Nationalists set for major U-turn on local income tax concessions

Published on Saturday 22 November 2008 18:37

THE Scottish National Party is moving closer to a major about-turn over controversial plans for a local income tax that will see stocks and shares income taxed and local authorities allowed to set different rates.

The prospect of Scotland's 32 councils being allowed to set their own rates will be a major policy shift for the SNP, which originally proposed to replace the council tax with a centrally set 3p income tax supplement.

A document seen by Scotland on Sunday also indicates that the SNP is to agree to another major concession to the Liberal Democrats and allow unearned income to be taxed.

Holyrood ministers had previously focused on earned income such as salaries.

A third major concession under consideration is to exempt students from paying the new tax. Students currently do not have to pay council tax.

A Convention of Scottish Local Authorities (Cosla) document outlines discussions between councils and Government civil servants as the political parties wait for Finance Cabinet Secretary John Swinney's official response to a consultation on the tax.

It considers three main areas officials have been looking at – "exemption for students, local variation on the rate to be determined (downwards only)… and the inclusion of investment income to be taxed alongside an individual's salary".

The document backs up remarks made by Swinney last month when he signalled that he was prepared to alter SNP policy to win Lib Dem support and get the legislation through parliament.

The Lib Dems have long called for a local income tax with differing rates that can be set at local authority level.

Jeremy Purvis, the Lib Dem finance spokesman, said: "They (the SNP] are moving in our direction. It is a big shift for them. They fought the election on the basis that they were going to be proposing a national income tax that was centrally government set in perpetuity. But we would not accept that.

"The evidence is that they are moving towards us, and the civil servants would not have told Cosla otherwise in my view. I think that there will have to be further discussions between us but I am pleased that they have recognised that their proposal needed improvement."

Labour has argued that a local income tax will penalise hardworking families, while the Conservatives have called for a reform of the council tax.

The consultation on local income tax has so far produced 500 responses. Most of those from organisations oppose the proposal.

A spokesman for Swinney said: "The Finance Secretary has already made it clear that these are suggestions which are being looked at in light of responses to the consultation exercise on local income tax carried out earlier this year.

"Scrapping the unfair council tax and replacing it with a fair local income tax, based on people's ability to pay, is a popular policy, and we will be publishing an analysis of responses to the consultation exercise shortly."