Council Tax and Pensioner Poverty
Good morning. The first item of business today is a debate on motion S2M-4363, in the name of John Swinney, on council tax and pensioner poverty.
On a point of order, Presiding Officer. I find it appalling that, despite lodging an amendment to this very good motion, my party and I have not had it selected for debate. Other parties have had their amendments selected. We have 100 per cent attendance in the chamber today, whereas only three Labour members, two Lib Dems and two Conservatives are present.
There are three Liberal Democrats.
My party represents solely senior citizens, but it is continually ignored when it lodges amendments. Presiding Officer, will you look into the problem and rectify it in future?
Mr Swinburne, you are one of 129 members. If you look at the score, you will find that you do rather better than your proportional entitlement. You will be called if you are good.
Mr Swinburne referred to the fact that only a few Labour members are here. I see that the Government front bench has now been taken over completely by the Liberal Democrat party, which is one of the most frightening sights I have seen in my life.
Here is another one.
Oh my goodness—it has taken a turn for the worse. I thought that things could only get worse, and they have. I say to Mr Lyon that it is only a matter of time before I am over on the Government front bench, which I look forward to with enthusiasm. Who else will be there is a different matter.
He agrees with you.
I am sure that he does.
This debate provides Parliament with the opportunity to examine how local taxation is raised and to establish the extent to which the method is fair. Our motion contends that the council tax is unfair because it is based neither on income nor on ability to pay, and it sets out our belief that local taxation will be made fair only when Parliament introduces a local income tax.
The fairness or otherwise of the council tax has been hotly contested since its introduction. Those who support it say that it is appropriate to tax on the basis of property value because so much other taxation is driven by income. They put the equally important argument that adequate measures have been put in place through the council tax benefit arrangements to temper any unfairness in the system.
On 12 February 2004, the First Minister told me:
"Those who are lowest paid or who have the lowest incomes receive council tax benefits that contribute towards meeting their costs."—[Official Report, 12 February 2004; c 5839.]
On 26 February 2004, the First Minister told me:
"Such a benefit system exists to help those who have problems with making their payments."—[Official Report, 26 February 2004; c 6078-79.]
However, statistics provided in parliamentary answers from Mr Lyon to my colleague Christine Grahame and information from the Department for Work and Pensions expose the First Minister's assurances as hollow rhetoric. In Scotland, 496,429 pensioners are eligible to claim council tax benefit, but information from the Department for Work and Pensions shows that only 56 per cent of them make a claim. More than 200,000 pensioners in Scotland who are entitled to claim council tax benefit do not claim it and therefore pay more council tax than they should. That means that more than one in five Scottish pensioners pay an extra £540 every year—Scottish pensioners pay a staggering £118 million more than they should in council tax.
So much for the Labour Party.
I am coming to the Labour Party. Mr Ewing should be patient and should not think that we will leave the Labour Party out of this.
Among pensioners, the take-up of council tax benefit has decreased by about 10 per cent since 1997-98. A Labour Government that is supposedly dedicated to helping the most vulnerable in our society has presided over a situation in which a smaller proportion of pensioners claim the support to which they are entitled. It is no wonder that not one Labour minister has come to the front bench of the Parliament today to face those statistics. It is an absolute scandal. All the advertising campaigns that have been undertaken to encourage take-up have delivered a very poor performance.
The take-up of council tax benefit by owner-occupiers is even lower than the average figures suggest; only 35 to 40 per cent of owner-occupiers take up the benefit. The statistics demonstrate that efforts to tackle the manifest unfairness of the council tax through a benefit system have failed to deliver on ministers' rhetoric. If we needed any further evidence to show that the current council tax system is unfair, the figures that I cited have delivered all that is required. Evidence that the benefits system is too complex to ensure that individuals receive the support to which they are entitled has dealt a body blow to claims that the system is fair. The council tax is manifestly unfair and must be abolished.
We believe that the council tax should be replaced by a system of local income tax based on the ability to pay. A local income tax would have a number of clear attractions as a new system for collecting local taxation. It would have the advantage of being local. Local communities would be in control of how much they wished to contribute to pay for local services. A local income tax would be based on the ability to pay. The income tax system already identifies those who are liable to pay income tax, and a local income tax would be a bolt-on to that system. A local income tax would be clear and simple and would not involve the bureaucracy of council tax and the council tax benefit system.
In the interests of a full and informed debate on the proposed local income tax, will the Scottish National Party publish its estimates of what local income tax would be for each of Scotland's 32 local authorities?
Obviously, Mr Muldoon is not paying attention. We published the estimates some time ago, when we launched the local income tax policy. We will, of course, publish our proposals in advance of the election campaign. We will also share with the public the consequences of retaining the council tax, which will be a revaluation of properties and a massive increase in council tax under the Labour Party. In the months to come, we will share that information with every household in Scotland.
A local income tax would be more reliable to collect. The income tax collection rate is 96.17 per cent, whereas council tax collection rates are much nearer to 92 per cent. A local income tax would be cheaper to collect. Council tax collection costs £78 million, £30 million of which is spent on the failing council tax benefit system. Those compelling reasons make a local income tax attractive and desirable, but there are others.
The Government amendment, for which the sparse Liberal Democrats on the front bench will argue, I presume, refers to the independent inquiry into local government finance. Goodness knows who will speak to the Labour Party's position. The amendment states that both the Labour Party and the Liberal Democrats have
"submitted clear and detailed proposals"
to explain their positions. The word "different" is missing, to paper over the cracks in the coalition, but they exist. As I indicated diplomatically to Mr Muldoon a moment ago, an essential element of the Labour Party's commitment to retain the council tax is that there will be an expansion of the bands for properties and a revaluation to take account of changes in values. Even if today the Labour Party is not keen to spell out clearly from the front bench the impact of its proposals, we will do our level best to ensure that the public clearly understand the consequences of the Labour position.
A brief look at the Welsh revaluation gives us a flavour of the cost of keeping the council tax. Across Wales, the council tax burden on nearly 40 per cent of properties increased as a result of revaluation. In the city of Cardiff, which has experienced the same housing pressures that many of our cities have experienced, 50 per cent of properties went up one band, 13 per cent went up two bands and 8 per cent went up three bands or more. Labour should make clear to the electorate that retaining the council tax will mean an escalating bill for many people, to add to the 60 per cent increase that has taken place since the Labour Government came to power.
