Local Income Tax
Good morning. The first item of business is a Labour Party debate on motion S3M-1715, in the name of Andy Kerr, on local income tax. I invite all members who wish to speak in the debate to press their request-to-speak buttons now. I advise all members that time is extremely tight and I will have to be pretty ruthless.
As we are learning, the nats' tax proposals can now be added to the list of broken promises and ill-thought-through manifesto commitments that they made. We have a long list of ditched promises to students, primary school pupils, and first-time buyers. We have the mess that is the Scottish futures trust. We have cut-back and cut-down promises on nursery provision, renewable energy, free school meals and the rest. We have cuts all over Scotland's local authorities to bus services, education maintenance allowances, enterprise, energy and tourism, and the rest.
We have waited for a long time for the nationalists' tax proposals to be presented to Parliament and the people. We know that the consultation document lacks the most basic figures. It is getting a worse reception than Thatcher's poll tax did when it was first published. Just yesterday, the Edinburgh Evening News said that the local income tax
"is just as big a political time bomb as poll tax".
It will be Mr Salmond's poll tax.
Many commentators and others have spoken on this matter. Iain McMillan of the Confederation of British Industry Scotland said:
"replacing the council tax with a local income tax is the wrong policy response"
and
"If Alex Salmond and his colleagues have any sense they will dump this policy forthwith".
In 2006, Mr Swinney said:
"Our conclusion is that there is no point in replacing one bad system with another".—[Official Report, 1 February 2006; c 22902.]
He is absolutely right, so I expect him to dump his nat tax proposals.
The great contradiction at the heart of the proposal is that it is not a local income tax. There is nothing local about it. Overnight, it would remove one of the key principles of local government: its right to determine how much revenue it raises locally. How would that show the new respect and understanding that we hear so much about?
The Scottish National Party proposals fail the test of accountability. A nationally set tax would mean that the Scottish Government would determine how much councils can spend, thereby removing fiscal autonomy and responsibility from local government. It is, as we know, centralisation by stealth. Autonomy is crucial because without it councils could not have resisted the tax-cutting agenda of the Thatcher years. Now we have a tartan Tory budget in Scotland. A minority Administration with a tax-cutting agenda is squeezing council budgets and causing cuts in services across Scotland. The nat tax will allow the SNP to continue that agenda, preventing councils from responding to local needs and priorities.
The Liberal Democrats should be extremely wary of any suggestion that the SNP would revert to a local tax in future years, given the broken promises in its manifesto.
Another myth around the so-called local income tax—which it is not—is that the rate would be 3 pence in the pound. We all know that it would be 5 pence at least. The Cabinet Secretary for Finance and Sustainable Growth is plain wrong to assert that a 3p rate of local income tax would provide the resources to replace the council tax. We cannot find one independent commentator who thinks that a 3p rate would be sufficient to raise the same amount of funds as the council tax raises. A 3p rate would provide only 60 per cent of those resources, leaving an £800 million black hole. Whichever way we look at it, the rate would be 5p not 3p, and that puts a totally different complexion on the SNP proposals. That would mean a 25 per cent increase in the standard rate of tax. Modelling by PricewaterhouseCoopers shows that a 5p rate would mean that a single person living in an average house and earning £22,375 would be a loser, as would a couple on a joint income of £33,450.
Before Mr Kerr leaves the point about the financing of local authority services, will he confirm whether the Labour Party in Scotland believes that the Parliament is able to change the system of local taxation and include in that calculation the resources that we currently receive in council tax benefit?
I will come to council tax benefit in a minute.
Three-fifths of Scottish households have more than one earning adult, and they will be very badly off under the nat tax. Far from being better off—the myth peddled by the SNP—many hard-working Scottish families would be worse off. The proposal is nothing less than a tax on jobs in Scotland. Unless local income tax bills are around 40 per cent higher than forecast, they will not close the shortfall in local government funding.
The local income tax will not be a fair tax. It can safely be concluded that the proportion of households that will be better off under the nat tax will be significantly lower than the 90 per cent figure that has been conjured up by the SNP. Bills will have to be higher because 25 per cent of households currently receive full council tax benefit and they will be no better off under the nat tax proposals. Almost half of Scotland's pensioners already pay income tax and they would still be liable for that under the SNP's local income tax plans. There is no recognition of the impact that the plans will have on pensioners, on young workers living at home with their parents, or on single adults living together, such as nurses who are in training or students who are working their way through college. They will be badly hurt by the nat tax.
I will address Mr Swinney's point about council tax benefit. The SNP was warned before, during and after the election that the council tax benefit that is currently provided by Westminster would cease on the introduction of a local income tax. That is not bullying by Westminster; it is the view of respected academics and commentators alike. It is wrong to assume that the £381 million provided through council tax benefit to low-income households would be transferred to Scotland. That assumption reveals a limited understanding of the Treasury. The Burt report—not Westminster, the Labour Party, or anyone else—says that "Council Tax Benefit would cease" if a local income tax was introduced in Scotland. I suggest that Mr Swinney read the Burt report more closely.
As we know, this is not a local income tax; it is a national tax. Families cannot afford it, businesses do not want it, local government does not like it, and, of course, the rich, who have accountants, will not pay it.
I move,
That the Parliament rejects the SNP proposals for a local income tax, noting that these proposals are neither local nor fair, that property has a role to play in our taxation system, that they would remove from local government any autonomy over raising resources locally and that they would fail to raise the resources required to fund much valued local services.
There are two approaches that we could have taken to the debate and that we could take to future debates on this subject. We could have taken the easy way and each party, once again, could have done nothing more than lay out its stall on local government taxation and knock down its opponents' arguments. The advocates of local income tax could have made the case for fairness and listened to nothing else. The SNP could have stuck to its 3p rate and the Liberal Democrats could have defended local variability to the hilt.
The opponents of the local income tax—more accurately called the salary tax—in its various guises could have listed all the shortcomings as we see them. The Conservatives could have restated the case for cutting the rate for pensioners. The Labour Party could have continued its attack on the administration or competence of the salary tax, or it could have raised more questions about the impact on average earners or the amount of revenue that it would generate.
The Greens could have made another speech about the merits of the land value tax, which the Burt review—that review somehow started gathering dust before it was even shelved—recognised. Every time we make a speech about the LVT, a majority seems to come together somehow and the chamber agrees that the idea shows promise and that we should fully investigate it. It never happens. The previous Government never made good on that promise, and the current one manages a less than impressive eight lines on the issue in its consultation.
So, we could have had that easy debate. Each of us could have set out our policy and defended our positions. The Greens could have taken the easiest possible approach and simply voted for the Labour motion, which rejects a local income tax but says nothing—not one word—about what should be done instead. How much further would that have taken us? Not a single step. Why? It is simply because the Parliament remains deeply and almost precisely evenly divided on the issue. There is no majority for a local income tax in the chamber, but there is no majority for the status quo either. Each party's colours are nailed firmly to its own particular mast and little room is left for dialogue. We appear to be at an impasse.
