Council Tax
The next item of business is a debate on motion S1M-1627, in the name of Tommy Sheridan, on abolition of council tax, and two amendments to that motion. Members who wish to contribute to this brief debate should press their request-to-speak buttons now.
I am proud to raise once again in Parliament the abolition of the unfair and increasingly unacceptable council tax. The Scottish Socialist Party believes in a fundamental and irreversible redistribution of wealth and power throughout Scotland.
Over the last 21 years of old Tory and new Tory Governments, the rich have simply got richer while the poor have, unfortunately, got poorer. The gap between rich and poor has grown to an obscene level, which makes a mockery of Mr Blair's utterances about the class war being over. Tony does not like talking about class warfare because he is too busy executing it on behalf of the rich and powerful.
Is it not shameful for new Labour members to have to admit that even Thatcher taxed the rich more than new Labour? She immediately slashed the top rate of tax of 83 per cent to 63 per cent when she took power in 1979. However, it stayed there until 1988. For nine years the Tories taxed the rich more than new Labour has done over the last four. The sad fact is that today the poorest 20 per cent across the United Kingdom pay more in tax than the richest 20 per cent as a result of the shift from progressive direct taxation to regressive indirect taxation.
We cannot address all those problems with the limited powers of this Parliament. That is why we need to have an independent socialist Scotland with an adult Parliament that can address those problems. However, we can make a start by abolishing one of the unfairest pieces of taxation. We have the power to abolish the council tax, to remove from the shoulders of this country's pensioners and the low-paid their share of the burden of paying for essential local government jobs and services. It is about time that the wealthy and the rich in this society put a much higher proportion of their income towards paying for local government jobs and services.
What the Scottish service tax does is to tax individuals according to their ability to pay. The more money people earn, the more they pay. It is not rocket science. It actually used to be an accepted part of political consensus. It is called progressive taxation. Unfortunately, the old Tories and the new Tories have now dumped that idea and that philosophy.
Along with the Scottish service tax, we would introduce a £10,000 exemption. Anyone with an income of less than £10,000 a year would be automatically exempt. There would be no humiliating forms to fill in and no hoops to jump through. Automatic exemptions and direct deductions would be handled through the Inland Revenue. Council staff would be redeployed to benefit-maximisation programmes to improve the incomes of pensioners and low-paid workers.
The proposal improves the disposable income of at least 2 million low-paid workers and pensioners across Scotland. It uses the limited powers of this Parliament to redistribute wealth in Scotland. That is why I recommend the motion to the Parliament today. If we represent anything, we should represent the need to redistribute wealth in this country, because we cannot tackle poverty until we redistribute wealth.
I move,
That the Parliament believes that the council tax is a fundamentally unfair and regressive tax; believes in social justice and the redistribution of wealth from the rich to the poor; therefore agrees to abolish the council tax and replace it with the Scottish Service Tax which is based on an individual's income and is inherently fairer, more efficient and redistributive; notes that the Scottish Service Tax would raise more revenue than the council tax and that it would remove the burden of paying for local government jobs and services from the shoulders of low paid workers and pensioners and place it firmly on the shoulders of the well paid and the wealthy, and believes that the introduction of the Scottish Service Tax should be complemented by the return of the right for local authorities to raise and retain their business rates and a thorough investigation of land value and speculation taxes to supplement local authority revenue.
I am afraid that what we have heard today from Mr Sheridan is another example of simplistic sloganising from the Scottish Socialist Party based on its usual superficial analysis of social issues in Scotland. His approach today, by allocating half an hour for debate, shows contempt for this Parliament and for the subject at hand. This debate is nothing more than a device to give himself another press release and a few more minutes in the spotlight. It is clearly not an attempt to promote reasoned or reasonable debate on an important issue. Mr Sheridan will not be at all surprised to know that the Executive will not be supporting his motion but will be urging the Parliament to support the amendment in my name. Let me explain why.
Mr Sheridan's proposals are riddled with policy flaws and contradictions. They are about centralising power, removing local policy choice, removing the local expression of priorities, undermining councils, undermining local accountability and removing the very essence of local democracy in Scotland and in the UK. Under Mr Sheridan's proposals, councils would lose their ability to levy local taxes. People would pay all their current central Government taxes to the Exchequer and their Scottish service taxes to the Scottish Parliament. At a stroke, it would remove the crucial element of accountability between local councils and their electorate and would in effect eliminate councils' control over their spending decisions.
