SNP Signals Climbdown On Scottish Income Tax Proposal

by Jason Gorringe, Tax-News.com, London

16 February 2009

The Scottish National Party, the majority party in the Scottish parliament, has shelved its controversial plans to introduce a flat rate local income tax to replace the current council tax charge.

In something of an embarrassing climbdown for the party, John Swinney, Cabinet Secretary for Finance and Sustainable Growth in the Scottish government, told the Scottish parliament on February 11 that plans to introduce the local income tax from 2011 are being dropped because of a GBP1bn cut in the Scottish budget imposed by the central government in London.

"The current Labour government in London has announced a reduction of as much as GBP500m in Scotland’s budget next year and the year after - a planned GBP1bn raid on Scottish public services," Swinney said.

"These UK government cuts will have a substantial impact - threatening frontline services, reducing investment and undermining our work to create and protect jobs. It would not be wise, and indeed would not be possible, to introduce a tax reduction of the scale we propose in the face of such swingeing Westminster imposed cuts," he argued.

One of the party's flagship policy proposals, the SNP wants to replace the council tax, a local government tax based on the value of an individual's dwelling, with a local tax on workers, set by councils, up to a limit of 3p in the pound. The party claims that the vast majority of Scottish council tax payers would be better off under the new system. However, the plans have provoked strong opposition from business groups who argue that the local income tax would be costly to administer and lead to falling investment by companies into Scotland.

Welcoming Swinney's announcement, David Lonsdale, assistant director of the Scottish arm of the Confederation of British Industry, said: "This decision will be warmly welcomed by businesses and employers throughout Scotland."

"We recognise that it cannot have been an easy decision to take, but are very grateful that Scottish Ministers have listened to our members’ views on this issue. In the current economic climate this is undoubtedly the right decision to take,” he added.

Lonsdale also welcomed plans to reduce local business rates for small firms from April 2009, and the Scottish government's efforts to freeze the council tax for the next few years.

Recommended