That is why we chose a different approach to this debate. If we were to agree a motion today that closed the door either to reform or to any element of property tax, Parliament would still be facing the same impasse. We would not have moved forward in any way. It is far better to recognise our differences and agree some basis on which to resolve them. That is what my amendment does—it specifies the criteria that we should establish for a local taxation system. If it is agreed, all of us—regardless of which system we support—will need to answer for ourselves against the criteria.
That is not the easy debate; it is the harder debate. It will be hard for the advocates of the salary tax to demonstrate how they can reduce tax avoidance, especially given that people at the wealthiest end of the spectrum would get away with paying nothing under the proposals. They will also find it hard to explain the economic advantages of the abolition of any element of property tax. It is a measure that, all things being equal, would be inflationary and would further distort the housing market and make it even harder for people to buy their first property. They will find it hard to point to any environmental benefits of such a tax, as it gives local authorities no facility to incentivise the efficient use of land. In case that seems to imply that LVT would get an easy ride, I am prepared to admit that we also have a hard job to persuade others that land value tax or site value rating can be made to ensure fairness for everybody. I know that there are questions about the detail that we have not yet answered and that we will need to work hard to answer them.
Some of us believe that local income tax as proposed by the Scottish Government is impossible to bolt on to a comprehensive, cohesive system of taxation set in Westminster. Will the same apply to land value tax, or is there a way round the problem?
If land value tax is introduced gradually it can be compatible with existing taxation systems, even in a devolved settlement, but we will need to put flesh on the bones of that proposal. I accept that that is a hard thing for us to do. My point is that we should all be prepared to have the harder debate on our own policy rather than just battle against each other.
The other parties that oppose the salary tax will also have difficult questions to answer. Those who have until now opposed fundamental reform will need to answer the fairness question. How can we address the strong, perhaps even overwhelming, public feeling against council tax and build greater fairness into the system? In Andy Kerr's words, it would be wrong to replace one bad tax with another. If we accept that council tax is a bad system, we need to accept the need for reform. How can we achieve improvements in social and environmental impacts if we retain the existing system? Those are all questions to which we do not yet have the answers, but it is only by asking them and by taking part in that difficult debate that we can move beyond the impasse and respond to the public clamour for change.
The most important lesson that should be learned from today's debate is that those, like me, who believe in the principle of retaining a property element in local taxation but understand the need for change, must have something more constructive to offer than the status quo. The status quo is unfair, unpopular and, after today, if my amendment is agreed to, it cannot be regarded as sustainable. After agreeing that, we can only move forward, rather than endlessly lock horns in a familiar, easy and futile confrontation.
I move amendment S3M-1715.1, to leave out from "rejects" to end and insert:
"notes the Scottish Government's consultation on the future of local taxation; recognises that this consultation is not due to close until 18 July 2008; notes the wider range of possible options, including local income tax, land value tax, property tax and reform of the council tax; recognises that the existing system of local government taxation is discredited, bureaucratic and unpopular; agrees on the urgent need for substantial changes to the system of local taxation, and agrees that, in developing this future system, due consideration should be given to fairness, local accountability, the need to reduce tax avoidance and the wider social, economic and environmental impact of any proposed system of local tax reform on communities across Scotland."
This Government is committed to abolishing the unfair council tax and introducing a fairer local tax, based on the ability to pay, as part of our agenda to create a more successful country, with opportunities for all of Scotland to flourish.
Council tax is unfair and regressive. It hits people on low incomes, particularly pensioners, who can least afford to pay it. Our proposals for local income tax will make most single pensioners, most pensioner couples, most couples—with or without children—most one parent families, most single people and most households with multiple taxpayers better off. Only the top income decile will pay more under our proposals.
Last June, this Parliament agreed
"that local income tax, which is based on ability to pay, is a fairer system of local taxation than the discredited and unfair council tax".
Parliament went on to note
"the position of the Green Party in regard to land value taxation."
Just over a month ago, the Government published a consultation paper that sets out our proposals for change. The consultation period runs until 18 July. Now, just over a month into that consultation, we are debating a motion that seeks to bring the debate to an end and keep the hated council tax in this country. Given that this Parliament gave us the authority to develop our proposals, it would be an insult to the people of Scotland not to give this Government the opportunity to discuss its proposals with those people.
On the subject of authority, the Scotland Act 1998 refers to
"Local taxes to fund local authority expenditure."
I accept that the local income tax would fund local authority expenditure, but, on the first part of the phrase, in what way is it a local tax?
The proposals that the Government brings forward will be for local taxation to support local public services, which is exactly what the Government is entitled and able to bring forward. I will address the point in more detail. In our proposals—
Will Mr Swinney take an intervention?
Let me address Mr Brown's point. In our consultation document, we make it clear that our proposals are to support local taxation and local services. The simple contrast must be with United Kingdom income tax. No matter how much they pay, if an individual lives in the UK that money flows into the coffers of the Treasury. Let us face it, many people who earn under £17,000 will now pay much more in tax thanks to that crowd in the Labour Party and their mates in the Treasury. The money that every individual pays in local income tax will go directly to the local authority area in which they live to pay for services for people living in that area.
There has not been an above-inflation increase in Glasgow's council tax for 10 years. For three of those years, it has been frozen. That is mainly down to councillors. Why is the Government proposing to abolish local democracy as well as to attack wage earners?
This Government has given local authorities more ability and discretion to decide their own priorities, in stark contrast to the way in which the previous Government strangled local authorities for the best part of eight years.
I am delighted to debate the issues on local taxation. Our proposals are designed to tackle the fact that low-income households pay 5 per cent of their income on average in council tax, but higher earners pay only 2.5 per cent. That is unfair and it is no wonder that Labour and the Conservatives want to keep the council tax. We are determined to press on with the debate to give people in Scotland a choice, because for eight years we had an Administration that put off the reform of local taxation and was put out of office as a result. We will reform local taxation and we will take the debate forward with the people of Scotland.
We could criticise the Labour party for giving only half its debating time this morning to the local income tax debate, but even if we had all week to debate local income tax there would not be enough time to cover all the flaws in the Government's proposals.
In the five weeks since the Government published its consultation, every week has brought fresh problems to the fore. With 13 more weeks to go, we can only conclude that it will be unlucky for some. I do not know whether Mr Swinney is a superstitious man, but the omens are not good for local income tax.
If the problems were not previously obvious to the Government, surely they must have become so on the day that Nicol Stephen and Tavish Scott pitched up at St Andrew's house and offered to help. Mr Swinney need only look to his left, to the Labour party, to see where help from the Liberal Democrats gets someone.
The Government should cut its losses, abandon its hare-brained schemes and focus instead on reforming the council tax. Ministers will not have to do that today, thanks to Patrick Harvie's amendment. Today is unlikely to be the day of reckoning for local income tax, although it will come soon enough. There may be some quiet satisfaction on the Government benches if the Labour motion is rejected at decision time, but a defeat for the Labour motion this evening will not be a win for the Government. In fact, it might prove to be the reverse as it will allow the local income tax plans to limp on and continue to drag down and damage the Government. Today there is an opportunity to save the Government from itself. Local income tax is supposed to be its flagship policy, but it is a flagship that is not merely holed below the water line; it has sunk so far that it should be based at Faslane.