What makes the proposals worse is that they ignore the fundamental changes that the Executive is making to council financing. In the very week that we abolish spending guidelines, give back discretion to councils and give councils freedom of choice, Tommy Sheridan seeks to remove those new-found freedoms and shackle councils, tie their hands, deny them choice and deny voters a council that is accountable to them. In effect, the proposals would be the beginning of the end of local government and of local democracy itself.
Worse still, the proposals would substantially disadvantage the ordinary working people of Scotland. Far from soaking the rich, the proposals would hit all Scottish taxpayers—those on average and below-average incomes as well as the rich. Tax rates could rise by as much as 15p in the pound. What would happen then? It is perfectly clear: the most mobile, the most entrepreneurial, the most able, those with most opportunity and those with most advantage would have the choice to leave Scotland, leaving behind higher bills for those who cannot move, who do not have the means to move and who do not have the choice. They would be left with greater burdens to carry on behalf of the rest of the community. There would be less inward investment, fewer jobs and less wealth for families and individuals. That is why the proposals are silly.
Typically, the proposals also have no basis in practicality. There is no reference to administrative problems and costs. Tommy Sheridan knows that the service tax could not be collected and administered locally, which is why he proposes to remove tax-raising and collection powers from councils. He denies any recognition that property taxes exist across the globe. Why? Because they are easy to administer, stable and easy to collect, cheap to collect relative to other forms of taxation, have a broad relationship to means and because rebate systems can be easily applied to them to protect those least able to pay. The so-called service tax proposal takes no account of those important factors. It is fundamentally flawed and that is why the Parliament should again reject it.
I move amendment S1M-1627.2, to leave out from first "believes" to end and insert:
"welcomes the substantial reforms that the Executive has brought to the operation of local government finance by the delivery of three-year budget figures for grant, by the removal of expenditure guidelines and by increasing the funding of councils; further welcomes the indications from the Executive that it will pursue further reforms in the future, and notes that the Local Government Committee of the Parliament is to conduct an investigation into the financing of local government."
I declare an interest, as I am the owner of a property in respect of which there is a liability for non-domestic rates.
In moving amendment S1M-1627.1, the SNP shows its full support for the decision of the Local Government Committee to hold an independent inquiry into local government finance. The SNP fully endorses that decision, which was taken by all members of the Local Government Committee, despite the view of the Executive, which was not supportive of such an inquiry. That view is maintained in the wording of the Executive's amendment, which says merely that it notes that the inquiry is taking place.
Mr Sheridan would do well to attend the nine sessions that are planned at which oral evidence will be taken. I commend to him also the written evidence that has already been submitted, part of which I hold in this folder. It shows that local government finance is, as has been said, a serious and complex question. Indeed, it has been compared in complexity to the Schleswig-Holstein question, which I believe only three people understood—one of them died, one of them went insane and the other one forgot. I am sure that there are people in Scotland who are able to understand some, if not all, of the complexities of local government finance, but I do not believe by any stretch of the imagination that Tommy Sheridan can be said to have done so today, not least because no one else in Scotland supports his proposals.
I hope that the Local Government Committee will consider the problems in the round and will examine the impact that council tax has on widows and widowers, on senior citizens who have retired on low incomes and on the discount for second homes, which I believe is extremely unfair, especially in areas where holiday homes have acquired a massive value, creating a barrier to access to housing for young people in many parts of my constituency.
I believe that the SNP has taken a principled stance in favour of local income tax as a method of finance, but we will not prejudge the outcome of what will be one of the most major inquiries that the Parliament will undertake and which will last for a year. That would be like pronouncing a verdict in a trial before the evidence has begun to be considered. It would be foolish and irresponsible and therefore we do not adopt that approach.