Those are some of the reasons why Parliament should move to new ground in local taxation. The council tax system has been shown to be unfair and the benefits system has been shown to have failed to protect the most vulnerable. A local income tax would be the fairest and most efficient system. I invite Parliament to support the motion in my name.
I move,
That the Parliament recognises that the council tax is an unfair tax which is based neither on income nor on the ability to pay; further notes that the council tax, which has increased by over 60% since 1997, discriminates against those on a fixed income, particularly the elderly; notes that means-tested council tax benefit has failed to help many of the elderly, in particular older owner-occupiers, and calls for the abolition of the unfair council tax and its replacement by a local income tax based on the ability to pay.
I am pleased to take part in this debate and to restate the Executive's position on the future of local taxation in Scotland. Following the last election, this devolved Government agreed to set up an independent review of local government finance. We all, I am sure, agree on the need for local taxation and on the importance of having the right systems to provide the funds that local authorities need to deliver the many vital services for which they have responsibility.
Of course I recognise that there are genuine differences of view across the chamber about what system is right. It is no secret that there is a difference of opinion between the Liberal Democrats and the Labour Party on this matter. Even the far-reaching and highly regarded Layfield committee report of 30 years ago recognised the difficulty of choosing between a property-based tax and a local income tax.
More recently, in 2002, the Parliament's Local Government Committee also examined the issues and highlighted the need to strike a balance between council tax funding of local services and the funding that the Executive provides. That is why we gave the independent review committee, under the chairmanship of Sir Peter Burt, a wide-ranging remit. Two months ago, Tom McCabe—the Minister for Finance and Public Service Reform—and I met the committee to review progress and receive an update. It is clear to me that the committee has approached its remit thoroughly and comprehensively. It has considered options for property-based local taxation, including the council tax, domestic rates and land value tax, and it has considered options for non-property-based local taxation, including a local income tax and a poll tax—although I have not seen any political support for that last one.
What about the Tories?
I had a look to see whether the Conservatives had supported the idea, but it seemed to be missing from their contribution to the review committee's consultation.
The committee consulted widely and has published a summary of responses on its website. I have a paper copy here with me today. From the summary, it is clear that the position of pensioners and their ability to pay are key issues that arose during the consultation.
When does the minister expect the committee to give Parliament its final report? Will both Executive parties endorse its conclusions?
The committee has indicated that it is likely to report in the autumn. Once we receive the report we will examine it closely and discuss how to respond to it and how to proceed.
The committee has taken evidence from a range of experts as well as from individuals and organisations with an interest. The work has taken time, but the committee has been able to indicate to us—as I have just said to Mr Morgan—that it is on track to publish its report in the autumn.
Will the minister take an intervention?
If Mr Swinney does not mind, I would like to make some progress.
In the meantime, we have not simply sat back to await the committee's report; we have acted to tackle pensioner poverty in Scotland. As a result, since 1999, 80,000 Scottish pensioners have been lifted out of relative poverty, which represents a reduction in relative pensioner poverty of more than a third. We have also introduced a number of specific measures, such as our central heating programme, the warm deal scheme, unlimited Scotland-wide free bus travel for older and disabled people, and free personal and nursing care.
I am interested in that list of measures, including those on bus travel and central heating, but none of them pays the council tax. Will Mr Lyon explain what measures the Government has taken to increase pensioners' uptake of council tax benefit, which the First Minister and others have cited as the mechanism for protecting pensioners from council tax poverty?
As Mr Swinney will know, we are doing a lot of important work in conjunction with the Department for Work and Pensions and local authorities to try to increase the uptake of council tax benefit in Scotland. Of course, for pensioners and for all council tax payers across Scotland, we have just had the lowest average council tax increase since devolution.
The independent review committee received around 350 responses to its public consultation, of which almost a third were from pensioners. It also received 450 postcards from pensioners, as part of a campaign co-ordinated by Help the Aged. I have no doubt, therefore, that issues relating to low-income pensioner households are being fully considered by the review committee. I am also sure that the team will closely examine those responses and all the others that it received, including those from political parties. The committee will examine all the ideas that have been presented.
For the future, of course we want a system of local taxation that is fair, reliable, predictable and stable. I am sure that members across the party divides agree with that basic concept. That is why we should await the review committee's report. I do not intend to speculate today on what the committee might or might not conclude. What I can say is that we will examine its recommendations very carefully, and we will act on them.
I move amendment S2M-4363.4, to leave out from first "council tax" to end and insert:
"Scottish Executive has established the independent inquiry into local government finance consistent with the Partnership Agreement of May 2003; notes that the Labour Party has submitted clear and detailed proposals to support changes to the council tax, and further notes that the Liberal Democrats have submitted clear and detailed proposals to support a local income tax and that the inquiry is due to report in the future."
It is fair to say that no one doubts the importance of tackling pensioner poverty. When high council tax levels make that poverty worse, we have to consider carefully any measures that can be taken to ease the burden. There should be no doubt that for some pensioners, as for many groups in society, council tax is a real burden.
At the heart of today's short debate is a fundamental divide over whether the council tax is simply a flawed tax that cannot be improved or whether it is the level of the tax that causes the problems. In short, the question is whether the council tax should be abolished or reformed. As others have suggested, disagreements exist not only within the Parliament but within the Executive.
We could have a long debate—or a relatively long debate within our time limits this morning—on the merits of the council tax versus those of a local income tax. No doubt when the review committee publishes its report we will have a rather longer debate on the subject.
I want to touch on some of Mr Swinney's figures. He talked about the benefits of a local income tax in terms of collection rates. Most people accept that the collection rate for income tax is generally quite high, but the collection rate for income tax for Scotland that Mr Swinney mentioned is actually lower than the collection rate for council tax in England and Wales. That is a signal that, in Scotland, council tax collection could be better.
Will the member give way?
No, I would like to make some progress.
If we improved collection rates—as the amendment in my name suggests we should—we could shave some money off the average level of council tax. The amount would not be huge, but it would make a difference.
Even if the review committee recommended a change, and even if—we might have to suspend our disbelief for a moment—the Executive agreed, any change to the local government finance system would take time. If we want to tackle pensioner poverty now, we should be considering more immediate measures. We should be considering what we can do with the council tax now.
