SNP tax plan will see Capital 'subsidising' rest of Scotland

EDINBURGH taxpayers will end up subsidising the rest of Scotland if the SNP manages to implement its local income tax plans, it was claimed today.

Lothians Tory MSP Gavin Brown said the Capital was already losing out in the way business tax revenue was redistributed and now faced losing out even more under the system for handling the proceeds of the new tax.

Finance Secretary John Swinney told MSPs yesterday that under the Scottish Government's local income tax plans, it intended local authorities would keep the money raised in their own area – but he warned government grants to councils would then be adjusted.

Earnings in Edinburgh are 12.8 per cent above the Scottish average, which means the centrally-set 3p local income tax will raise more money in the Capital than in most other parts of the country.

And the fear is the funding which the city currently receives from the Scottish Government would then be reduced.

This year, government grants account for 78 per cent of Edinburgh City Council's £986m revenue budget, with the council tax making up the other 22 per cent. Under the Scottish Government's plans, city taxpayers face footing a far bigger proportion of the bill.

Mr Brown said: "Other councils, with lower employment or lower wages, would not collect so much in local income tax and the Government would have to top up their money with increased rate support grant.

"Edinburgh has lost more than £1 billion over the past decade under the system that redirects money collected in business rates to other parts of Scotland.

The Tories called on the Government to publish figures showing how each council would fare.

He said: "A supplement is only a supplement if there is stability in the baseline funding."

Lothians Independent MSP Margo MacDonald, who won the promise of the Capital City Supplement, insisted it was safe but said she feared the Government could try to exploit the "milch cow that is Edinburgh" and warned that would undermine Edinburgh's ability to drive the Scottish economy.

Edinburgh's Labour group leader Andrew Burns said "These are serious and valid concerns."

City council leader Jenny Dawe said the SNP's plans removed the "localness" and called for the whole formula for council funding to be re-examined.

A Scottish Government spokesman said: "No council in Scotland will lose out. Councils will continue to receive the same overall level of funding."

Double-income households hit

A TWO-INCOME household in Edinburgh living in an average Band D house would be £399 a year worse under local income tax, according to Tory calculations.

And the party warns that would prove "disastrous" in the current economic climate.

The SNP plans to replace the council tax with a local income tax, set at 3p in the pound.

It claims four out of five households would be better off under the plans.

Pricewaterhouse-Coopers calculate that households in band D for council tax would pay more when their combined income hits £49,000 and Band G homes when their income hits £75,000 a year.