In the short time available to me, my final point is that the burden of council tax between Scotland and England is unfair. As Mr Peacock well knows, the Local Government Finance Act 1992 created a system of fiscal apartheid, so that the range of values in Scotland is from £27,000 to £212,000, but in England is from £40,000 to £320,000. That, translated and put into a stark comparison, means that a house worth £50,000 in Scotland pays an average council tax of £855; in England, the figure is £659. That means that, for a house of the same value north and south of the border, the Scottish householder pays an extra £196. That is a Scottish surcharge. If the Executive is interested in removing unfairness, I hope that it will examine this issue when it gives evidence to the Local Government Committee inquiry.
I move amendment S1M-1627.1, to leave out from first "believes" to end and insert:
"endorses the unanimous decision of the Local Government Committee to carry out an independent inquiry into local government finance, and believes the outcome of that inquiry should be awaited before any fundamental changes are made to the current system."
Last year, we had a similar debate on a similar motion. This Parliament showed its will, as the motion was heavily defeated. Mr Sheridan should have taken the opportunity to debate another issue in the time that is available to him. The other option would have been to have a longer debate on a single issue that concerned him, rather than the three-ring circus that we have had this morning.
The review of local government finance by the Local Government Committee is continuing; it will consider the future of local government taxation. This debate is premature because it again tries to tie the will of the Parliament to a change in taxation before the committee has completed its investigation and reported its findings to Parliament. That cavalier attitude to the parliamentary process shows that Mr Sheridan's election to Parliament has not elevated his politics to a mature and parliamentary level.
As in the previous debate, we oppose the service tax proposal: it would destroy the local basis of funding councils and reduce accountability. It is because of a lack of accountability that there are problems in local government now and Scottish Tory policies are all aimed at restoring accountability and local democracy.
We argue against this tax not only on principle—the economic effects would be very damaging. The service tax would create adverse disincentive effects for the Scottish economy compared with the rest of the UK. People would move to avoid the punitive tax rates that Mr Sheridan proposes. It would be impossible to force people in Scotland to pay additional Scottish taxes when many regions of the north of England would gladly take business resettlements and the jobs that go with them. The proposed tax would make local services reliant on an inefficient tax base and we cannot support it.
I am happy to speak in support of the amendment moved by Peter Peacock. Like most Executive amendments, its wording is open to criticism, but the general thrust is okay.
Local government taxation is an important issue. Where I part company with Tommy Sheridan is that, as I remember from the previous debate, his tax, which is a local income tax under another name, is so progressive—to use his term—that it would encourage wealth creators in the community to go elsewhere. The principle of the local income tax is a very good one, which the Liberals and Liberal Democrats have supported for many years. I am not claiming that it is coalition policy, but it is our party's policy and we can push it within the coalition and in future elections. We will argue that case to the Local Government Committee, which is undertaking an important review of local government finance.
Mr Sheridan's motion mentions land value taxes. I am an enthusiast for that and the Local Government Committee will also consider it. It is considered an anorak subject. As an enthusiast for local land value taxation and proportional representation I go around with two anoraks, so I am a warm person.
The issue is how local government is funded. The money must be paid; it does not come down like manna from heaven. It is a matter of paying it as fairly as possible and, in the view of the Liberal Democrats, as locally as possible. The local council must have more control over the taxation. Local income tax on individuals and, possibly, land value tax or a similar tax on companies would be the best way forward.
A point has also been raised about second homes. Like many of my colleagues, I do not see why those have a discount—that would be another way of finding taxation. We should examine other methods of raising money that do not discourage local enterprise but play fairly for the whole community.
This issue is important, and we will contribute to the Local Government Committee's inquiry. Furthermore, we hope that the Executive will contribute, as well as help with the necessary research. The Liberal Democrat part of the coalition will push the issue along the road to a more exciting policy, as previous policies have usually been very conservative. Although the future is bright, it is not the way that Mr Sheridan sees it.
I thought that Donald Gorrie was about to say, "The future's bright, the future's orange" in reference to Mr Sheridan's tan.
Although Tommy Sheridan purports to speak for poorer people, he consistently speaks only for the greater glory of himself. Over the years, he has misled a number of poorer people, especially in various non-payment campaigns; indeed, many people have been led into debt as a result of his activities. As a result, it is surprising to see him suggest a proposal that purports to represent the interests of poorer people within the tax system.
It must be recognised that this proposal will significantly disadvantage many working people in our society. Tommy Sheridan is actually going against the conventional socialist principle of taxing property by imposing a tax on work, which would have considerable consequences for individuals. According to my calculations, as a result of the scheme, two teachers living in a band D house in Glasgow might end up paying as much as £1,000 more for their council services.