The local income tax plans are based on many dubious assumptions and assertions. It is claimed to be a local tax, but it is a national one. It is claimed to be a tax on income, but it is a tax on earnings. Of all the dubious assumptions, surely the most dubious are about the arithmetic—even the parliamentary arithmetic.
The Government has sensibly rejected the notion that every council in Scotland could set a different rate of local income tax. That would be a costly bureaucratic nightmare. It used to be SNP policy until Mr Mather had one prawn cocktail too many with those who would have had to administer it. Clearly, there were no prawn cocktails for Mr Scott because that is still Lib Dem policy. The Lib Dems have made their position clear—not a phrase I have ever had occasion to utter before. If local councils cannot set their own rate of local income tax, the Lib Dems will not support the policy. If the Conservatives and the Labour Party are opposed to the Government's proposals, the SNP's hopes lie with that most unlikely of outcomes: that the Lib Dems abandon their principles, go back on their word and do one thing, having said another. Who would have thought that the cabinet secretary would be so reckless as to gamble the Government on such a remote possibility?
Much as I am thoroughly enjoying an excellent speech, I wonder whether the member agrees that outside these hallowed walls, people are much more concerned about whether they can pay their mortgage and the collapse of the international monetary system than fancy dancing on something that will never happen.
I certainly hope that it never happens.
There is some other arithmetic that has exercised the cabinet secretary. The Conservatives have published more figures on local income tax than the Government has. When the Government tried to rebut our figures, it said that the local income tax would lead to a £281 million tax cut. However, that is nothing to do with local income tax and everything to do with a decision by the Government to subsidise local income tax to a greater degree than it subsidises the council tax. If the money could be found to subsidise local income tax, why can it not be found to reduce the council tax? How much could council tax bills be cut if that additional funding was used to reduce them?
If we reject the motion, we can go on to consider council tax reform, but as long as local income tax is on the table that will not happen. We will happily work with the Government to reform and improve the council tax. That is an open and constructive offer, which will remain on the table and which I hope the Government takes up. In the meantime, for the first time in almost a year, I urge members to support the Labour motion.
Mr Brownlee was keen to talk about arithmetic. I recall that when the Conservatives were in Government, they recalculated unemployment at least 19 times. When it comes to arithmetic, Mr Brownlee's party certainly knows how to cook the books—it did it for 18 years and people were out of work because of the way in which it behaved. We will take few lectures from the sanctimonious Mr Brownlee on such matters.
Labour and the Tories are competing to be the voices of conservatism. Both are arch advocates of the council tax, despite their open acknowledgement that it gravely penalises Scottish pensioners. There is a consultation, which parties can use. We can let Parliament debate the issue when the Government introduces legislation. Through our Steel commission, the Liberal Democrats will work on a wider package of fiscal reforms. We take the point about the importance of local income tax fitting into a general basket of taxation, in terms of both the objective of growing the economy and the pressure on the incomes of Scotland's hard-pressed households.
The council tax is the ultimate in discredited and unfair blunt instruments. Labour and the Conservatives—because they introduced it—argue for its retention.
In the previous debate on local income tax, Mr Scott said:
"I give clear notice that the Scottish Liberal Democrats will work with the SNP Government on the issue."—[Official Report, 21 June 2007; c 971.]
How is that work going, Mr Scott?
It is interesting that Mr Brown disapproves of those who want to work to change the council tax. I want to work to get rid of the council tax and he does not, which is where he and I disagree.
Despite the rises in the cost of living in this country, Labour and the Conservatives argue for the retention of the council tax. The people in the lowest income tax bracket are being hit by changes in the budget, such as the withdrawal of the 10p minimum tax rate that was introduced by the Labour Government. Margo MacDonald referred to the international monetary system. Today, we hear that the Labour Government is to bail out the banks and expose taxpayers throughout the country to unprecedented levels of risk. That follows the utter shambles of Northern Rock. Labour cannot come here and lecture us and, more to the point, the country on taxation and on management of the economy. In China yesterday, our esteemed Chancellor of the Exchequer said that Labour needed to sharpen up. At least Mr Darling is more in touch than the boss. There can be no greater indication of how much Labour in London is out of touch than its withholding what most Scots see as their money—that has given the SNP the easiest campaigning, anti-Labour argument. It is clear from last night's "Newsnight" that Labour needs rather more of Paul Murphy and a lot less of Des Browne and Yvette Cooper.
As Patrick Harvie pointed out, the Labour/Tory motion contains no proposals. There is nothing about the new council tax bands proposed by Labour during last year's election and nothing about revaluation, which also came up at the election. In Wales, where revaluation happened, millions face rises in local taxes that are not linked to the ability to pay. The Tories never seem to have any proposals, but what we remember of the most recent election is that they proposed cutting tax and rewarding the better off. That is not quite the on-message position of Mr George Osborne, who has had his Gordon Brown "Today" programme moment and committed the Tories to Labour spending levels and no tax cuts. Mr Brownlee's position is therefore even more right wing than that of George Osborne, which takes some doing.
Labour and the Tories are tied to what a recent survey of 30,000 internet financial users found to be the most hated tax—above inheritance tax, VAT and even fuel duty. The Scottish Government's proposals for a local income tax address some of the inequalities inherent in the current system. If the detail can be got right, 60 to 70 per cent of local tax payers throughout Scotland could be better off. However, the SNP's plans for a national tax undermine the autonomy of local councils. Our plans avoid the legal issues that appear to beset the SNP's position. There are differences between the Liberal Democrats and the SNP on local accountability—which we believe in—but we absolutely agree that no matter how the council tax is adjusted, it will always be unfair and it will always fail to reflect ability to pay. We will work constructively with the Government on the case for change and the detail of that change.
I am grateful for the opportunity to debate the local income tax. A few of us served in local government through some fairly turbulent periods—periods in which Derek Brownlee was probably in nursery school, if his counting is anything to go by.
There are various issues that I would like to discuss. First, in the debate about local government, a key point on which I think all members agree is the right of local councillors to determine their budgets in the light of local circumstances and to have responsibility for how they raise revenue. One of the central problems with the local income tax is that it is not local and it removes that accountability. When I read about the council tax freeze and investment in council services, I recall the issue of parity of esteem, which was prevalent in debates prior to the election. Since the election, a coach and horses have been driven right through the principle of accountability, which many of us who have served in local government defended with great vigour, particularly during the Conservatives' centralising agenda in the 1980s and early 1990s.
Mr Swinney may dispute the point but, unfortunately, the Scottish Government is by stealth endangering the very autonomy of local government. That autonomy is meant to be one of the pillars of the new relationship and concordat—not to mention the parity of esteem—between the Scottish Government and local government. Those of us who have a background in local government and who have had discussions with our colleagues in local government should be wary of the commitment that the Government has made so far in the local income tax debate.
