THE SNP's flagship local income tax policy suffered a new blow last night, when it emerged it would bring tens of thousands of the poorest students in Scotland into the local tax net for the first time.
Alex Salmond, the First Minister, has championed local income tax (LIT) as a fairer alternative to council tax because it is based on the ability to pay.
But the Scottish Government has admitted that up to 55,000 full-time students – who do not pa
y council tax at present – would end up paying LIT.
Student leaders warned that the tax would hit only the poorest – those who do not get financial help from their parents and have to work through the year to cover the cost of their studies.
This is just the latest setback for the SNP's key policy of changing the way local services are paid for. It follows warnings from a number of academics last week that the tax would be unconstitutional and illegal.
And yesterday, Alistair Darling, the Chancellor, made it clear the UK government would not release £400 million a year in council tax benefit payments if council tax was abolished in Scotland. The Scottish Government had been relying on this cash to cover the shortfall between the amount raised in council tax and the amount due to be raised under LIT.
Student leaders have been worried about the impact on their members ever since the policy was unveiled earlier this year. But it was not clear how many would be affected by the tax, until John Swinney, the finance secretary, revealed in a parliamentary answer that a quarter of all full-time students in Scotland – 55,000 – might have to pay the new tax.
He said the government estimated three-quarters of students would be exempt from the tax, leaving the rest liable to pay.
The threshold for the LIT would be £5,435. Anybody earning more than that would have to pay the new tax.
According to student leaders, there are thousands in this position. Most work full time – 35 to 40 hours a week – during the 16 to 18 weeks' holiday they get each year and then fill in, working for 16 hours a week or so, during term time, taking them well over Mr Swinney's threshold.
The SNP's estimate is also based on students earning £5 an hour, just above the £4.60 minimum hourly wage for 18 to 21-year-olds, but many students earn more than that, particularly if they can secure office work during their holidays.
James Alexander, the president of the National Union of Students in Scotland, said the tax, which is supposed to be progressive and based on ability to pay, would end up hitting the poorest students the hardest. He said: "This is a tax which is specifically designed to ensure that those with lower incomes pay less. Not only do students make up one of the poorest elements of society, but the poorest students will be hit the hardest.
"They are the ones who have to work the most hours to cover the costs of their studies. Those from better-off backgrounds and who get money from their parents will not have to pay it."
He added: "Students don't work to earn money to have a cosy life – they work to survive. Every hour they work is an hour less to spend on course work."
Mr Swinney admitted yesterday that some students would have to pay, but he insisted they would have to work long hours to have to pay the new tax.
"A student would have to be working 21 hours each week for 52 weeks in the year before they would be in any way liable for local income tax," he said.
"The local income tax is a fair system reflecting individual ability to pay. What we have done for students is we have abolished the graduate endowment."
But Claire Baker, Labour's spokeswoman on higher education and student support, said:
"It really begs the question what do the SNP have against students? They promised to replace loans with grants – they didn't. They promised to write off student debt – they haven't.
"And since being elected, we have seen proposals to restrict where students live, changes to the means test that hit many poor students currently at university, and now a local income tax that will ask tens of thousands of students to find yet more money to fund the SNP's other priorities."
Murdo Fraser, the Scottish Conservatives' education and lifelong learning spokesman, said the SNP should abandon the policy. "The case for a 'local' income tax, which is in reality a nationally set tax, rather than a reduction of the council tax, is unravelling by the day," he said.
Working long hours to make ends meetNIKI Ralphs has to work for the whole year just to make ends meet as a student.
The 21-year-old from Luton is in the third year of a five-year structural engineering and architectural design course at Heriot-Watt University.
She gets a student loan of about £3,000 a year. After tuition fees (because she is an English student in Scotland), she is left with £2,000 for everything else: rent, food, travel, heating and books.
During term time, Ms Ralphs works as a supervisor in the student shop at Heriot-Watt. Her usual shifts mean she works 18 hours a week, but she often does more, pushing this total up to 25 hours a week. She gets £6.64 an hour, giving her between £119.52 and £166 a week.
In the holidays, Ms Ralphs works even harder. She returns to Luton, where her parents live, and works full-time in an off- licence.
There, she works a basic 40-hour week, but again often does more hours.
Last year she earned about £7,000 in total from both her jobs, about £1,500 more than the proposed local income tax threshold of £5,435.
She said: "It's not as if I spend my time socialising. We are expected to do 40 hours for our course and I work 18 hours a week on top of that. When I'm not working, I'm studying."
'Let down' by the party that wooed them a year agoCLUTCHING champagne glasses while throwing their mortar boards into the air, they looked like any group of students celebrating graduation day.
But these students were massed outside the Scottish Parliament in a protest about politicians who have consistently vowed to make life easier for students but who many believe have failed to deliver.
Before last May's elections, the SNP targeted the student vote, promising a return to free education, to reintroduce grants and to pay back graduates' student loans.
All they have done so far is to scrap the graduate endowment – a one-off fee of around £2,000 to be paid at the end of a degree.
But the poorest graduates were exempt and the majority of the rest simply took out another student loan to cover it.
Student leaders welcomed its demise but stressed more needed to be done.
NUS Scotland published a report in April which showed thousands of students had considered dropping out of their courses because of financial hardship. The trend was particularly marked in students from poorer backgrounds.
NUS Scotland organised the champagne protest to highlight fears that university education is becoming the preserve of the rich, as affluent families subsidise their children but less well-off students are forced to take on paid employment during terms as well as holidays.
Now, with the news that the proposed new local income tax would hit those students who work the hardest, many who voted for the SNP are beginning to feel let down.
Fiona MacleodBACKGROUNDJOHN Swinney unveiled the SNP's local income tax plans on 11 March, immediately running into a barrage of opposition from the Conservatives, Labour, business leaders and some unions.
The Liberal Democrats also objected because the scheme does not allow councils to set the tax rate locally.
The opponents agreed that the current council tax was not perfect, but warned there were major problems with the proposed new scheme.
They claimed the proposed local income tax would not raise as much as the council tax, leaving an annual shortfall of £280 million.
On top of this, the UK government has made it clear it would not continue to pay council tax benefit if the council tax was abolished in Scotland, leaving another £400 million gap in the SNP's plans.
The plan was also criticised for failing to tax unearned income, allowing wealthy people whose income was not from a salary to escape the tax.
A series of academics also became involved in the debate, warning that the entire plan might be illegal and unconstitutional under the current devolved system.