The fundamental problem with the council tax is that it has increased by 60 per cent since 1997. That increase is well above the rate of inflation and well above the increases in income of most people who pay the tax. If we want fundamentally to reform the level of council tax rather than simply make an incremental change—that is, if we want to do something significant about the level of council tax rather than simply tinker at the edges—we will have to take a fundamental look at what councils do and at what we expect them to raise through the local government finance system, whatever that system might be.
Every time the Executive suggests new or enhanced services, we have to ensure that the councils that will be expected to provide them will be funded in full. I suspect that a significant portion of the increase in council tax since 1997 results from additional services being asked of councils but not financed.
Mr Brownlee said that we have to take a fundamental look at what councils do. What powers would the Tories either take away from councils or give to them?
The point is more about what councils can do with what they are asked to raise. For example, if education services were taken away from local authorities, shifts could be made in council tax. That should be considered. Education could be devolved to a lower level.
Will the member give way?
No, I want to make some progress.
We could consider many issues in relation to the role of councils and what we expect them to raise.
As John Swinney pointed out, the uptake of council tax benefit is nowhere near as high as it should be. I suspect that many pensioners do not know that they are eligible for it, while others find it difficult to complete the application form or have a problem with the intrusive nature of many of the questions that they are asked in order to qualify for it.
Pensioners' difficulties have been compounded by the Chancellor of the Exchequer's scrapping of the temporary £200 council tax rebate that he introduced before last year's election. The day after he introduced it in his budget, he told the "Today" programme that his
"spending plans … including what we can do for pensioners"
were "costed and affordable". In an online chat at the Labour Party conference, his friend the Prime Minister went further and said:
"Labour is helping the most vulnerable to meet the costs of council tax".
Of course, as soon as Labour got back into power, it scrapped the rebate.
I should point out that between 33 per cent and 42 per cent of pensioners who are eligible for pension credit do not receive it, so it is a bit naive to think that the Scottish Parliament alone can deal with pensioner poverty. Instead, we need a joined-up approach with the Westminster Administration.
Moreover, we should not discount the impact that improving council tax collection could make. Some councils—particularly those in cities, but I could mention some others—are simply not collecting the appropriate amount of council tax.
What practical measures to improve their council tax collection rates should councils take that they are not already taking?
They should look at best practice. However, I strongly urge all councils not to look at what Inverclyde Council is doing. Its tax collection rates seem to be going down.
But what should councils do?
Inverclyde Council provides a very good example of what a flagship Liberal Democrat authority is not doing.
If we are serious about tackling pensioner poverty instead of scoring political points, we must work with the United Kingdom Government, no matter its colour. I realise that that might be difficult for some SNP members who take a different view of life.
Defenders of a local income tax system claim that it will benefit pensioners, because they will not have to work, but the Liberal Democrats recently suggested that pensioners should work and that we should take the tough decision to raise the state pension age. As a result, under the Liberal Democrats, pensioners would be no better off, because they would have to work and pay local income tax.
We should not expect to resolve local government finance issues in a 75-minute debate. However, we need to address some pretty fundamental issues of council tax reform rather than debate certain parties' ideological obsession with the local income tax, which would be difficult to implement and expensive to collect.
The phrase "ideological obsession" will come back to haunt the member.
I was referring not to Christine Grahame but to political parties.
I have pleasure in moving amendment S2M-4363.1, to leave out from "recognises" to end and insert:
"notes that the council tax has increased by 60% since 1997 and that it is this large rise which has made the cost of local council services a punishing burden for so many Scottish households, especially pensioners; calls on the Scottish Executive to fund fully the centrally-driven policies which it imposes on local councils; further calls on the Executive to ensure that those who are entitled to council tax benefits are in receipt of them, and notes that in 2004-05 councils collected only 92.7% of council tax and that, if the Scottish councils improved their average collection rate to that of England, 96.5%, an extra £41.50 could be shaved off the average band D council tax in 2005-06."
My amendment falls into two separate parts. First, it recognises that, as some members have already pointed out, the council tax is unsustainable as a system of raising revenue to pay for local government jobs and services. For a start, it is fundamentally flawed and unfair. It charges the very wealthiest people in society very little while charging the lowest paid workers, and particularly pensioners, a lot. Because it hammers the poor and pensioners and pampers the wealthy and well-off, it is clearly a Tory tax.
Unfortunately, since 1997—and particularly over the past seven years since 1999—this Tory tax has survived on a life support system operated by the Labour Party and, in Scotland, by Labour and the Liberal Democrats. Because they have helped to keep the council tax in place over the past seven years, the Liberal Democrats, in particular, should be ashamed of themselves.
Does Tommy Sheridan accept that, given that the Labour Party and the Conservatives are opposed to changing the council tax system, there is no majority in this Parliament for such a change?
I hope that during the 2007 election campaign Mr Rumbles and his colleagues will stand up at every hustings and say, "Listen, there's no much chance of us getting our policies through because we're no going to have a majority, but gaunae vote for us anyway?" The Liberal Democrats are involved in deliberate political deceit. As in the recent Dunfermline by-election, they are telling the electorate, "Vote for the Lib Dems to scrap the council tax in Scotland." However, in this Parliament they are saying, "Oh, wait a wee minute, we've no got a majority, so we cannae vote to scrap the council tax. Let's just keep it now we've got the electorate's votes under false pretences."
Members should be in absolutely no doubt that the council tax is unfair. Even according to the Scottish Executive, 110,000 pensioners in Scotland are officially in council tax poverty because they are paying more than 10 per cent of their disposable income on the council tax. Indeed, Help the Aged suggests that that figure might be as high as 30 per cent. Of course, we are talking not just about pensioner households but ordinary working-class households. Seventy-eight per cent of Scotland's workers earn less than the average annual wage of £20,603. They are being hammered by this unfair tax. The first and foremost principle that we must establish this morning is that the council tax is rotten to the core and it must go.
In the second part of my amendment, I point out that the SNP has been politically duplicitous and has displayed rank political hypocrisy. In February, the nationalists had the opportunity to abolish the council tax when the Parliament voted on the general principles of the Council Tax Abolition and Service Tax Introduction (Scotland) Bill, but they refused to seize that opportunity, even though the convener of the Local Government and Transport Committee made it clear that the principle behind the bill was to abolish the council tax and replace it with an income-based alternative. We proposed that the form of any such alternative could be decided at stage 2, but the SNP refused to vote to allow the bill to proceed to that stage. That was political duplicity.
