Local income tax: the battle lines deepen

Published on Sunday 30 March 2008 21:36

ALMOST by the week the battle lines between Holyrood and Westminster over the SNP's plans to introduce local income tax are dug deeper. The SNP is driving forward with this proposal, which was a clear manifesto commitment. And it feels duty-bound to pursue it as far as a minority administration is practicably able. Central to that practicability is agreement from at least one of the other political parties at Holyrood to support the proposal.

But it must also ensure that taxpaying voters in Scotland are clear what the financial implications of such a change are, and the consequences for them if the administration's sums do not add up. The plans have already drawn widespread and growing opposition from the Labour Party, the Conservatives, trade unionists and the business community.

Yesterday Yvette Cooper, the UK Treasury Chief Secretary, set out her concerns in a letter to the SNP finance minister, John Swinney, ahead of a scheduled meeting tomorrow about the SNP's financial assumptions. The chief assertion in her letter is that there is a 750 million "black hole" in the Scottish Government's plans. This is the difference between the 2.1 billion currently raised in council tax and the 1.35 billion which the Treasury expects a 3p increase in income tax in Scotland would be likely to raise.

But because this is an SNP flagship policy, and financing local government is essentially a devolved responsibility, does Ms Cooper have a legitimate right to intervene? She sets out two reasons for so doing. First, the introduction of local income tax in Scotland will need legislation at Westminster to authorise Revenue and Customs to collect the new tax. Second, she believes that the UK government has the right to express its concerns if it believes there is a threat to the provision of public services in any part of the UK.

Central to the SNP's calculations is the 400 million in annual council tax benefit which comes to Scotland from the Treasury to cover the costs of those who cannot pay the council tax. Mr Swinney is adamant that this should continue to come to Scotland, even if the council tax is axed, because it is part of the Scottish block grant. The UK government is equally convinced that it is not, and that it will not be paid out if council tax is abolished.

It may be tempting to see this as just another extension of the grievance politics of the SNP. This would be profoundly wrong. The switch to local income tax is a fundamental change. It needs to be fully and robustly costed, for taxpayers need some assurance on what is being proposed. Is it 3p extra on income tax, but with cuts in services? Or 3p now and another tax rise down the line? Many feel that the raging row over constitutional politics is obscuring a bigger fact, that council spending is already too high and too little attention is being paid to productivity and value for money. The deepening battle lines will do little to reassure them, particularly if the new tax is to proceed on poor arithmetic.

New code for more responsible era?

FEW envisaged that the launch of the new Banking Code would coincide with the worst credit crisis for a generation. Wholesale money markets as a source of mortgage finance have seized up. And banks are now markedly more wary, not only about the volume of their lending, but the criteria applied when loan offers are made.

Does it really need a new code to rediscover prudential behaviour in banking? The era of 125 per cent loan-to-value mortgages and credit cards being showered like confetti on already over indebted households is vanishing fast. In its place comes a new, less comfortable era, more attuned to the problems of arrears, repossessions and insolvencies: the grim detritus of the belief that low interest rates and ever-rising house prices were permanent features of our economic life.

The sanction of the business cycle does not render the new Banking Code superfluous. It formally obliges banks to be more helpful when dealing with customers in difficulties. It sets out a programme for "responsible lending" (should there be any other kind?). And it obliges banks to give more information on credit card and overdraft charges – a cause of many complaints. It is also a signpost to more far-reaching regulation for the banking industry as we battle for a way out of the credit crisis. And that, unfortunately, is going to take a lot more than a code.

Capital conditions for running

IT MAY not have been the best Edinburgh weather from a spectator point of view. But for those athletes who took part in yesterday's World Cross Country Championships, the wet and wintry conditions would have been welcome. Cross-country running is not a sport to be enjoyed on blazing-hot summer days.

As it was, Holyrood Park proved a spectacular setting for this showpiece occasion. It drew runners from 79 countries and attracted more than 10,000 spectators. Congratulations are due to the athletes who gave a magnificent performance, particularly to the Ethiopian runners who scooped all four of the top prizes. But praise is also due to the organisers. It is the first world cross-country event to be staged in Scotland since Glasgow's Bellahouston Park played host in 1978 and, it is hoped, will inspire a new generation of cross country runners across the UK.

The event marks a significant extension of the skills and ability of the Scottish capital to stage world-class events with flair and professionalism. The city's economy stands to benefit by an estimated 2 million as a result of this event. As well as drawing participants and spectators from around the world, it should also inspire return visits and – it is hoped – other athletics events. We have the logistics, we have the terrain and, for the athletes, fitting weather for such a gruelling sport.