MSPs endorse council tax reforms

Scottish ministers said the council tax system was unfair

The Scottish Government has been saved from a defeat at Holyrood on plans to replace Scotland's council tax with a local income tax.

Labour, which said the plans were less popular than the poll tax, urged MSPs to back its motion to reject them.

Parliament instead voted for a Green amendment, calling for substantial changes to the local system.

Ministers currently do no have enough parliamentary support to pass plans for the 3p income tax.

The Scottish Government said a tax based on the ability to pay would be a vast improvement on the current system.

But Labour public service spokesman Andy Kerr told MSPs there was nothing local about the centrally-set 3p tax, which he said would raise 60% of required funds compared to council tax - leaving an £800m black hole.

Each party's colours are nailed firmly to their own particular mast. Little room has been left for dialogue Patrick Harvie Green MSP

The former Scottish finance minister added: "A nationally set tax would mean the Scottish Government determining how much each council can spend, thereby removing both fiscal autonomy and fiscal responsibility from local government.

"It is centralisation by stealth."

Tory finance spokesman Derek Brownlee said the omens were not good for local income tax, adding: "The government should cut its losses, abandon these hare-brained plans and focus instead on reforming the council tax."

Ministers hope to introduce their plans in 2011/12, around the time of the next Scottish Parliament election, and are banking on Liberal Democrat support to help get them through parliament.

Liberal Democrat finance spokesman Tavish Scott's party said councils should be able to run the new system, but offered to work with the government on plans for change.

"The Scottish Government's proposals for a local income tax address some of the inequalities inherent in the current system and if the detail can be got right, 60% to 70% of local taxpayers across Scotland can be better off," said Mr Scott.

'Hitting pensioners'

Green MSP Patrick Harvie said parliament had come to an impasse over the issue, adding: "I don't think there's a majority for income tax in this chamber. I don't think there's a majority for the status quo either.

"Each party's colours are nailed firmly to their own particular mast. Little room has been left for dialogue."

Finance Secretary John Swinney insisted the government was committed to abolishing council tax, telling MSPs: "Council tax is unfair and regressive.

"It hits people on low incomes, particularly pensioners, who can least afford to pay it.

"Our proposals for local income tax will make most single pensioners, most pensioner couples, most couples, with or without children, most one-parent families, most single people and most households with multiple taxpayers better off - only the top-income decile will pay more under our proposals."