I remind the member that at the time he used the phrase "featherbedding". Under his bill, I, my wife and MSPs would have paid less tax. Only 21 words in the bill would have survived stage 2 amendments to make it into a piece of legislation to replace council tax with a fair local income tax. Mr Sheridan's proposal was simply not possible, and he should acknowledge that now.
I will acknowledge that, under our alternative, Mr Stevenson, with his salary of £52,000, would have paid an average £2,500 more than he is currently paying in council tax. The same would have applied to everyone in the chamber, which is probably why the bill was voted down.
Stewart Stevenson said that, after stage 2, only 21 words would have remained of my bill—well, it would have been 21 words more than the SNP has introduced to deal with this matter in seven years. The SNP tells us that it is sincerely committed to replacing the council tax, but it has not introduced a single bill to do so. That political duplicity should be exposed today.
By all means let us scrap the council tax, but we must also expose the political double-dealing and duplicity of the SNP and the Liberal Democrats, who might well be partners in future.
I move amendment S2M-4363.3, to leave out from "and calls for" to end and insert:
"regrets the failure of the SNP and Liberal Democrat parties to vote for the replacement of the unfair council tax with an income-based alternative, when presented with such an opportunity during the February 2006 debate on the Council Tax Abolition and Service Tax Introduction (Scotland) Bill; notes the failure of either the SNP or Liberal Democrat parties to propose any concrete legislative alternative to the council tax over the last seven years, and believes that the overwhelming majority of Scottish citizens support the replacement of the council tax with a system based on income and designed to tax the wealthy more and ordinary workers and pensioners less."
I welcome the opportunity to speak in the debate, not least because it provides us with an opportunity to highlight what Labour has done for pensioners both here and throughout the United Kingdom since coming to power. It also offers us an opportunity to examine the very real effects that the SNP's proposals for a local income tax would have. At best, the nationalists' attacks on council tax and their proposals for a local income tax are disingenuous. The very phrase "axe the tax", which the nationalists are so keen to punt, belies the fact that they are not planning to axe the tax at all, but merely proposing a different tax. We all know that no tax system will please everyone and that no tax system is ever perfect. The SNP must face up to the question whether its proposed tax system is fairer. In particular, does it deliver for our poorest people?
Will the member make it clear whether criticisms of the SNP also apply to her colleagues in Government?
I shall mention that—I am sure that Mr Morgan will not be disappointed.
Is the SNP's proposed tax system practical and cost effective to collect? On all those points, the local income tax fails. I will touch on that later.
Let me be clear: improving the lives of older people—in particular, the poorest and most vulnerable—always has been and continues to be a priority for the Labour Party. Over the past few years, we have introduced a range of measures that I know from conversations with my constituents have made a real difference to older people in Scotland. Initiatives such as free national bus travel, the central heating initiative and warm deal, free health and dental checks and free personal care have complemented the improvements made by Labour colleagues at Westminster, which include the winter fuel allowance, free television licences and the pension credit. All those initiatives have helped to lift more than 170,000 Scottish pensioners out of poverty. That is not to say that more should not be done. In relation to today's motion, I recognise the need to improve and reform the current council tax system. In particular, it is important that the concerns raised by organisations such as Help the Aged are dealt with and that we improve the uptake of council tax benefit among the elderly. That is why I look forward to the findings of the independent local government finance review committee, which are due to be published soon.
Christine Grahame should sit down. I have a lot to say and she is just going to have to listen for once.
What a spiteful madam.
Christine Grahame taught me all I know about that.
John Swinney was wrong to suggest that the local government finance review is considering revaluation—we have ruled that out. The nationalists' proposals and, it has to be said, those of the Liberal Democrats, are not the solution. Many of the difficulties with those proposals have been fairly and clearly set out in the Local Government and Transport Committee's stage 1 report on the Council Tax Abolition and Service Tax Introduction (Scotland) Bill. Like Mr Sheridan's bill, the nationalist proposal would require primary legislation at Westminster and would take about nine years to implement. There would be no quick way to modify the pay-as-you-earn system for the collection of the tax, which in any case would be set at different levels in the 32 Scottish local authorities. Bristow Muldoon challenged John Swinney to set out what that would mean in all 32 local authorities. I have John Swinney's paper here. It gives us examples of seven local authorities in Scotland; it does not list all 32. It is about time John Swinney came clean and gave us the details on all 32 local authorities and all bands, not just band D and up, given that 70 per cent of Scots live in bands A to C.
It does not take much imagination to predict the kind of difficulties that would be faced in setting up a collection system. That is one of the questions that the nationalists and others in favour of a local income tax must face up to. How much will it cost to set up and run the bureaucratic system necessary to assess and collect a local income tax? What impact will local income tax differentials have on public services if people choose to move to areas of low taxation? What burden will be placed on the poorest citizens, who are in most need of those services? How will councils meet the shortfall in income resulting from the withdrawal of council tax benefit from the Treasury? The nationalist proposals are ill considered and would result in a bureaucratic nightmare that would leave Scotland's local authorities short of much-needed money and our public services struggling. That is why I cannot possibly support the SNP's motion.
Today's debate is aptly named "Council Tax and Pensioner Poverty". The council tax is not the cause of pensioner poverty; the blame for that lies firmly at the door of 11 Downing Street. The golden boy, Gordon Brown, and all his predecessors at 11 Downing Street have combined for about 60 years—since the end of the second world war—to treat with indifference and disdain the financial problems of long-suffering pensioners. The result has been that pensioners feel that politicians pay only lip service to their problems. They are 100 per cent right. Gordon Brown, in his latest lengthy budget, allocated a mere few seconds to pensions, saying that he would be examining in detail the findings of the Turner report, before continuing on to more pressing issues. That sums up his brief reaction to the fact that 1.8 million pensioners in the United Kingdom—by the Labour Government's reckoning, not mine—are living below the poverty line. In Scotland, that equates to 194,000 pensioners below the Government's poverty line. For one of the richest countries in the world, that is an abomination. No politician can look a pensioner in the eye and say, "We're being fair to you." Politicians should think, "Black, burning shame on us for what we are doing for pensioners—it is not nearly enough."