The second issue is much more fundamental. In the 1980s and 1990s, there was a debate not only about ensuring that we had enough resources to meet our statutory needs but about how we should address the new concerns emerging in communities throughout Scotland about issues such as pressure from population growth. In the case of Glasgow, an issue that Charlie Gordon and I had to confront was a diminishing income base and working population because of developments outside the city. Glasgow has an agenda for regeneration and the generation of income inside the city. The local income tax is a policy that could jeopardise much of the hard work that has been undertaken in Scotland's largest city.
There are major problems of accountability and fiscal prudence. I was a councillor and a council leader for a number of years, and I respect the fact that we expect councillors to make decisions locally. It is important that Mr Swinney gives them the opportunity to do that. The local income tax proposal, as it is currently constituted, does not present that opportunity.
My colleague Andy Kerr identified many other issues. My third point is that the Layfield committee, the Burt commission and—in relation to England and Wales—the Lyons report identified that if we are to have an effective local government system, we have to have the consent of local taxpayers to changes in taxation. The vast majority of those who will be making the most substantial contribution are working families. If there is a policy that penetrates their personal incomes to such a level that the noble aspiration to meet the needs of pensioners and the poor—
Will the member take an intervention?
I am sorry, but I am in my final minute.
If you undermine that commitment, which was one of the clear problems with the poll tax, you imperil not only the accountability of local government but the effectiveness of the revenue-raising capacity.
Local income tax is an SNP manifesto commitment. You have had the bravery to ditch manifesto commitments when they have been inconvenient, but here is one that you may get consent to ditch because it imperils the legitimacy of local government and those who raise taxes locally. I urge members to recognise that that is part of the debate. There are broader debates on other issues, and I hope that the ministers will listen carefully to all the speeches.
I remind all members that the only "you" they should refer to in this chamber is me.
I thank the Labour Party for its choice of debate. I would have thought that, in a month when 500,000 Scottish households have become worse off as a result of the scrapping of the 10p tax rate, Labour would be wary of debating taxation. However, rather than talking about how Labour's policies affect people throughout Scotland, we once again have a Labour debate on one of the SNP's flagship policies—a policy that is popular throughout the country, in stark contrast to Labour's hated council tax.
The idea of a local income tax is highly popular. In fact, the most recent academic research found that almost nine out of 10 Scots are in favour of replacing the council tax with a local income tax.
Does Joe FitzPatrick concede that Malcolm Rifkind also claimed that the poll tax was popular when he first introduced it in Scotland?
My claims are based on the most recent academic research by the University of Strathclyde; Mr Brownlee can defend Malcolm Rifkind's past actions. We all remember that the council tax was introduced by the same people who introduced the poll tax.
I am not sure how many of the 88 per cent of Scots who are in favour of scrapping council tax and moving to a fairer, income-based tax are in the Labour Party but, given that Jack McConnell and Gordon Brown have previously called for the introduction of such a tax, there may be more than we think. It is a shame that party politics prevents the progressive elements in the Labour Party from speaking out in favour of progressive taxation.
The reason why the local income tax is so popular is that, as well as being fundamentally fairer, it will leave the majority of Scottish households better off, as we heard from the cabinet secretary. We have heard Labour's made-up costs for LIT, which fail to take into account the SNP Government's commitment to deliver the biggest tax cut in a generation, and have read about the Tories' fantasy families. I will talk about some real-life scenarios in my constituency.
A single mother who lives in a band C rented house and works full time as a cleaner will be £35 a month better off when the council tax is replaced with a local income tax set at 3 per cent. That £35 assumes that she claims all the benefits to which she is entitled under the current system, even though we know that many people who are entitled to council tax benefit do not receive it in spite of campaigns by local authorities and anti-poverty groups.
We could also consider the police officer whose partner works for the council. They have a joint income of £40,000, live in a band D property and would pocket an LIT saving of £337 a year on what they pay under Dundee's council tax. That is after we have frozen the council tax—we can only speculate what the difference would be if we did not have an SNP Government.
Does Joe FitzPatrick have any case studies of a family of two adults with two grown-up children who cannot afford to pay mortgages living at home? Will they look forward to paying four times what they pay now?
I thank Margo MacDonald for that point, because I came across such a family in Dundee. During the election campaign, I was quite surprised to come across one family who lived in a former council house and would pay more. They showed me that they would pay more, but they said that that was okay because their grannie and mother would pay less. The most vulnerable people in society will pay less, so they were happy to pay a tiny bit more. Other people in Dundee would pay a little bit more, myself included. However, that is the result of a fairer system. For example, I would pay an extra £55 a month as a result of a local income tax, but that is less than 1.5 per cent of my salary as an MSP, which is a small price to pay to remove the crippling chains of the council tax.
Before I came to this place, I spent 17 happy years as a councillor, many of them as chair of the finance committee of a big regional council. If I learned anything doing that job, I learned something about the essence of local government and local democracy. As Frank McAveety described, right at the heart of local democracy are local councillors assessing local needs, deciding on priorities and exercising discretion on how they meet those needs. That is principally enabled by their ability to levy a local tax and stand accountable at the ballot box for their decisions on that local tax, as I did when I was in that role for many years.
Scotland is littered with evidence of local discretion, local diversity and local choice in services and facilities. That is the essence of local government and local democracy but, at a stroke, the minority Government would eliminate all the local discretion that we have enjoyed for many decades. Not even Mrs Thatcher was prepared to contemplate that when she introduced the poll tax. At a stroke, a century or more of local discretion would be swept away. All local discretion would be removed and the often-articulated long-term ambition of local government in Scotland to raise a greater proportion of its income locally would be thwarted. In future, local government would not raise a greater proportion locally; it would not raise any local tax at all.
Will Peter Peacock give way?
With respect, I will not, because I want to get on; I have only four minutes.
The irony is that the Government that is proposing to do that is also arguing for more tax powers for the Scottish Parliament. It is doing that at the same time as it removes all local taxation powers and leaves Scottish local government with fewer tax powers than English parish councils enjoyed. What a joke it is for the Government to dress those proposals up as a local tax. There is nothing local about it. It is a new, extra Scottish national tax—a nat tax—and it will leave many worse off, unlike what Joe FitzPatrick said. That will be the case particularly in the region that I represent—the Highlands and Islands—and more widely throughout rural Scotland. Many households in Orkney, Shetland, the Western Isles, Moray, the Highlands and Argyll and Bute, where council tax levels have traditionally been lower than the Scottish average, will be worse off not only by a few pounds but by hundreds of pounds. Rural Scotland will be hit disproportionately, just as it was under the poll tax.
The proposed tax has many of the same features as the poll tax. It is ill considered and ill judged. It is costly to administer. It creates disincentives to pay and incentives to evade it, which is a huge issue for any taxation system. It adversely affects rural areas in particular and leaves the laird paying less than his keeper will pay. However, it adds problems that even the poll tax did not have. It removes all the local discretion that I have talked about. Its yield is inevitably unstable and unpredictable, unlike any form of property tax, and it raises big questions about redistribution between local government areas in Scotland. In the process, it reduces local government to agents of central Government.
