Alex Salmond will not introduce Local Income Tax in the lifetime of the next Scottish Parliament. The SNP will work with others to find a fair replacement for the council tax after 2016.
The new system will be taken to voters in the election that year and implemented in the next parliament – by which time the Scotland Bill will have given Holyrood more control over income tax. It is likely that if the SNP win this year’s election the pressure will increase in Westminster to devolve tax powers further, including the ability to tax outwith the basic rate.
There is also a chance that council tax benefit will be devolved to Scotland by 2016. It was the last Labour government’s refusal to hand over the benefit that made the introduction of Local Income Tax problematic.
Council tax was a major issue in the 2007 election, with the SNP and Liberal Democrats both promising to replace the unpopular charge with a form of local income tax based on the ability to pay. Under Labour, council tax increased by 60%.
However, the recession, London’s refusal to hand over Scotland’s share of the council tax benefit, a £500m cut from London and the Liberal Democrats refusal to co-operate with the SNP at Holyrood meant the tax could not be introduced.
Instead John Swinney, the Finance Secretary, froze council tax for four years, a policy that is so popular Labour recently performed a dramatic U-turn and copied it despite condemning it repeatedly at Holyrood and in the media.
Scottish Labour leader Iain Gray continues to try to make political capital out of Local Income Tax, although Labour’s own promise to replace council tax has been abandoned. Labour claims it will deliver 250,000 leaflets about the LIT “tax bombshell” – something it has neither the funds nor the organisational capacity to deliver.
An SNP spokesman said: “Labour’s silly leaflets should be pulped – they are bogus and irrelevant.”
He said Labour’s intention to mount a dishonest campaign on LIT was obvious after they failed to bring forward their own policy alternative and copied the SNP council tax freeze.
“We are delighted that they have now committed themselves because they are campaigning on false ground – their ball has been taken away. Labour’s leaded-footed campaign hasn’t been paying attention, and yet again is well behind the pace – no wonder the SNP have overtaken Labour in the polls.
“As we indicated last month and as is obvious, this would be done once the Scottish Parliament has the broader income tax powers that are coming from 2016, as well as the transfer of council tax benefit resources.
“In the next Parliament, we will work with others who are prepared to support local tax based on ability to pay, and take these proposals to the people so that we can legislate in the parliament after next.”
In October 2008 Iain Gray admitted Labour’s local taxation plans in 2007 ‘didn’t add up’ and that they would not make their new plans ‘on the back of a fag packet’.
In March 2009 he announced that a working group had been set up by finance spokesman Andy Kerr to study the issue. By August that year it was reported that the policy would ‘form a key part of the party’s campaign and manifesto for the 2011 Holyrood election’ and would be ‘revealed in the coming months’.
Yet by August 2010 no plans had yet been published and Labour MSPs were warning Iain Gray that they needed ‘a coherent policy’. An MSP close to the leadership predicted that details would emerge in October at their Oban conference. By then, the working group was in the hands of Michael McMahon MSP who said it was ‘finalising its report’. In December 2010 the party said ‘plans will be published in our manifesto’.
Labour’s manifesto will be published this week but it is unclear whether replacing the council tax will be in the document now.
The SNP remains committed to set a 3p local income tax and have dismissed the 5p rate quoted by Labour as “scaremongering.”
Government projections figures in 2008 indicated that a single pensioner in a band C property would save £385 with 3p in the pound Local Income Tax, while a pensioner couple on a band D with an income of £15,000 each would save £691 a year.
A family household with one earner making £25,000 and another making a part-time wage of £8,000 a year living in a band D home would save £462 a year.
A family household comprising an experienced fireman on a salary of £27,000 and £13,000 for a teaching assistant on a band D would be £252 a year better off.
The SNP remain confident that Scots will trust them on tax because of the freeze which Labour was opposing until recently. Last October, Iain Gray said councils should be given: “Their freedom to set tax locally.”