I could go on and on all day, but there is an issue that we can do something about. In a written question to the Scottish Executive, I asked whether it would consider exempting pensioners who are in full receipt of council tax benefit from paying the cost of water and sewerage rates. It sounds logical: if a pensioner who has been means-tested qualifies for council tax benefit, having jumped through all the hoops, that can bring their income up to about £114 a week. However, then they are sent a bill for their water rates. For an average band D home, that amounts to £354.60. Where in the name of goodness is a pensioner who is on the breadline and who lives alone going to get £354.60 to pay their water rates? We can settle that question in the Parliament by instructing councils to stop sending out water rates demands to pensioners. That would avoid a lot of problems.
The answer I received from the Executive was:
"On 1 April 2006 the Scottish Executive introduced a water services charges reduction scheme for vulnerable households."
That means pensioners, by the way. The answer continues:
"The scheme provides a reduction in charges of up to 25% a year for households with more than two adults, who are in receipt of Council Tax Benefit (CTB), and no other discount. The purpose of the scheme is to introduce a permanent means of assisting low-income households largely occupying lower Council Tax bands, in receipt of CTB, which had previously received little or no assistance with their water services charges. The Executive has no plans to extend the scope of the scheme."—[Official Report, Written Answers, 9 May 2006; S2W-25504.]
The Executive lifts pensioners marginally out of poverty, then puts its foot on them and pushes them back down into poverty with water rates. For a single pensioner in a band D house, £354 is one hang of a lot of money. How the Executive can sit there and allow that to go through unchallenged is beyond my comprehension. No wonder ministers are hanging their heads.
By the way, I say to John Swinney that taxation raised through PAYE is not necessarily the answer. Lord Levy, who is alleged to have helped Tony Blair to sell peerages, is a multimillionaire and, allegedly, paid only £5,000 in income tax last year. A nurse pays more than that, so the Treasury will have to tighten up. I wish that Gordon Brown would tighten up on the Lord Levys of this world, as opposed to tightening up on the pensioners, who cannot afford to pay council tax and deal with all the other financial impediments that are put in their way.
I am proud of what the Parliament has done to introduce free personal care, free travel and free central heating for the elderly. The free central heating scheme is magnificent but, sadly, as time goes on, increasing numbers of pensioners find it impossible to turn on their excellent free central heating systems because the cost of fuel is going up at such a rate.
Politicians simply do not seem to be able to grasp the reality of what is happening to pensioners in this country. Pensioners make up about 22 per cent of the population and when it comes to putting an X on the ballot paper, they will not listen to the weasel words that are flung at them but will look at the council tax and water rate demands and will vote for people who are out to try to better their situation. Then members will think, "I wish I'd done a wee bit when I had the chance."
As an aside, I must pick up one illogical piece of nonsense from the Labour Party. In her speech, Karen Whitefield ruled out any revaluation and then went on to criticise the bureaucracy of the local income tax. However, she fails to realise that ruling out revaluation in her preferred system will, for the next 20 years, cause assessors to go around valuing any new property that is built—some are still being built despite the mismanagement of Scottish Water—at the price that it would have been worth had it existed in 1991. What kind of bureaucratic nonsense is that?
I refer members to the report of the Scottish Valuation and Rating Committee, also known as the Sorn committee, which I first mentioned in a debate in June 2002—there are some new members who did not hear me speak on that occasion. The Sorn committee considered different methods of raising tax. On the proposal of a local income tax, it said:
"This suggestion has been put to us from one quarter only, namely, the Scottish Council of the Labour Party."
That was in 1954. It is a pity that the ancestors of current Labour Party members did not manage to pass down some of their wisdom.
One of the reasons why the Sorn committee rejected local income tax was that, although it acknowledged that the rates, as they were then, did not reflect ability to pay, it thought that the totality of local government funding—at that point, 51 per cent came from the Treasury and 49 per cent came from rates—reflected ability to pay, because the 51 per cent from the Treasury was collected from income tax. If that was the case then, it would be true in spades now, because the Treasury contribution has gone up from 51 per cent to something like 80 per cent. Although it is true for the totality of local government finance, it is decidedly not true for individuals on fixed incomes, who are the subject of the motion. Their contribution is not based on ability to pay; it is based on a fixed council tax that they have to pay out of a fixed income.
Another reason why the Sorn committee rejected local income tax was to do with practical difficulties. It is interesting that the committee did not investigate the difficulties itself but simply quoted a previous committee, which sat in 1922—I remind members that the Sorn committee reported in 1954. I hope that, as a result of his conversations with the Layfield committee, the minister will be able to assure us in his closing speech that the committee will not say whether or not something is practical simply by quoting the evidence from the 1922 committee—if he needs it, I can give him the reference for the document.
Any tax system relies on relief to make it equitable and acceptable, but if the types of relief become complex and costly to administer, if a substantial number of the proposed beneficiaries of them do not take them up and if the proportion that is not taking them up is increasing, we clearly have a major problem. The predecessor to the council tax—the poll tax—collapsed under the weight of its complexity, its contradictions and its huge unpopularity. It also brought its proponents to political near extinction in Scotland. We are fast approaching the point at which the council tax will go the same way, and, for the good of Scotland, I hope that when it goes—as surely it will—it also brings down the Labour-Liberal Democrat coalition that has been supporting it for the past seven years.
John Swinney's opening speech dealt with local income tax as an alternative to the council tax, rather than considering other aspects of pensioner poverty and how they have been tackled by the measures that the Labour Party is delivering in the coalition, but I suppose that that was to be expected.
I begin by considering the matter that John Swinney concentrated on most—the replacement of the council tax with a local income tax. There is no doubt that a local income tax would hit working families the hardest. Double-income families would be among the biggest losers. That has obvious implications for younger people who are just starting work, given the difficulties that they face with finding affordable housing, which we all know about. Single people who live alone would lose their current discount, which means that every person who lives alone would pay more. A local income tax would be less stable than a property-based tax, as the yield from income tax is less predictable.
Will Sylvia Jackson give way?
I am sorry, but I have a lot to get through.