It is also a deception to suggest that it is a 3p national income tax. An independent commission—it was set up by the previous Administration, but it was independent—said that it would be at least 5p. If the Government disagrees with Sir Peter Burt's conclusions and with all his expert advisers, it has an obligation to publish in detail the precise reasons why it believes that he got that calculation wrong. It will not, because he did not get it wrong.
The proposal is ill considered, expensive and ill judged. The Scottish National Party will rue the day that it introduces the Scottish national tax.
In the recent parliamentary recess, we learned that change is apparently what the Labour Party does. Nothing signifies the Labour Party's change as a force for social justice to its modern form more than its desire to defend the Tory-introduced council tax.
I will dwell briefly on the council tax that Labour wishes to defend, even if it cannot quite bring itself to mention it by name in the motion. That unfair tax hits people on low incomes the hardest, as it bears no relation to their ability to pay. We have heard much wailing and gnashing of teeth about vulnerable groups from the Labour members, but their continued support for the council tax betrays their shallow position. The council tax rose by 60 per cent under Labour's leadership during its time in government, and the most vulnerable and poorest people were the hardest hit.
The motion asks us to consider the merits of a local income tax, but the Parliament has already done so, on 21 June last year. Contrary to Patrick Harvie's assertion that there is not majority support in the Parliament for a local income tax, we agreed at that time that a local income tax that is based on the ability to pay is a fairer system of local taxation than the discredited and unfair council tax.
I politely remind the member that the motion for the debate to which he refers did not get an absolute majority and was passed only because a number of members abstained on the basis that, without knowing the detail, we have no way of judging whether the SNP's proposal would be fairer. I also remind the member that fairness is only one of many criteria.
Members can, of course, choose to abstain from any vote. On that day, we secured a majority, which I take to be our agreeing on a starting point, at least.
We know that, out in the country, the people of Scotland are considering the merits of a local income tax. The survey for the University of Strathclyde that my colleague Joe FitzPatrick mentioned showed that 88 per cent of people in Scotland believe that local services should be funded through a tax that is based on income rather than one that is based on property values. The reason is simple—people will be better off. The tax will be a particular help and relief to Scotland's poorest and most vulnerable households and it will make Scotland a fairer place in which to live.
We hear an alternative view from the Labour Party, but it is hard to take Labour seriously when it so recently increased the tax burden on hundreds of thousands of low-income citizens in Scotland. Gordon Brown should be ashamed of himself. The perverse tax hike for our poorest citizens—the very vulnerable groups that Labour members go on about—stands in stark contrast to the SNP Government's intention to make local taxation fairer.
If the Parliament unites around the proposal and a local income tax is introduced, it will be the single biggest social democratic, progressive change that can be made in Scotland under the powers that are available to us under the devolution settlement. Perhaps that is what the Labour Party fears the most about a local income tax—it represents the radical, progressive social change for which people thought they were voting in 1997, only to be sorely disappointed.
Will the member give way?
No, I am afraid I will not.
The SNP seeks to maximise the Parliament's powers because we believe that that is the way in which to improve people's lives throughout Scotland. We can radically change them for the better.
No form of taxation will ever be universally approved of, but we can make tax fairer. To me, doing so necessarily means having taxes that bear some relation to people's ability to pay. That means a local income tax and not the unfair council tax.
The SNP's plan to introduce an unfair and wholly bogus so-called local income tax is coming apart at the seams. Its many faults and failings have been well exemplified in the speeches that we have heard so far. In my remarks, I will focus on the fundamental issue of legal competence and whether the SNP's proposal could be translated into law with regard to the terms of the Scotland Act 1998.
Schedule 5 to the 1998 act reserves to Westminster the levying of taxes and excise duties. However, there is an exception, which is described as
"Local taxes to fund local authority expenditure (for example, council tax and non-domestic rates)."
It is self-evident that, for the purposes of interpreting the 1998 act, a tax is not a local tax just because it is called a local tax. It must, in substance, be a local tax by reference to its characteristics. Moreover, the fact that the proceeds of a tax are used to fund local authority expenditure does not make it a local tax. If that were the case, the phrase "local taxes" would have no meaning, nor would there be a need in the legislation for the descriptive examples of council tax and non-domestic rates.
If the SNP's view were correct, the Scottish Parliament could legislate for any tax as a so-called local tax just because it was used to fund local authority expenditure. On that flawed line of reasoning, the Parliament would have the power to introduce a Scottish national sales tax, excise duty, capital gains tax, inheritance tax and corporation tax. When one bears it in mind that the total expenditure of local authorities in Scotland is more than £11 billion, on the SNP's Government's flawed analysis there is ample scope for a range of national taxes to fund that expenditure. Patently, that cannot be right. It was most certainly not the Westminster Parliament's intention when it passed the 1998 act.
To be within the competence of the Scottish Parliament, a local tax has to have local characteristics. Such characteristics are wholly absent from the SNP's proposal. The rate of tax is to be set nationally, and the tax is to be assessed, collected and distributed nationally. By contrast, if we consider the council tax and non-domestic rates, although one is set locally and the other nationally, they both have strongly localised characteristics because they are based on the capital and rental values of properties, which are assessed locally, held on local valuation lists and collected locally by our councils.
The SNP Government takes umbrage when anyone has the temerity to suggest that its plans are fatally flawed. It should address the serious issue, but all that we get is bluster about interference from London. Frankly, that is not good enough. The SNP Government and the Parliament have a responsibility to conduct themselves within the parameters that were set by the Scotland Act 1998 and to legislate only when it is competent to do so. As a party, the SNP might want to kick over those traces, but as a Government it does not and cannot have that luxury if it is to act responsibly. The SNP's plan is not competent. It is not a local income tax but a Scottish national income tax. It is out of order.
We have heard many criticisms of the Scottish Government's proposed local income tax, not least because, as Mr McLetchie said, it is not a local income tax at all. There is wide agreement that the term is a misnomer. The tax is indeed a nat tax—a national income tax. I will focus on two key areas of the debate: first, the impact of the tax on families, with particular reference to younger people; and, secondly, its impact on the provision of key local services, particularly those for the vulnerable.
Labour has pointed out repeatedly that the proposal will hit families with two or more incomes. That relates to the question that Margo MacDonald posed earlier. I am talking not about families where those in employment are on extravagant incomes but about people who have jobs with average salaries. Both we and the Scottish Conservatives have released estimates of how much extra such families would have to pay. In many cases, it is hundreds of pounds, and I made similar findings about the impact of the Government's proposal on families in the north-east. It is as much of a fantasy to say that four out of five families will be better or no worse off as it is to say that the proposal will be popular throughout Scotland.
A great many families in today's Scotland have two or more incomes coming in, not because they are wealthy but because many young people are staying in, or moving back to, the parental home. The Scottish household survey figures for 2006 show that almost half of 20 to 24-year-olds were living at home. A huge number of people are affected. Many such households will pay more because the young people are working. At present, students are exempt from the council tax, but they will be subject to local income tax if they are in employment while studying.
I am afraid that young people are staying on in their parental home not purely because of their affection for their parents but because of an issue about which every party in the Parliament has expressed concern: the affordability of housing.
Will the member take an intervention?
Will the member give way?