The existing income tax system can be criticised on the basis that very rich people can avoid tax through the self-employment regime and the use of accountants. As a result, it seems very strange for Tommy Sheridan to argue that his local service tax should be based on such a defective system, instead of on property tax, which is a very difficult tax to avoid. The scheme is illusory; it does not help poorer people, but instead infringes on many working people and represents a move away from the socialist principle that property is a key aspect of taxation.
As members have said, there is an important debate to be had about the future of the system of local government taxation. I know that there are many views on the issue; indeed, I have views myself. As Fergus Ewing said, we need a sustained debate on the subject. However, all we have had from Tommy Sheridan is a stunt, which in fact is what the whole morning has been. This proposal in particular is a bit of a stunt, because it is fundamentally unworkable and unsustainable. As Peter Peacock pointed out, it moves against the basic principles of accountable democracy. Local authorities would not raise tax, but would instead be dependent on central Government allocation decisions for how they collected their income.
Finally, the whole system would be incredibly expensive to administer and is full of loopholes that people could exploit. As a result, the chamber should absolutely reject it.
I am very happy to put on my anorak and support Donald Gorrie's comments on land value taxation, which is otherwise known as community ground rent or CGR. The Scottish Green party has supported LVT for a considerable time as a method of raising local taxation and I look forward to putting its case at the Local Government Committee with its other supporters.
Will the Green party make a submission to the Local Government Committee's inquiry into local government finance?
Yes, I hope so.
Where was I? I will outline a couple of the advantages of LVT. First, LVT acknowledges the principle that land gets its value from the community. Land has value only because people live and work on it. That value is recognised by LVT.
Secondly, communities would be able to set local LVTs as they see fit. One of the great advantages for cities in Scotland would be that, under LVT, the community could specify a brownfield site or derelict site as needing to be used for any purpose such as housing, recreation, factories or other employment. The owner of that land would then be taxed on the CGR that had been allocated to it from the moment that they bought the land. They would not be able to hold the land for five, 10, 15 or 20 years in the hope of eventually making a profit on it when they sold it on or started to develop it. The value of the land would be identified and would be taxed accordingly, and that would apply for all other properties.
LVT is also capable of sophisticated application. Differences between types of occupancy—whether tenement occupancy, rented or owned—can be decided on to a greater extent than is possible under present council tax rules. People would pay more fairly under LVT than they do under the current council tax system. In addition, LVT has a considerable number of other advantages.
We have birled through the debate, with the result that closing speakers will have a bonus of up to a minute each.
Thank you, Presiding Officer. Life gets more exciting by the moment.
I welcome the Local Government Committee's inquiry into local government finance in Scotland and remind the Executive that the last such major inquiry was the Layfield committee inquiry, in the 1970s. I had the pleasure of presenting the Labour party's evidence to that committee, which supported a local income tax. I hope that the Executive reads again the evidence that the Labour party gave to that committee and reconsiders the benefits of a local income tax.
There is broad consensus among members that council tax is not the best way in which to finance local government for two fundamental reasons. First, it is an inherently regressive tax and is not related to income or wealth other than in a very approximate way. Secondly, it makes up only a small percentage of the total income of councils. As long as we have a tax base for local authorities that makes up only about 20 per cent of their total income, local authorities will have to continue to operate totally at the behest of central Government, whether in Edinburgh or anywhere else.
The Local Government Committee must consider certain fundamental principles in its inquiry. Tommy Sheridan has received a lot of criticism this morning. I have read the paper that he commissioned from the University of Paisley, which I recommend that the Local Government Committee read. There is a difference between considering a tax system in principle and agreeing what the rates should be. The argument about the rate of the tax could be left aside. What we are discussing—and what the Local Government Committee needs to focus on—is what system of local taxation we should introduce. In principle, the local service tax is similar to the local income tax.
The following principles should be adopted in the objectives that are set for the Local Government Committee's inquiry. First, there should be a system of local taxation that is based on ability to pay, which would be much fairer and related to people's incomes and—if there is also to be a land value tax or property tax—to their wealth. Secondly, the tax base should be widened to increase the share of income that local authorities receive from it to much more than 20 per cent.