A local income tax would be more complex and expensive to collect than the council tax. Although the proposal might look attractive to pensioners, the local income tax form could be as complicated to fill in as self-assessment tax returns. Those issues have not been addressed at all.
The Labour Party believes that the council tax can be redesigned to be fairer and more representative of today's property market. The 2003 Scottish Labour Party manifesto and the partnership agreement committed us to an independent review of local government finance. The manifesto commitment stated:
"We will design a fairer council tax banding system which is more representative of house valuations in Scotland",
particularly by extending the range of the upper council tax bands. That is another point that John Swinney and other SNP members conveniently did not mention.
The real issue is what the SNP's proposals are for a local income tax and whether they can stand up to scrutiny. Although the SNP is always willing to highlight what its proposals would mean to those with no income, it is less enthusiastic about spelling out their effects on working families. Its proposals, which were launched in March 2004, seek to replace the current council tax with a locally set income tax and, according to the SNP's figures, would increase income tax by 4.3p in the pound. There is no doubt that such proposals would hit ordinary working families the hardest.
It must also be pointed out that the SNP's proposals consider only seven local authorities, not all 32. There is no reference in the SNP's material to what its proposals would mean to any of my constituents. Moreover, the SNP does not consider council tax bands A, B or C; all that it considers in its material is band D. Is it not suspicious that the SNP considers only one band?
I reiterate what Karen Whitefield said about the many things that the Labour Party has done to alleviate pensioner poverty. The winter fuel allowance, the warm deal, the central heating programme, free television licences and free national bus travel—the list goes on. For the reasons that I have outlined, we cannot support the SNP motion.
I am grateful to the SNP for spending part of its debating time this morning on the unfairness of the council tax and the growing problem of pensioner poverty, not least because it gives me the opportunity to expand on not one, but two, key Green economic policies: land value taxation and the citizen's income. As the Greens argued in their submission to the independent review of local government finance, land value taxation is a more equitable, efficient and economic solution to the needs of local government finance. We hope that, whenever that report comes out, it will recognise the benefits that LVT—to which I will return later—can bring.
The first question that we must address is that of why pensioners are facing such hard times. What are the causes of pensioner poverty? Council tax poverty is only one kind of pensioner poverty. Pensioners face fuel poverty, and they even face food poverty. As John Swinburne rightly pointed out, inadequate pension provision lies at the heart of the matter. Less than half of pensioners earn enough to pay any income tax at all. A recent report showed that a worker earning an average wage is likely to retire on less than the minimum wage. We are an affluent society but, at the moment, we are not providing a decent income for all pensioners.
The single most helpful action that we could take for the pensioners of both today and tomorrow would be to restore the link between pensions and earnings. We can change the local government finance system as much as we like, with income taxes, council taxes, poll taxes or LVT, but unless we tackle the central problem that is faced by pensioners, which is that they are not getting enough money in, we will not do anything to tackle the causes of pensioner poverty.
The latest long-term projections by the Treasury and the Department for Work and Pensions show that the amount that they plan to spend on the state pension is falling as a percentage of gross domestic product, from 6.2 per cent today to 5.8 per cent by 2050. The number of pensioners is going up, but the Treasury predicts that it will spend less of GDP on the state pension. That is largely due to the windfall of at least £5.5 billion a year from the retirement age for women going up to 65. It is also a consequence of the Government's failed approach, with a morass of means-tested benefits topped off by the minimum income guarantee.
That is a major disincentive for anyone to save. With means-tested benefits, if people have saved, they will not get the minimum income guarantee. That is why Green policy is to award all pensioners a citizen's pension, as a supplement to the citizen's income scheme, which would mean a guaranteed payment to all by right. That would be the solution for bringing pensioners the money that they need.
That arrangement would have to be linked to the taxation system—a fairer, more equitable system of local government taxation. The problem with the council tax is not, as Derek Brownlee argued, that it is too high. It is a flawed tax, which was drawn up by the Tories on the back of a fag packet to deal with the disaster of the poll tax. It is not based on real ability to pay, and—
The sound system has been switched off because the fire alarm is sounding. The fault—if it is a fault—has not been traced. The building is being evacuated in phases, and it is now necessary to evacuate the chamber.
When we resume the meeting, we will probably have to adjust the remainder of the day's business. I do not think that I will be calling you for the remaining 30 seconds of your speech, Mr Ballard—although it was very well received by members.
Meeting suspended.
On resuming—
Order. I think that the official reporters can carry on straight from the sound. The sound goes upstairs. What we do not have are the people to send the messages in the chamber, but I think we can pick up the debate with the closing speeches.
Because of the interruption in the course of the debate, I communicate my apologies to Andrew Arbuckle and Stewart Stevenson, whom I am not now going to call. We are going now to the closing speeches. I call Tommy Sheridan to close for the Scottish Socialist Party.
The interruption gives a whole new meaning to the idea of continuing the debate outside. It appears that that has a different connotation in the west of Scotland from the one that it has in the east of Scotland.
We have had a partial debate. Unfortunately, none of the SNP or Liberal Democrat speakers was able to defend themselves from the accusation of duplicity. Obviously, whoever sums up for those parties will try, in vain, to defend themselves from that accusation. I look forward to highlighting over the next 12 months the fact that, when this Parliament was given the only opportunity to—
Will the member give way?
I will give way because the member never got a chance to speak and I am a fair type of guy.
Will the member accept that, under the proposals that he brought to Parliament, which I voted against, I would have paid no tax, although I have one of the highest incomes of anyone in this Parliament?
Not for the first time, Stewart Stevenson is talking nonsense. Under the service tax proposal, he would have been taxed on his income as an MSP at a rate of £3,900 a year. There is not a council tax bill in the whole of Scotland that currently reaches £3,900 a year. Stewart Stevenson would have paid more under the Scottish service tax than he pays under the council tax. That would have been quite appropriate, because he can afford to pay that amount of money.
In relation to the abolition of council tax, we are talking about introducing a fairer form of taxation that redistributes wealth away from those with plenty and toward those with little. That is what redistribution of wealth is all about and is what the proposal that was before Parliament in February would have delivered. After we had voted for the principle of abolishing council tax and replacing it with a form of income-based taxation, we could have had an argument at stage 2 about the form of taxation that we wanted to put in place and debated the pros and cons of a tax that is set nationally in comparison with a tax that is set locally.
