Rebellion over SNP finance package grows in public and private sectors

PRESSURE continued to mount on the Scottish Government yesterday as business and council leaders drew battlelines over SNP policy.

As revealed in The Scotsman, leaders of Scotland's leading business organisations, known as the Group of Six, met with John Swinney, the finance secretary, to demand he drops plans for a 3p local income tax (LIT).

The SNP government was also facing revolt from councils over free school meals, continuing the council tax freeze and two of its plans to tackle the recession.

The meeting involved CBI Scotland, the Federation of Small Businesses, Institute of Directors, Scottish Council for Development and Industry, the Chambers of Commerce, and Scottish Financial Enterprise.

They warned Mr Swinney that "the gloves would be off" if he pursued a policy which would be "disastrous" in a recession.

Afterwards, David Watt from the Institute of Directors said: "There was a free and frank exchange of opinions."

Mr Swinney said: "Our proposals are a tax cut for Scotland, putting money into the pockets of low and middle-income households. Scotland would have the lowest local tax in the UK, as well as the fairest."

The business leaders received their answer two hours earlier in First Minister's questions when, under questioning from Labour leader Iain Gray and Tory leader Annabel Goldie, Alex Salmond insisted his government would press on with replacing the council tax with LIT.

But Ms Goldie has demanded the First Minister clarifies claims he made to her that there will be a rise in income-tax take in 2011 of 18 per cent, rather than a fall.

"As far as I am aware, the 18 per cent increase to which you refer does not appear as economic data in the Pre-Budget Report," she said. But a source close to Mr Salmond said: "The figure can easily be extrapolated from the information available."

There were also continued rumblings from senior figures in Scotland's 32 councils, with behind-the-scenes moves toward demands for more cash to deliver the council tax freeze than the £70 million on offer.

Yesterday The Scotsman also revealed anger over Mr Swinney's claims he would decide how to spend £260 million of capital spend brought forward to tackle the recession. Councils said it was theirs to decide how to spend. A source close to Mr Swinney seemed to soften the line last night, saying: "We need to work together in partnership for the benefit of Scotland."

The issue was presented as evidence that the concordat between councils and the Scottish Government was unravelling.

A vote by parliament to allow councils to provide free school meals to all children in P1 to P3 classes could also lead to conflict. Up to 23 councils have threatened to not deliver the policy, even though it is part of the concordat because of tight budgets.

A further row emerged over the SNP's £100 million accelerated programme of building affordable housing. It has emerged that Glasgow, Edinburgh, Aberdeen and Aberdeenshire may not get to apply for the money, even though they have to pay part of the extra £40 million contributed by councils.

Aberdeenshire and Glasgow council sources confirmed this.

Liberal Democrat North-east MSP Alison McInnes branded it "an outrage." However, a Scottish Government spokesman said: "Claims from the Lib-Dems that certain local authorities areas are not allowed to bid for accelerated funds are completely false."


BACKGROUND

THE problems faced by the Scottish Government with councils centre on the "historic" concordat signed last year.

The deal was that councils would freeze the council tax in return for extra funding and attempting to deliver SNP flagship policies including reducing P1 to P3 class sizes to 18 and give the same year groups universal free school meals. In return, councils would have their budgets freed up to spend as they wished.

However, this relationship has begun to fragment. Up to 23 councils have claimed there is not enough money for free school meals and there is nothing ministers can do to force them to provide them. But the biggest fight will be over the council tax freeze next year. Many councils have said it cannot happen without significantly more money.