Lib Dems 'win round one' as local income tax deal draws closer

Published on Thursday 2 October 2008 22:26

THE prospect of replacing the council tax with a local income tax came a step closer yesterday after the first stage of a deal between the SNP and Liberal Democrats was completed.

The two parties co-sponsored an amendment to a Conservative motion on local income tax (LIT) demanding the 400 million Scotland receives in council tax benefit should continue to come from Westminster, even if the council tax is abolished.

But, crucially, John Swinney, the finance secretary, conceded the money would go straight to local authorities and not to the Scottish Government.

The Lib Dems claimed to have won the first round in the battle between the two parties over the key issue which splits them – they want councils to decide the level of LIT, while the SNP wants the rate to be set centrally .

A Lib Dem source said: "We got exactly what we wanted out of the deal and we intend to push the principle of local accountability on to setting the rates."

Jeremy Purvis, the party's finance spokesman, has already told The Scotsman that if a "sunset clause" can be introduced that would allow councils to set the rate two or three years after LIT was introduced, his party would back the SNP plans.

If this happens, the parliamentary arithmetic means the SNP will still need to garner the support of the two Green MSPs by offering to look at their land value tax proposal.

However, if the Nationalists win the by-election expected in Motherwell and Wishaw when former Labour First Minister Jack McConnell takes up his post as High Commissioner in Malawi, they will need only the backing of the independent MSP Margo MacDonald, who has said she could be persuaded.

Yesterday's Tory motion was an attempt to smoke out details of how a centrally set LIT of 3p would be distributed. The Tories believe it will result in the North-east and Edinburgh, which already lose more than 100 million in business rates between them to other parts of Scotland, having to subsidise other areas by even more.

Derek Brownlee, the Conservative finance spokesman, said: "I'm no fan of local income tax. That's why I'm so pleased the Scottish Government looks likely to publish these details."

Labour was left embarrassed as the only party not to vote for the 400 million to be retained in Scotland. Their MSPs decided it was better to leave themselves open to claims they were voting against Scotland rather than supporting the SNP/Lib Dem amendment and opposing their colleagues in Westminster, who have said Scotland will lose the 400 million if LIT is introduced.