My argument is that the form of tax that was proposed in the Council Tax Abolition and Service Tax Introduction (Scotland) Bill would have been more cost effective, more efficient and more redistributive than a local income tax could be. A local income tax would require 32 different sets of taxation. If that local income tax system also involved different rates within each local authority, each of the 32 local authorities would set different rates. There would be 32 different collection mechanisms and 32 different sets of explanations of the level of income at which people would have to pay their tax. However, under the proposals in the bill that the SNP and the Liberal Democrats voted against, the rates that would have been set nationally would have ensured that an individual on £20,000 a year in Paisley would have paid the same in local taxes as an individual on £20,000 a year in Perth.
Some members on the Labour benches have asked the SNP how much people would pay under the SNP's local income tax scheme. We can tell members in detail how much people would have to pay under our system. We can tell members that, based on the latest figures from HM Revenue and Customs, the proposal that the SNP voted against would not only have taxed people more fairly but would have raised £300 million more for local government jobs and services. We would have had a win-win situation.
The problem is that the SNP and the Liberal Democrats have spent seven years desperately telling everyone in Scotland who was willing to listen that they were going to scrap the council tax but, when they had the only opportunity in seven years to do so, they were feart of taxing the wealthy too much. That is disappointing, not only for the people who voted for those parties, but for ordinary Scottish citizens.
I urge members to support the amendment in my name.
As Sylvia Jackson has already spoken on behalf of the Labour Party, I call Dave Petrie to close for the Conservatives.
I thank you for your warm welcome to the chamber, Presiding Officer—nothing to do with the fire, of course.
It is patently obvious that there is no palatable way in which to fund essential local services. However, the most important provision that we want from our local authorities is a service that represents value for the money collected. The concern of all parties must be that, at the moment, money is not being used to the best effect and, more important, is being driven into ever-increasing bureaucracy while the provision of front-line services continues to disintegrate.
I am particularly concerned about the double handling of public funding of major functions such as transport, education and social work at Holyrood and councils. That feeds bureaucracy and undermines those vital services. It is worth pointing out again that, since Labour came to power in 1997, council tax has risen by 60 per cent. I agree with the widely held view that people are dissatisfied with the high levels of council tax that they must pay today and endorse the view that they are paying too much, particularly given that, on average, councils collect only 92.7 per cent of owed council tax.
We have had an excellent debate and have heard some interesting speeches. As my colleague Derek Brownlee said, council tax can be only one part of the overall equation. The Scottish Conservatives' argument is for a broadly based and rational funding system rather than one that is based solely on income. Because of that, I cannot agree with the SNP motion.
Under the local income tax proposals, it seems that the greatest burden would fall on those who have families and on parents who have mortgages, income tax, national insurance and household bills to pay. Hard-working families are often cited as the very people whom political parties would seek to help. We should not be weighing them down with additional taxation. The SNP's proposals would make housing more unaffordable for young couples and first-time buyers, whose income would be targeted. As an MSP for the Highlands and Islands, I am particularly aware of the lack of affordable housing to buy or rent and the difficulty that people have in making the first step on the housing ladder.
There are already great disparities between the levels of comparable council service in rural and urban areas. In Argyll and Bute Council's area, in which I live, residents pay similar levels of council tax to those that are paid by people in Glasgow and Edinburgh but do not receive anything approaching comparable levels of public services such as libraries, museums and recreational facilities. In addition, there is a moratorium in Argyll and Bute on free personal care for the elderly. I have great sympathy for those pensioners who are suffering and living in poverty. While council tax bills have increased at twice the rate of pensions, real poverty has left them at risk of cold-related illnesses.
Tax rises, such as those of the past decade, are most hard on those with low, fixed incomes, such as pensioners. As Help the Aged has pointed out, council tax benefit can be highly effective in alleviating the worst effects of council tax and should be a mechanism to ensure that the poorest in our society do not suffer. However, the system is so complicated that the benefit often no longer reaches the people who are entitled to it.
On-going difficulties in finding out about entitled benefits and consequent limited take-up of such initiatives is a serious problem. To simplify the matter and make the system more inclusive, we propose to restore the link between pensions and average earnings as a better way to help pensioners. Pensioners who are suffering due to the current weaknesses in the system deserve a revision of that reality and should be given a more appropriate liability to pay.
I urge members to support the amendment in the name of my good friend, Derek Brownlee.
The debate has reflected previous debates on this matter, with the various parties setting out their positions with regard to the future of the council tax.
Mr Swinney set out the SNP's position quite clearly and recognised the difference of opinion that exists between the Liberal Democrat and Labour members of the coalition.
Mr Brownlee talked about improvements in the collection of council tax. Everyone in the chamber would like collection rates to be improved and agrees that such an improvement would have an impact on the provision of services and on council tax levels. With regard to his claim that council tax has increased by 60 per cent since 1997, I point out that since 1999—when the Liberal Democrat and Labour coalition came to power—the increase in council tax has been 11 per cent.
I take it from the minister's comments on the difference between 1997 and 1999 that Labour is to blame for the rises in council tax.
I am just quoting the facts. I leave it to Mr Sheridan to draw conclusions.
I was interested in Mr Brownlee's comment that the Conservatives were going to take responsibility for education away from councils. I am not sure whether that was a new policy announcement or whether Mr Brownlee was just thinking out loud.
Will the minister take an intervention?
No. I will make some progress. We are short of time.
We heard Mr Sheridan's usual strong rant from the back about the Scottish service tax. As we all know, that would be a national and not a local tax. It would centralise decision making and be punitive in nature. It would drive out entrepreneurs and those who create the wealth in Scotland, but Mr Sheridan has made it clear in previous debates that he does not give a damn about that.
Mr Morgan mentioned the Scottish Valuation and Rating Committee report of 1954. Unless I misheard, he mentioned my conversations with the Layfield committee and said that I should do various things. I think that he meant the Burt committee. I certainly was not around when the Layfield committee reported.
As I said in my opening speech, in 2004 the Executive commissioned an independent local government finance review to undertake a comprehensive study and make recommendations on the way forward. I reiterate the commitment of Scotland's devolved Government to the independent review, which is the correct way forward on the vital issue of local taxation. The matter is serious and complex and the Burt committee needs to complete its work before the Parliament makes decisions on that important issue.
