Page last updated at 15:50 GMT, Thursday, 13 March 2008

Local income tax plan under fire

5 notes in a wallet

The Scottish Government's plan to replace council tax with a local income tax has come under fire at Holyrood.

Labour branded plans for the 3p tax a "con" which lacked basic figures, while the Tories said the wealthy would not have to pay the new charge.

During question time, First Minister Alex Salmond said the scheme was fair and had attracted widespread support.

Scottish Lib Dem leader Nicol Stephen demanded to know ministers' plans to help first time home buyers.

The minority Scottish Government hopes to introduce the local income tax in 2011/12, but needs the backing of rival parties to pass the plans, and the UK Government's support to implement them.

Referring to analysis of the plans by PricewaterhouseCoopers, Scottish Labour leader Wendy Alexander told MSPs the accountants were at a loss to explain "why the most basic numbers were missing" from the proposals.

Under the Scottish national income tax, the dustman will pay but the duke will not
Annabel Goldie
Scottish Tory leader

These included how much council tax cash had to be replaced, which years the plan referred to, how much 3p would raise, and the size of the resulting "black hole".

"The Nat Tax got an even worse reception than Thatcher's poll tax," she said.

Mr Salmond said 432,000 pensioners would welcome the alternative to the "unfair" council tax, as it would be based on ability to pay.

He went on: "What Wendy Alexander describes as a black hole is a 281m tax cut for working families across Scotland. That represents less than 1% of Scottish Government expenditure."

Ms Goldie said that, under the local income tax, those whose earnings came from bank interest and shares would pay nothing, adding: "Under the Scottish national income tax, the dustman will pay but the duke will not."

'Hated tax'

"The first minister must face facts," she told parliament. "His Scottish national income tax is unravelling by the day and what he will have to do is to reform the council tax, follow our lead and cut, not just freeze but cut, council tax for everyone."

Mr Salmond said the government's proposals would see a tax on second homes - which would apply to most of the "super rich" - adding that economic experts believed any attempt to tax dividend income would cost more than it yielded.

"Our system which is infinitely preferable to the council tax which the Conservative Party introduced," he added.

"Since March 1997 council tax in Scotland has increased by 62% and let's not forget the double digit increases that occurred in the years after the Tory Party introduced this hated tax."

Man looking in the window of an estate agent

Meanwhile, Mr Stephen demanded to know whether ministers would implement the SNP manifesto pledge of a 2,000 grant for those looking to get a foot on the property ladder or "break a promise made to 30,000 first-time buyers every year".

Challenging Mr Salmond, the Lib Dem leader said: "In 2005 he said it was urgent. In 2006 his deputy said it was time. In 2007 his manifesto said it's a promise.

"But where is it in 2008? The newspapers tell us that its cancelled."

Mr Salmond said the government was currently consulting on the future of housing.

He told MSPs: "The consultation document is out just now, the government will be carefully considering measures to help first-time buyers and indeed people across the housing market of Scotland."

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