I give way to Margo MacDonald.
Does the member agree that that is why there is so much concern about the income tax that will be levied on the young people to whom he refers?
The position of those young people is crucial. I take that point entirely.
Will the member take an intervention?
I am sorry. I must make progress.
Many young people are staying with their parents to save money so that they can get on to the housing ladder. They will find it more difficult to save under a local income tax because, although they are not required to pay council tax, they will be required to pay local income tax.
The second issue on which I want to focus is the huge, £800 million funding hole in the Scottish Government's proposals. The potential impact of that is of grave concern. Either the Scottish Government would have to admit that sufficient funds could not be raised on the basis of a 3p hike and that the rate would have to be much closer to the 5p that the Burt commission said would be necessary, or there would be even more swingeing cuts to local services of the kind that we have seen in Aberdeen, where the administration, which includes party colleagues of the cabinet secretary, has instigated £27 million of cuts that most affect people with disabilities and older people, as well as young people who have had their access to sporting facilities restricted. It has been suggested that the First Minister will intervene personally in the situation. I would be interested to hear the cabinet secretary enlighten us on that.
The reason why I found Jamie Hepburn's speech so perplexing is that I fear that the Scottish Government will not hesitate to axe vital local public services for its own political purposes in relation to this policy. It is clear that its sums do not add up and that the most vulnerable people in Scotland are likely to pay a high price for that.
The debate has shown that the nat tax proposals are neither progressive nor advantageous for hard-working Scottish families. The proposals are shambolic. On all counts, the proposals are not worthy of approval by the Parliament. That is the message that should come loud and clear from Parliament this morning.
On 21 June 2007, the Parliament stated its view that a local income tax based on the ability to pay was a much fairer system of local taxation than the discredited and unfair council tax. It is time to take the next step and move to the delivery of that parliamentary position. That is what the parties that wish the council tax to be abolished are trying to do.
Will the member take an intervention?
No thank you. I have only four minutes and I want to make my points clearly.
What we have from the Labour Party this morning is an attempt to turn back the clock and defend the council tax. It is pretending that the Parliament has not already taken a view, that all is rosy with the council tax and that the Scottish public support the council tax. Such pretence and self-delusion will not help my constituents in Glasgow or the people of the rest of Scotland.
In Glasgow, the council tax has increased by almost 51 per cent—by £408—since new Labour swept to power in the UK. It is hardly any wonder that 88 per cent of Scottish people favour taxation based on income for local services over the council tax.
Citizens Advice Scotland is equally keen to see the end of the council tax. In 2005, it called on the previous Labour and Liberal Democrat Executive to
"examine fully alternative means of local government taxation, and introduce a fairer and more cost effective system as soon as possible."
I am delighted that, free from the shackles of the partnership agreement with the backward-looking Labour Party, the Liberal Democrats can now play their part in answering the call of Citizens Advice Scotland, along with the SNP Government.
Labour is determined to persevere with the council tax. I will highlight three problems with the council tax that would be solved by the introduction of a local income tax based on the ability to pay.
The first problem is that we all know that the council tax discriminates against Scotland's pensioners and low-paid workers, because it takes no account of their ability to pay. A constituent of mine in Glasgow might have worked all their life to earn a modest salary and then find themselves retired and struggling on a fixed income. Labour does not seem to care about that. Is its advice to those pensioners that they should pay up or sell up? The SNP will treat our pensioners with a lot more respect than the Labour Party will. That is why, under a local income tax, the average pensioner couple will be £717 better off per year.
The second problem is that at some point Labour will have to face up to the desperate need for a revaluation of Scottish properties if it wants the council tax to have a future. Labour put off the pain of a property revaluation when it was in power, but it cannot possibly believe that in 2008 a property-based council tax should be predicated on the house prices of 1991. A Labour revaluation would be bad news: it would force an estimated 750,000 Scottish households to pay more. With a local income tax, the need for such a revaluation would disappear completely.
The third problem is the potential unknown. Thousands of houses in Glasgow alone, and many more throughout Scotland, have been banded too high. I have discovered a number of such properties in Glasgow, and in conjunction with SNP councillors I have managed to get them brought down to the correct banding. That means that the householder, quite rightly, gets refunded previous overpayments, which often date back several years. It also means that there is a direct loss of revenue to local authorities, which, quite rightly, have to make good those overpayments from their funds. A local income tax will prevent future injustices to home owners on that front and prevent local authorities being exposed to such financial liabilities because of inaccurate bandings.
The Scottish Government wishes to take forward a scheme of progressive local taxation based on the ability to pay. The Labour Party has no answer and no way of reforming the council tax. I would like to hear in its spokesperson's summing up what its alternative is.
Andy Kerr began the debate and appeared to endorse the concern that we should not replace one bad tax with another bad tax. That was an implicit acceptance that the council tax is a bad tax. The only question that we have to ask ourselves is, what are we going to do instead? I am sorry that no one from the Labour Party has answered that.
In responding to interventions, I suspect that John Swinney spent more time than he would have liked on answering the question whether the local income tax is local or national. The Scotland Act 1998 can clearly be read one way or another by people, depending on their agenda.
Rubbish!
I would like to continue, if I may. It is clear that a similar previous scheme was not considered incompetent by the previous Presiding Officer. I am sure that the current Presiding Officer is looking forward to making such a decision at some point.
Would the proposal reduce local democracy? That is the more important question. The attack on local income tax or salary tax should be that it is a bad policy. An attack that comes down to blocking tactics will be destined to fail, because it will amount to the UK authorities being seen to look north and say, "No, you cannae."
Tavish Scott and I are rarely on the same side of a debate. However, we were on the same side at least with regard to the amendment, if not with regard to his policy. Like others, Tavish Scott is concerned to ensure that councils continue to have the freedom to raise some of their revenue. I agree, but he failed to address the complex consequences, with which we are all familiar, to which his plan would give rise. We can all imagine a scenario whereby two work colleagues in a shop, hospital or office do the same job, but one of them knows that month after month there is less in their pay packet than in their colleague's, not because they work less hard or achieve less, but because they live on the other side of a local authority boundary.
I accept Mr Harvie's contention that there will always be complexity in proposals for changes in taxation. However, he was not terribly clear about how complex his proposal would be. I would be grateful if he would tell us.
The Green party has been clear for years that our policy is land value taxation—it was once the Liberal Democrats' policy, too.
However, my attack on Tavish Scott's proposal is that, although I support local flexibility, salaries are the wrong basis for local variability. A new Scottish salary tax would be in danger of becoming even more unpopular than the council tax—and quickly, too.
Derek Brownlee made the case that as long as local income tax remains on the Government agenda, reform will not happen. I say the opposite: reform must happen, and until those of us who accept the need for reform but want a property element to remain propose something clear and specific, it would be wrong to close down the argument.
Although we in the bad kids corner enjoyed the idea of a broad interpretation of Holyrood's tax-raising powers, David McLetchie's attack was on the competence of the proposal.