I would like the Local Government Committee to consider what happens in other European countries, particularly Sweden, where the taxes are raised locally and donated centrally.
Unfortunately, I have already run out of time, having used nearly three minutes—
You have two seconds.
I say to the Local Government Committee that it should not discard the proposals in the paper from Paisley University, which was commissioned by Tommy Sheridan, and remind that committee that the proposals are similar to what was proposed by the Labour party 25 years ago.
Others in the debate have exposed Tommy Sheridan's proposals for what they are: shallow, superficial, thoroughly impractical and damaging to ordinary people.
Fergus Ewing welcomed the nature of the Local Government Committee's inquiry. I welcome it as well. It is an important issue that the Parliament should take time to consider. As Alex Neil and others have indicated, this subject is hugely complex. It is not something to be rushed into. We must consider what the alternatives might be.
As welcome as it is that the Local Government Committee has seized the initiative, does the minister agree that the Executive should have conducted an inquiry and saved us the bother?
The Executive is in the midst of making fundamental reforms in the financial system of local government. We have acted in areas on which we did not need to have a major inquiry. We have also said, as our amendment suggests, that we will move further with reforms of local government finance but we will not do so without the most detailed analysis.
I support Alex Neil's hope that the Local Government Committee will revisit the Layfield inquiry evidence, which is revealing. It is interesting to consider why, after all these years, no action has been taken on that evidence. I suggest that it is due to the complexities involved in finding alternative forms of taxation. To drop the council tax, we must go down one of two routes. One option is to remove services from local authorities to reduce the amount of tax that must be raised locally, thereby increasing the proportion that can be raised from the local taxpayer, which local government has done. The other option is to find an alternative form of taxation, of which are many in Europe and Scandinavia. We need to consider such forms properly and I hope that the Local Government Committee will do that.
I will reiterate what I said in concluding my earlier remarks. The proposals in today's motion are not principled, practical or deliverable. They reflect a simplistic analysis of the situation that people face. I trust that the Parliament will dismiss them as it did last year and leave the sensible debate on this issue to take place through the Parliament's Local Government Committee. The Executive will be listening closely to what that committee has to say.
Tommy Sheridan, if you could be done by 12:30, that would be helpful.
The Scottish service tax is not only much fairer than the council tax but would raise more money than the council tax does. Unlike Labour members, I can say how much individuals would pay under the Scottish service tax and that it would be a uniform tax across the country. If Mr Peacock had read the motion, he would have noticed that, along with the introduction of the service tax, local authorities would have the right to set and retain their business rates so that there would be some financial autonomy—not enough, but his Executive is doing nothing about that anyway—and that there would be an investigation into land value taxation and speculation tax with the aim of increasing autonomy for local councils.
I find it pathetic that the Labour benches appear to have been hypnotised. They believe that there is nothing that we can do about the fact that some people in our country are obscenely rich and powerful because, if we try, those people might leave the country. Labour members are worried about challenging inequality of wealth and power, but they should realised that the Labour party was formed to do just that.
The Tories—the old ones on the benches opposite me and the new ones on the benches to my right—launched a remarkable attack on the patriotism of the rich this morning. Some members seem to be suggesting that, just because Brian Souter is the richest individual in Scotland, with a personal wealth of £500 million, and just because his council tax bill last year of £1,516 would become a Scottish service tax bill of £82,000—leaving him with only £550,000 to live on—that patriotic Scot would up sticks and leave because he would be appropriately taxed. For goodness' sake, surely the rich have more of a tie to Scotland the brave than some members would have us believe.
Des McNulty picked a wonderful example of two teachers living in Glasgow paying more under the Scottish service tax. I do not know where Des gets his figures from—I know that he is not particularly good at arithmetic—but I can tell him that two individuals in Glasgow on £17,500 take-home pay would pay less in service tax in a band A house in Glasgow, never mind a band D house.
In reality, more than two thirds of earners in Scotland would pay less under the service tax. This is why Keith Harding will keep hearing about this campaign from the Scottish Socialist Party right up to 2003—because it is time to have a redistribution of wealth. The message to the rich and powerful in this country is that the cheap ride is over. It is time that they paid their dues.