Local income tax: 'The issue will dominate the by-election'

Published on Tuesday 9 September 2008 09:44

SUGGESTIONS that both the Liberal Democrats and the Greens are edging closer to supporting the minority SNP Government over the introduction of local income tax will send shivers down the spine of middle Scotland and the business community.

Should it become clear that there is a political consensus for LIT the issue will pose a headache for the Calman Commission, which is currently looking into the future of devolution. The cross-party group was given further food for thought last week with Gordon Brown all but agreeing in a keynote speech that he accepts tax-raising powers for Scotland are almost inevitable.

Should Calman, like the Steel Commission, come out on favour of greater, or even total fiscal autonomy for Scotland, the potential for the SNP to drive more wedges between Holyrood and Westminster will increase greatly.

Were Holyrood ever to win full tax-raising powers, in reality it would put the country a hair's breadth away from virtual independence. And a YouGov poll published yesterday, which showed that many more Scots would vote for independence if the Tories win power in Westminster, illustrates just how close this is to becoming to reality.

The announcement last week by the SNP that it is to push ahead with a local income tax Bill may be timely for them. It is an issue that will dominate the Glenrothes by-election hustings and give the party the opportunity to press home its case in a largely working-class constituency by telling voters the bulk of them will be better off under LIT than council tax. It is an argument that might not hold good in other more affluent areas like Edinburgh but it is tailor-made for Glenrothes.

The principle of a tax levied on the ability to pay is almost impossible to counter, and in opposing it Labour will be going into its traditional industrial heartland arguing against a tax which even its critics accept will see the least well-off paying less. At this time that seems suicidal.

Perhaps what should happen is an extension of the principle of fiscal autonomy and responsibility. If it is right that the Scottish Parliament should raise what it spends, then shouldn't the same apply to local authorities? Given that the cash would come out of wage packets, would it not be appropriate for the amount taken for councils to be clearly explained on payslips, just as happens just now with National Insurance?

Administering and collecting it would be an enormous headache, but if councils were responsible for setting their own tax and every wage-earner could see precisely how much money was being taken to pay for local services, that would improve local accountability... and the pressure on councillors.