My greatest disappointment is that not one single Labour member had anything positive to say about what they would do instead of introducing a local income tax. If the council tax is a bad, unpopular tax, as Andy Kerr seems to accept, let us agree to my amendment, endorse the need for reform and spend the rest of our time debating the basis of that reform, subject to the criteria that my amendment lays out.
It is not difficult to understand why we are having this brief debate this morning. The leader of the Labour Party, after months of unrelenting bad publicity and personal attacks—some of them even coming from members of other parties—has had some joy of late in putting the First Minister on the spot over the detail of the Government's proposals for reforming the system of local taxation in this country.
As my colleague, Tavish Scott, made clear in his opening remarks, Liberal Democrats agree with some of the criticisms of the Government's approach. We have made it clear not only that any system of taxation should be based on the principle of fairness, and therefore the ability of an individual to pay, but that, in the case of local tax reform, the principle of local accountability is also essential. Frank McAveety and Peter Peacock made some valid points in that regard.
However, we entirely support the Government's initiation of a consultation on the future of local taxation. The consultation will conclude in July, and will enable the various parties' different approaches to be considered and tested before proposals are put to this Parliament for debate and, ultimately, a vote. That approach is sensible and constructive.
Does the member think that the Government's consultation document is a more substantial piece of work than the report of the Burt committee, which was commissioned by his party when it was in Government?
The consultation is a sensible and constructive approach and I look forward to seeing the Tories' contribution to it.
So, why are we having this debate today? What this debate has exposed is that Labour and the Tories will say and do anything to prop up the discredited council tax, even though they concede that it unfairly penalises pensioners and others on low fixed incomes. Many members have highlighted the complete lack of detail in Labour's motion. In the past, Labour talked about introducing new council tax bands. However, Gordon Brown's abolition of the 10p income tax rate has not only clobbered lower income families but done serious damage to Labour's taxation credentials, particularly when it comes to bands.
Rebanding has other consequences. To split the top and bottom bands, a revaluation would be required. It would then be inconceivable that the other bands would not be revalued—after all, council tax cannot forever be based on 1991 house prices. There are lessons to be learned from what has happened in Wales. When revaluation goes ahead, millions face an unfair rise in local tax bills—rises that are not linked at all to the ability to pay.
Will the member give way?
I am sorry, I do not have time.
The Tories, too, cling faithfully to the council tax. After their experiment with the hated poll tax, they believed that they had hit upon a vote winner, yet even the Tories have had to accept the serious flaws in the council tax. However, not surprisingly, their response to those flaws has been not progressive but opportunistic and inconsistent. First, we had promises of cuts in everyone's bills, with a larger rebate for pensioners, irrespective of their ability to pay. The Tories' next position was that only pensioners would benefit from their largesse. However, the Institute for Fiscal Studies exposed their plans as not benefiting the poorest pensioners at all, but instead targeting most resources on the richest 10 per cent of pensioners. The Tories' latest wheeze is to propose an across-the-board cut for all council tax payers, again despite the fact that that would target more resources on the more well off and would fail those who are least able to pay.
Labour is wedded to the council tax, despite Andy Kerr's suggestion that it is a bad tax, and the Tories refer to it as being "as fair a tax as you'll find". Richard Baker and Joe FitzPatrick raised the issue of tax and popularity, which are not natural bedfellows, but it is true to say that the council tax was recently voted the most hated tax. To do that, it had to fight off stiff opposition from fuel duty, which is no small feat in my part of the world.
The suggestion that the United Kingdom Labour Government would try to withhold £400 million that is currently paid to Scots through council tax benefit is nothing short of scandalous.
Liberal Democrats do not believe that the sticking-plaster solutions offered by Labour or the Tories are sufficient. Council tax cannot be fixed. It needs to be removed, and it should be replaced with a genuinely local income tax that is based on ability to pay.
Five weeks ago, the local income tax was a flagship policy of the SNP Government. However, after relentless attacks, lots of scrutiny and tough questions, it remains a dog with fleas that, I hope, we can get rid of as soon as possible.
The SNP is so desperate today that it has not gone for the usual last-ditch tactic of bringing in Mike Russell to give the closing speech in the hope that he will have some kind of defence.
Serious issues have been raised in relation to this national income tax, on the grounds of both its legality and substance.
David McLetchie succinctly outlined the arguments around the legality of the tax, but it is worth reading again the relevant line in schedule 5 to the Scotland Act 1998:
"Local taxes to fund local authority expenditure".
The word "Local" is critical.
On the matter of legality, do we not also have to consider the legitimacy that is conferred on elected representatives by voters? Voters voted against having a council tax.
The Scotland Act 1998 is particularly clear on the matter. Margo MacDonald might not like it, but that act was clearly passed, and it is the legislation that we have to work under.
Until today, the Government's only response to the question about the legality of the tax was from Mr MacAskill, who said in the press, "That's nonsense". Today, Mr Swinney has merely used a tautological argument, saying that the tax will be used to fund local services. We have heard no arguments whatsoever about how the word "local" fits in to the Government's analysis. The tax will not be set locally, the values will not be assessed locally and it will not be collected locally.
I issue a challenge to the Government. I am fairly sure that it will have taken legal advice in advance of its consultation. What did that legal advice say? The Government's enthusiasm for the tax has certainly gone down since the consultation started. Will the Government publish the legal advice that it was given on the national income tax? Let us see what its legal advisers said about the legality of the tax.
On the substance of the tax, we have heard a number of powerful arguments against the proposal. We have heard that it will penalise hard-working families, especially those with two earners in a household. We have published information over the past week or so that shows that the average two-income household that is currently paying the average council tax will be £289 a year worse off under the local income tax.
We have heard about the shortfall, which even the Government concedes will be at least £281 million. If it can find that money through savings—or cuts or whatever it wants to call them—it could equally use that money to fund a council tax discount, as outlined by Derek Brownlee.
We have heard powerful arguments about the loss of local authority autonomy. Currently, local authorities raise 20 per cent of their income. Under the Government's proposal, that would go down to zero. Do we want local government or do we simply want local administration? The national income tax will lead to local administration.
We have heard about the additional costs. The new tax would cost £30 million to collect and, according to the Burt report, would place a burden of an extra £28 million on businesses.
The Government's flagship policy has become a mess. It is unworkable, unfair and, most probably, unconstitutional. We do not need another tax on the Scotland that gets up in the morning. It is time to ditch the idea.
Margo MacDonald made a number of points. One that merits particular attention is her point about the impact of the current economic circumstances on the household budgets of families in Scotland. She is quite right to highlight the significant unease that exists in households about mortgage costs and other increased costs—Mr McArthur mentioned fuel and there has been clear information about rising food prices. That makes the Government's determination to freeze the council tax and give some respite to families facing financial difficulties all the more justifiable.
In the course of this debate, which has been interesting—I am sure we will have many more such debates—Tavish Scott has been criticised, particularly by the Conservatives, for engaging with this Government in discussions about the formulation of our local income tax policies.
Which is rich, coming from Derek Brownlee.
Mr Scott's comment from a sedentary position makes my point. As the Conservatives know full well, their party engaged in constructive discussions with the Government that were influential in changing our priorities in relation to other areas of our budget, and we secured from Parliament support for that budget. [Interruption.]
