib Dems: Would scrap the council tax and replace it with local income tax, which they say would mean a saving of around 1000 for a pensioner couple living in an average Band D house.

Conservatives: Would fund schools directly from central government, which they say would cut council tax by an average of 35 per cent. And they would give pensioners a further 50 per cent discount up to a maximum of 500 per household.

Greens: Would scrap the council tax and the uniform business rate and introduce a land value tax which they say would encourage more efficient use of land and speed up urban renewal.

Scottish Socialists: Would abolish the council tax and introduce a Scottish Service Tax, based on income, which they claim would leave 77 per cent of Scots better off.

Do you think council tax should be replaced with a local income tax? Let us know.

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