Jim Gallagher: SNP proposals - the good, the late and the daft

After years of paralysis, the SNP has produced a modest proposal on local government finance. It's got a lot to be modest about. One idea is sensible as far as it goes, one is late, and one is barking.

Aberdeens oil price woes would be aggravated by assignment. Picture: Robert Perry
Aberdeens oil price woes would be aggravated by assignment. Picture: Robert Perry

The sensible idea is changing the ratio of council tax paid by houses in each tax band. These were set back in 1991 by Tory ministers who didn’t want big rate bills for big houses. So the most expensive house in the country pays only twice as much as the average one. Under the SNP’s plan, it rises to 2.45 times; but those households are still better off than if council tax had been allowed to rise. Hardly a radical assault on the rich, but councils will welcome the bit more revenue.

There’s the promise of jam tomorrow, but no help today. Councils have been forced into widespread redundancies, but ministers now say the tax freeze might be lifted after the election, subject to a 3 per cent cap. The titanic 1980s struggles when councils fought for fiscal autonomy against a centralising Conservative government are long forgotten. Emasculated councils will accept whatever limited tax power they get. But it won’t help current redundancies. No tax rises before the election.

The one new idea is daft: assigning local authorities a share of income tax in their area. A botched local government finance commission proposed it, to administer the quietus to a long forgotten SNP commitment to local income tax. “Assigning” tax means handing over revenue, but no power over the tax itself. Exporting risk, but not control. So if revenues fall short, tax rates cannot be increased to fill the gap. And those councils needing to spend most will have the least income tax to spend.

Ministers argue assignment gives councils an incentive to promote growth. But say Glasgow promotes development and jobs. More income tax will be paid. But not necessarily in Glasgow – the bosses paying the most tax might live elsewhere. Or, say, the collapse in oil cuts Aberdeen incomes: will Aberdeen council have to cut services and worsen local economic problems?

The SNP says income tax is rising, so assigning it is good news for council budgets. Just last week it demanded a UK fiscal framework to underwrite the risk of income tax falling. Now it wants to export that risk to councils, who would need a cast-iron fiscal framework before taking it on. Will Mr Swinney offer one? I think not.

l Professor Jim Gallagher is a visiting professor at Glasgow University