Taxing questions for MSPs at Holyrood

By John Knox
Political reporter, BBC Scotland

"The Nat tax got an even worse reception than Thatcher's poll tax."

John Swinney's local income tax plan was not well received

So Wendy Alexander summed up Labour's version of events at Holyrood this week.

"Families can't afford it, businesses don't want it, local government doesn't like it and, by the way, the rich won't even pay it," Ms Alexander told Alex Salmond at First Minister's Question Time.

The SNP say their local income tax, to replace the council tax, would be the biggest tax cut in Scotland for a generation and, at last, local tax would be "fair" i.e. linked to the ability to pay.

They say four out of five households would be better off, or at least no worse off, and only those households with a joint income of more than £64,000 a year would pay more.

But it soon became clear, after the finance secretary John Swinney outlined the SNP's tax plan to a sceptical press gathering at Holyrood on Tuesday, that there are more difficulties with the scheme than there are tax inspectors in the Inland Revenue.

One problem, as Wendy Alexander pointed out, is that investment income will not be subject to the tax, apparently because it would cost more to collect it than it would yield in revenue. Even the Conservatives found that difficult to swallow.

'Biggest cut'

"How can it be fair?", asked Annabel Goldie at question time. "The dustman will pay, but the duke will not. The bus drivers will pay but the bus owners might not, the dividends of ministers will be Scot free but the wages of workers will be hit hard."

Another problem is the rate at which the tax will be set, 3p in the pound.

The SNP admit that it will not raise the same amount as the current council tax, that's why it's "the biggest tax cut in a generation".

They say the shortfall would be £280m a year, which they would find from central funds to make sure council services do not suffer.

The first minister was accused of having a "cavalier" approach

But that assumes that Westminster will continue to pay £400m to Scotland in council tax benefit. That is what economists call a "heroic" assumption.

And this is where the Liberal Democrats come in. They don't want the rate to be set nationally. They want each council to set its own rate so it can be a truly local tax.

No-one has yet asked those tax inspectors in the Inland Revenue if they are willing to collect the Scottish income tax, let alone collect 32 different rates.

Never mind, say the Liberal Democrats and the SNP, all will be sorted out during the four-month consultation period which has just begun.

So, will the new tax win a majority in parliament and come into effect as planned in 2011 or 2012?

Well, even if the Lib Dems are on side, the two Green MSPs would need to vote for it as well.

They are still wedded to a property tax, however, and the SNP would need to promise them a windmill in every garden to change their minds.

'Poor judgement'

But, as Alex Salmond pointed out at question time, people said the SNP would never deliver a budget or a council tax freeze and yet, like the spring, they are coming into effect next month.

Was he being "cavalier"? Well, I'm afraid that is Alex Salmond's style, according to a local government committee report out this week.

It found that his actions on the controversial Donald Trump golf resort planning application showed "exceptionally poor judgement".

Four Liberal Democrats voted the wrong way over tagging

The SNP minority on the committee however reminded everyone that he'd broken no rules and they condemned the report as a "vendetta".

The result of all the shenanigans over this Aberdeenshire dream is that an official Reporter has been appointed to hold a public inquiry into the whole affair and he won't even begin his work till June.

MSPs got themselves into a fair old tangle over electronic tagging this week. Such was the confusion over two apparently contradictory motions that four of the Liberal Democrats voted the wrong way and the leader Nicol Stephen arrived just too late to vote at all.

The result was that the government only got half of what it wanted. Low risk prisoners will be allowed out on "home detention curfews" for the last six months of their sentence, rather than four and half months as at present.

But the same conditions will not apply to prisoners who've served sentences of more than four years.

We got more confusion over the Borders railway.

MSPs debated the new funding mechanism for the project, the setting up of a not-for-profit company.

MSPs allowances

Transport Minister Stewart Stevenson said "considerable interest" had already been shown by private investors but he was unwilling to say how much of the £235m - £295m required for the railway would be provided by the government.

Finally, some housekeeping.

The Langlands review into MSPs allowances has recommended that parliament should no longer pay the mortgage interest on homes bought in Edinburgh by members from far-flung constituencies.

He's also suggested that the MSP mileage rate be cut from 50p to 40p. And as if that wasn't enough waste management, it's understood the Holyrood pensions committee has recommended that first ministers in future should not be entitled to a £38,000 a year pension no matter how long they serve.

The amount should instead be linked to their length of service.

Thus Alex Salmond has every incentive to stay in office for as long as it takes to introduce a local income tax. And that could be a very long time.