As I have said to the Parliament before, we need a careful and independent consideration of the different models of local taxation. That is what the review team is doing. The committee is considering all the various models of taxation that have been proposed by the political parties: the local income tax model from the Liberal Democrats and the SNP; the improved council tax model from the Labour Party and the Conservatives; and the land valuation tax model and the Scottish service tax model from the Greens and the SSP. Even the poll tax is being considered, although I do not think that there is any political support for its return.
I am heartened by the interest and debate that the independent review has generated and continues to generate throughout Scotland. I am sure that I am not alone in receiving many letters on the issue, particularly from pensioners. They are glad to have the opportunity to feed their views into the review and the committee's work. Many pensioners and pensioners groups took the opportunity to respond to the Burt committee's consultation and I am sure that they are well aware of the many issues that have been raised today.
I have some sympathy with many of the points that have been made, especially on pensioner poverty, which is an important issue. None of us wants a system that impacts disproportionately on some of the most vulnerable people in society. The issues are complex and challenging and the debate will continue. Local taxation is a fundamental issue and we look forward to the review's conclusions and findings.
I call Christine Grahame to wind up for the SNP. You have seven minutes.
Thank you, Presiding Officer. I will speak slowly; I thought I was going to get only five minutes.
If you can do it in five minutes, that would be helpful.
I will try. I wish I had not said that, now.
It is a great shame that the fire alarm—which will, no doubt, be the butt of many jokes in columns and perhaps newspaper headlines tomorrow—will overtake what has been a serious debate about pensioner poverty and the complete failure of the Liberal-Labour coalition, over seven years, to do something that we have the power to do in Scotland, which is to get rid of the council tax and put in its place a fair local income tax.
The basic rule of tax is that it should be fair and collectable. None of us likes paying tax, but we accept that basing taxes on income is the fairest way to tax people. I will move on to the collectability of tax shortly.
The background to the debate is the shame of pensioner poverty in Scotland. Some 190,000 pensioners in Scotland live in relative poverty even though Scotland is an oil, gas and energy-rich nation. There is a failure in the targeting of benefits. I find it astonishing, after my many years here, that Labour is still defending the targeting of benefits. As Labour members know, there has been a 10 per cent decrease in claims for council tax benefit in the past five years. We also know that one third of pensioners who are eligible for the pension credit do not claim it. In a debate many months ago, I produced the pension credit application form—all 60-odd pages of it—and another booklet about how to fill it in. There are many reasons why people do not claim pension credit, including the complexity of making a claim, the fact that they do not know that they are entitled to it, and the shame of asking for it. During the same period, the Labour Government at Westminster has had the shameful record of keeping the basic state pension at the same level—currently, it is only £82 for a single pensioner. Many single pensioners do not even get that, particularly women who do not have enough credits to their name. Again, many of them do not claim pension credit.
Against that background, what could the Scottish Parliament have done for the 1 million Scottish pensioners? What does it have the power to do? It has the power to introduce a fair tax, but the Labour and Liberal coalition has singularly failed to do that. No matter what members from the Labour benches say, if one speaks to individual pensioners in the supermarket or to pensioners organisations, the two things that they say they want are a decent pension and a local income tax. Of course, with independence we could also deliver, as my party would, a decent citizens wage. That would take all the means testing out of the system.
Despite pensioner poverty in Scotland, pensioners pay their council tax bills, their rent and whatever else they have to pay. Where are the cuts made? They are made on eating and heating. If we go to the supermarket and look in pensioners' trolleys, we see they do not contain a Sainsbury's crate of six bottles of wine, or instant meals. Pensioners buy small amounts and individual bits of food that they can use up and they look for things that are reduced. Many of Scotland's pensioners buy their clothes in charity shops.
The central heating programme is welcome, but what is its point if people cannot afford to switch on the heating? In 2004-05, there were 2,760 excess winter deaths in Scotland.
I waited three and a half minutes before trying to intervene. Christine Grahame is right to highlight the fact that the Lib Dems and Labour have failed to change the tax for seven years. However, does she accept that, during that time, the SNP should have brought forward legislative proposals to change the council tax? In the absence of such proposals, does she accept that the SNP should have voted for the socialist Council Tax Abolition and Service Tax Introduction (Scotland) Bill?
I will come to Tommy Sheridan's bill shortly.
I wanted to set out the background because we should remember the canvas against which we work.
I turn to the points that were raised by other members. Tommy Sheridan's bill was fundamentally flawed. Ten of the 11 sections in the bill would have punished people and would have done nothing to alleviate pensioner poverty. Not only that, the bill would have taken away local accountability. Frankly, the Parliament has taken too much away from local government. I want local government to be responsible for raising some of the money that provides the services. We would still provide some of the money from here. People want that to happen. We cannot expect people in the Borders to pay the same local income tax as people in Glasgow because they have different needs and requirements.
Karen Whitefield's claim that she was my star pupil astounded me. I have to say that my pupil has not been paying attention and that she must speak to teacher after class. She has lessons to learn.
Free personal care was lauded, but the coalition had to be dragged kicking and screaming to deliver the initiative, which was driven by the Scottish National Party. The SNP took the lead on the issue—I was the first person in the Parliament to lodge a member's bill on free personal care. The SNP drove forward the proposal, against the wishes of the then Minister for Health and Community Care, Susan Deacon.
The point about the cost of collecting local income tax was a red herring. Consider the money that is wasted at present: £30 million-worth of council tax benefit is not collected and £78 million is spent on collection. The system would be simple to administer. We all have national insurance numbers, income tax codes and postcodes, so it would not be beyond our wit to administer the system. Sylvia Jackson talked about working families, but Labour's record on the shambles of the working families tax credit system is shameful. My in-tray is full of letters about that.
Pensioners will not be reading tomorrow's paper to read about a fire. Pensioners will want to know what members have said in the chamber. I will use extracts from Labour members' speeches in my election campaign next year. Votes are running away from the Labour Party. The 1 million pensioners in Scotland are listening to the fact that the SNP would deliver a local income tax and a decent pension. The Liberals have had seven years to deliver that and they have not done so, but they swan around as if they have achievements. Were we in their position, we would now have a local income tax. The voters are waking up fast to the Liberals, who have no proposals. I am also delighted that it has been put on the record that a revaluation will not take place.