THE Scottish Government's flagship local income tax (LIT) plans could leave Scots with a near £1.5 billion "tartan tax bombshell", the Tories warned last night.
A 3 per cent drop in expected income tax yield – as a result of cuts announced by Alistair Darling in Monday's Pre-Budget Report – will leave the SNP with a £300 million shortfall if LIT is set at the planned 3p level, opposition MSPs claimed.
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SNP has already admitted that its centrally set 3p LIT rate would leave a gap of £281 million.
The party claims the 5 per cent efficiency savings announced on Monday by the Chancellor will mean a further £500 million taken from the Scottish block grant. Added to this, the Nationalists look set to lose out on £400 million of council tax benefit which would no longer come north of the Border, bringing the total shortfall to £1.48 million.
Meanwhile, the SNP's independence aspirations were also dealt a blow by projections of big falls in oil revenues and employment levels, which would put further strain on the Scottish economy.
The SNP still hopes to introduce a bill to abolish the council tax early next year and get its proposal through the Scottish Parliament with support from the Liberal Democrats and Greens, with aspirations of launching LIT in 2011.
Derek Brownlee, the Tories' finance spokesman, accused the Nationalists of "living in fantasy land". He said: "Income tax revenues are projected to fall dramatically and would then have to rise by 25 per cent in a single year just to put them back on track.
"If the Scottish Government really thinks that this will happen, then it is either deluded or perpetrating a massive tartan tax con. The £300 million shortfall is the equivalent of an extra £150 a year for every family in Scotland. If the SNP cannot find this money, then LIT has just got bigger. It is a tartan tax bombshell set to burst just as the economic recovery hopefully begins."
However, a spokesman for John Swinney, the finance secretary, claimed the Tories were too wedded to the "unpopular council tax". He said: "They have nothing to offer when it comes to local taxation except a stubborn adherence to the unfair, discredited council tax, which they designed and which rose massively under their stewardship.
"As the Pre-Budget Report makes clear, income tax receipts will be rising substantially from 2010-1 – a full year before our proposals for a fair local income tax, based on the ability to pay, come into effect."
Alistair Darling, the Chancellor, last night dismissed the SNP's complaints that the Scottish Government was effectively facing a £500 million budget cut in 2010. He said: "I don't believe it's beyond the wit of either Alex Salmond's administration or us at UK level to be more efficient."
In a difficult week for the Nationalists, opponents claimed there was also a blow to their oil-funded dreams of independence in the Pre-Budget Report, with oil revenues projected to drop one third by 2010-1.
This was made worse yesterday when the Organisation of Economic Co-operation and Development (OECD) forecast that UK unemployment would be up by 2 per cent by 2010.
Iain Gray, the Scottish Labour leader, said: "The Nationalists' argument for independence has been irreparably undermined by the global economic crisis and the collapse of the oil price. We have always said that basing the entire economic future of Scotland on a single, finite commodity whose price is highly volatile is wilfully naive."
However, the SNP said oil revenue was still at record levels and well above Treasury forecasts.
