Local income tax

'This flagship policy is in serious trouble'

IF the responses to the Scottish Government's consultation on its plans for a local income tax are anything to go by, this flagship SNP policy is in serious trouble.

Alex Salmond and his colleagues fought last year's Holyrood elections on the promise they would replace the current council tax with a so-called "local" income tax, although this would be set nationally at 3p in the pound.

The Nationalists' argument is clear – taxing income is fairer because it is linked directly to ability to pay. And they claim most people in Scotland would be better off under their scheme.

But a host of influential organisations have lined up to put the case against the proposed new tax.

By the time the deadline for responses to the consultation expired yesterday, these included the Institute of Directors; Unison, the UK's biggest public sector union; the STUC; CBI Scotland; the Federation of Small Businesses; Edinburgh Chamber of Commerce; the Chartered Institute of Public Finance and Accountancy; and the Institute of Chartered Accountants. They warn a local income tax would mean extra bureaucracy and drive away business and investment.

Labour finance spokesman Iain Gray says the weight of opposition to the proposal from such organisations amounts to a damning indictment of the policy. And he has called on the SNP to abandon its tax plans.

Given the absence of a majority in the Scottish Parliament, it is not clear whether the SNP can muster enough support to proceed with a local income tax. Only the Liberal Democrats back the idea – and they still oppose a centrally-set rate. Unless the Greens can be persuaded to come to the rescue, the plans look likely to be blocked.

But opponents of the SNP proposal are sufficiently concerned at the possibility of a local income tax to spell out the dangers in clear terms. There are not many issues that unite employers and trade unions against the Government, but the SNP's proposed new tax has done just that.

Iain McMillan of CBI Scotland warns it would mean Scotland had the highest income tax levels in the UK and send out the wrong message. And Matt Smith, Scottish secretary of Unison, says it would make many families worse off or lead to cuts in services.

The SNP insists the council tax is unfair and must be replaced, but it has failed convince with its local income tax plans. This is one election promise many hope the Government will not keep.