ALEX SALMOND'S controversial local income tax plans suffered a double blow last night, as the figures underpinning the scheme started to unravel and Green MSPs warned they could not see any way in which they could give their support to the move.
When John Swinney, the finance secretary, unveiled the plans this week, he faced criticism from opposition politicians and business people who warned there was a funding gap of up to £700 million.
But it now appears the "blackhole" could be
as much as £1 billion or more – money which the taxpayer will have to find if the scheme gets the go-ahead.
Official figures published yesterday showed that in 2010-11, a local income tax of 3p in the pound would be expected to raise £1.5 billion – almost £1 billion less than the £2.473 billion due to be raised by the council tax that year.
When he published his plans, Mr Swinney accepted there would be a gap between what was raised through council tax and what will be raised by the local income tax, but insisted the shortfall would only be £280 million – which he claimed would come from the Scottish Government.
At present, another £400 million a year comes in the form of council tax benefit from the Treasury. Mr Swinney is adamant the Scottish Government will get this back from the UK government, but yesterday Alistair Darling, the Chancellor, ruled that out too.
That makes a gap of £680 million, but according to the figures released by the Scottish Parliament yesterday, the real gap could be £1 billion.
Wendy Alexander, the Scottish Labour leader, yesterday warned the only way the Scottish Government could make its new tax work would be to raise the rate to 5p in the pound, which would hit hundreds of thousands of working families.
She added: "Families can't afford it, businesses don't want it and local government doesn't like it – and the rich won't pay it."
Mr Salmond said that a local income tax would be welcomed by single pensioners, pensioner couples, couples with or with- out children and one-parent families.
As a minority administration, the SNP government will need the support of Holyrood's two Green Party MSPs to get its local income tax passed.
But last night, one of them, Patrick Harvie, said his party was fundamentally opposed to the plan as it was unfair, and the Greens wanted to retain at least a form of property tax.
He said: "I do not see any scope for us coming on board. Certainly, there has not been an approach from the SNP."
He said the absence of a tax on unearned income would exempt some very rich people and encourage other wealthy individuals to find ways of living off their unearned income, just to avoid paying the tax.
Mr Harvie added: "I do not see a way of resolving that fundamental problem."
FIRST MINISTER'S QUESTIONS … BUT NO ANSWERS ALEX Salmond suffered probably his most difficult outing at First Minister's Questions yesterday, when he was put under intense pressure over the Scottish Government's local income tax plans.
The First Minister was challenged by both Wendy Alexander, the Scottish Labour leader, and Annabel Goldie, the Scottish Tory leader, over the controversial plans, announced earlier this week and which would replace the council tax with a 3p-in-the-pound rise in income tax.
Mr Salmond was asked to produce figures to back up his claims that the new tax would not leave a massive financial black hole in the country's budget, but he could not produce the figures.
Instead, he insisted that the move would be championed by pensioners and the low paid, and would be a much fairer system than the council tax.
Ms Alexander said: "This time last year, in the SNP's scramble for votes, they were willing to answer all of these basic questions – but none of these numbers appeared in this week's document.
"Will the First Minister agree he is duty bound to publish the basic numbers then let the people of Scotland decide?" Mr Salmond replied: "What Wendy Alexander describes as a black hole is a £281 million tax cut for working families across Scotland. That represents less than 1 per cent of Scottish Government expenditure."
Miss Goldie said that, under the government proposals, those whose income came from bank interest and shares would pay nothing, as the charge only applies to earned income. The First Minister told that her economic experts believed any attempt to tax dividend income would cost more than it yielded.
Lies, damned lies and statistics – who's right?
ANALYSISWHEN any proposal to change a major tax comes along, each side likes to use statistics to back up its arguments, writes Hamish Macdonell.
In the case of the local income tax, both its supporters and detractors have been insisting that the statistics support their case. So who is right?
The Scottish Government claims that 67 per cent of Scots would be better off under the income tax plan and only 18 per cent would be worse off (with 15 per cent seeing no change).
Ministers also claim that they would only have to find £280 million from their budget to cover the shortfall between the money raised by council tax and that raised by a 3p-in-the-pound local income tax.
They accept that their sums include £400 million in council tax benefit which they believe will be returned by the UK Treasury and that without that there would be a £680 million deficit to make up.
Labour and the Tories dispute the Scottish Government's figures. But it is difficult, and probably impossible, for them to challenge the Scottish Government's assertion that 67 per cent would be better off, because to do that they would need access to more accurate data, and it is impossible to get.
Officials at the Scottish Government came up with that percentage by taking UK government estimates of what Scots earned and comparing it with what they paid under the council tax system.
Officials used a database of 4,500 families to get their figures. Anybody trying to get more accurate figures would have to find a database of real families with their income levels and their council tax liabilities, and that is very hard to do. It has been easier for the opposition to challenge the Scottish Government's financial assumptions, though. Labour asked the Scottish Parliament's information centre to forecast council tax and local income tax receipts for the next few years.
The results showed a gap of about £1 billion between the expected revenue from council tax in 2010-11 and the expected revenue from local income tax.
This has allowed Labour and the Tories to undermine the Scottish Government's case on the general figures, even if they have not been able to do the same when it comes to the number of winners and losers.
The full article contains 1166 words and appears in The Scotsman newspaper.