I hear Johann Lamont muttering, as usual, from the Labour benches. Perhaps if she had learned something from the approach of Mr Scott and Mr Brownlee, she might be in a slightly more influential position rather than someone who simply mutters from the left-hand side of the chamber.
This is a minority Government. We have to work with other people and engage in discussion and dialogue. That is why we have launched a consultation paper on local income tax to engage with others and seek their contributions. Patrick Harvie's amendment encourages the process of debate within Scotland. It is a welcome debate, if we bear in mind the fact that one of the critical issues in the election campaign was the level of dissatisfaction with the council tax. That was not a peripheral issue—it dominated a number of debates during the campaign.
Patrick Harvie and other members, including Tavish Scott, were right to say that the Labour Party, after eight years in government, during which it could have reformed the council tax, offered proposals in the election campaign that hardly lasted a moment after their launch. The proposals were not mainstays of Labour's arguments—it could not substantiate the changes. It is a bit rich for Labour members to come to Parliament and lecture me about bringing forward reform proposals when the Labour Party singularly failed to do so.
In interpreting what voters thought of what the Labour Party said, will the cabinet secretary accept that voters thought that the SNP's proposed local income tax would mean not that everybody in a family would pay but that only the person who paid the hated council tax would pay?
That requires a degree of psychological analysis that I do not have at my disposal today, but I will find out if there is any research.
On the subject of research, the Labour Party commissioned the Burt report, which has been much cited in this debate. The independent Burt committee came up with a proposition. I remember it vividly, because it was rubbished by the Administration before it was even published, and yet Labour cites it here.
Frank McAveety—who made, to be fair, a thoughtful speech in today's debate—made a point about the importance and sanctity of local accountability. The Burt committee said:
"The Committee have been unable to find any evidence in any of our research as to why accountability is enhanced by local government having its own tax-raising powers."
I do not agree with that point of view, but it was expressed by the Burt committee and cited by the Labour Party. Labour did not bring a roof tax forward, because it is bereft of ideas in this debate—that is why it is no longer in office.
One of the fundamental revelations in the debate was that Andy Kerr made it absolutely clear that the Labour Party in Scotland supports Her Majesty's Treasury's argument that council tax benefit should not be part of funding for local authority services in Scotland. There we have it: a £400 million cut in Scottish public services and finances initiated by the United Kingdom Government and enthusiastically supported by the Labour Party in Scotland. If that is what Labour members mean by standing up for Scotland, it is no wonder that they are sitting on the Opposition benches.
Mr Swinney's financial incompetence comes to the fore. I was not quoting the Treasury when I said that that money was not due to Scotland; I was quoting Sir Peter Burt and many other learned professors and commentators who all agreed at the outset of the debate—as the SNP knew fine well when it drafted its manifesto—that council tax benefit money was not going to come to Scotland. That money is paid to individual families, not to individual Governments—local authorities get that resource because of the profile of the communities within their areas.
I remind members of some of the comments that have been made about local taxation. First, I remind Patrick Harvie that it was John Swinney who said:
"Our conclusion is that there is no point in replacing one bad system with another".—[Official Report, 1 February 2006; c 22902.]
I contest that the local income tax system—which is not local; we all know that it is national—is a bad system.
The debate has been about many key issues. First, no-one—not one commentator, professor or journalist—will stand up the SNP's contention that the rate is somehow going to be 3p in the pound. As a result, we have the misleading myth from the SNP that, somehow, 90 per cent of Scots will benefit from the proposal. That is based on a flawed figure of 3p in the pound, which we know will not be the rate.
Many members spoke eloquently about local accountability. It is interesting that Mr Swinney said in 2006:
"Local communities would be in control of how much they wished to contribute to pay for local services."—[Official Report, 11 May 2006; c 25491.]
That will not be true under the SNP Administration's proposals.
Christine Grahame has said:
"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."—[Official Report, 11 May 2006; c 25515.]
However, under the nat tax people would pay the same. With regard to local accountability—I disagree with Sir Peter Burt's point—the SNP in opposition made the point that every member in the chamber bar SNP members is now making: the national income tax would remove one of the key primary responsibilities and accountabilities of our local authorities.
Other members, such as Margo MacDonald and Richard Baker, made interesting points. It is indeed working families in Scotland who will pay. When the SNP was trumpeting its alternative to the council tax, it did not point out with absolute clarity the following points: that more than three fifths of Scottish households have more than one earner; and that, as Richard Baker pointed out with regard to the household survey, in many homes there are young earners, all of whom will be individually liable for the nat tax. Nurses in training and students will be liable for the nat tax. That is not fair on them or on Scotland's hard-working families.
John Swinney talked about launching manifestos and documents—those did not last long. I squirmed when I saw him on "Newsnight" on the very day the local income tax proposals were launched. He could not answer any basic questions about the so-called flagship policy. He should not lecture me or anyone else about the issues.
With regard to David McLetchie's speech, the reason why Scotland should not have the tax is that it is a bad tax and a bad way to raise money for our local services. It would be interesting, as Gavin Brown said, to see the legal advice. I am happy to hear the cabinet secretary's view on that point. Will he publish the legal advice that he was given, so that we can understand where the Government is coming from and put the issue to bed? That would help us all to progress the debate.
Some members made points about pensioners. Those pensioners who pay income tax will continue to pay the nat tax; they will not get away with it. The SNP should not lecture the Labour Party about pensioners. We introduced the free national travel scheme and the free central heating scheme, and did much other work for pensioners. In 2007, we would have immediately halved pensioners' water charges, which would have had a real benefit straight away, and we would have subsequently removed the water charges in their entirety. That would have been real action to help pensioners, unlike the SNP bringing forward its flawed proposal. Our response is clear on the key issues that have been raised about pensioners.
Mr Swinney should make clear the proposal's legality by publishing the legal advice. With regard to local democracy, why does the SNP not live up to some of the words that it used when it was in opposition, instead of selling out today with a national income tax that will be levied from the centre? Other members have raised points about the administration of the system. Not only will the Treasury—presumably—raise the so-called local income tax, but other issues will be involved, such as taxes on second homes. What will we do about that? Who will collect the water rates? What is the burden on business for collecting the national income tax?
I return to the comments that I made in my opening speech. The proposal is ill-thought through, ill-judged and ill-measured. There has been no consideration of impact, and the consultation document is frankly embarrassing in its lack of detail. Publishing such a Government document is an abject response to a key debate in Scotland.
I will finish by considering some of the economic impacts. Jim Mather said in the debate about a Scottish service tax—which the SNP's proposal is essentially a version of—that it would cause a flight of the best brains out of Scotland. That is what the SNP's proposal will do. The economic impact will be high, given the adverse impact of the marginal rate of tax, and it will be bad for business and bad for the Scottish economy. The Confederation of British Industry says that it is misguided, and the Institute of Directors and the Federation of Small Businesses say that it is anti-business. With regard to the SNP's economic strategy, those organisations completely condemn the proposal. Business does not like it, the unions do not like it, local government does not like it and we do not like it. The Government should drop it.