SNP suffers its first defeat over tax plans

THE SNP has suffered its first serious defeat on efforts to introduce the controversial 3p local income tax.

The Scottish Government is under pressure to allow alternatives to LIT to be considered when it tables its council tax abolition bill next year.

In what was described by the Conservatives as "a landmark vote" in Holyrood yesterday, MSPs decided that all options for local taxation should be given a fair hearing when legislation is brought forward by the SNP.

An SNP amendment declaring the council tax to be discredited, claiming it should be abolished and saying that an LIT based on ability to pay is a fairer system of local taxation, was defeated.

It is the first time MSPs have specifically rejected the SNP's plan to replace the council tax with a 3p LIT – an idea opposed by business groups, trade unions and many other organisations.

Although the vote yesterday was not binding Alex Salmond, the First Minister, promised when he took office last year that he would not ignore the will of parliament. And if he accepts yesterday's vote, it will mean MSPs will have a multi-option bill next year. This will include the SNP's fixed rate 3p LIT, the Liberal Democrats' LIT, which can be varied by councils, the Tory proposal to lower and reform the council tax and the Greens' suggestion of a land value tax aimed at hitting developers who sit on landbanks.

Derek Brownlee, the Tory finance spokesman who proposed the motion, accused the SNP of wanting to leave MSPs with a straight choice between the status quo with the council tax, which he said nobody wants, or its version of LIT.

He added: "Polarising the debate between the government's preferred option and the status quo might give the government a slightly better chance of winning a vote, but it doesn't give Scotland a better system of local government finance."

The Conservatives won with the backing of Labour and Green MSPs, along with the independent MSP Margo MacDonald.

Patrick Harvie, a Green MSP, said the motion "gave Holyrood a great opportunity to move beyond the usual stale and unproductive approach. I urge the Scottish Government to work with the opposition parties to give all options consideration".

The motion was opposed by the SNP and Lib Dems. Alison McInnes, a Lib Dem MSP, said: "This is the first time I have come across the idea of a pick-and-mix, multi-option bill."

John Swinney, the finance secretary, said Labour had yet to come up with its own solution and accused the Tories of creating a mishmash, "chopping and changing" their position.

A spokesman for Mr Swinney last night said the Tory idea for a multi-option bill was "incompetent". But he added: "We will, of course, take account of the debate (and] we will update parliament on our plans early in 2009."