Our correspondents in Scotland

This is the first in a regular series of articles by Scottish-based bloggers giving their thoughts about developments in Scottish politics. Bernard Salmon is a Lib Dem activist based in Inverness and blogs at thesoundofgunfire.blogspot.com.

Scottish First Minister Alex Salmond proved himself to be a wee sleekit cowerin’ tim’rous beastie last week.

His betrayal of the SNP pledge to abolish the council tax and replace with a so-called ‘local’ income tax (in reality a nationally-set tax of 3p in the pound) was supposedly motivated by the fact that the parliamentary arithmetic was against him. Although the Scottish Lib Dems supported a truly local income tax, the Tories and Labour resolutely opposed an end to the unfair council tax, while the Greens want a system of land value taxation.

But rather than stand by his principles and try and build support for ending the council tax, Salmond chose to throw in the towel. Make no mistake, this was a significant moment in Scottish politics, as voters will remember the SNP’s betrayal of one of its flagship policies from the 2007 elections. It proves what some of us have known for ages: that Salmond is a complete chancer and the SNP doesn’t really believe in anything except independence.

There have been a couple of effects from Salmond’s U-turn on council tax. Firstly, the spotlight has been thrown once again on the SNP’s other key pledge from 2007, a referendum on independence. Both Scottish Lib Dem leader Tavish Scott and Labour’s aptly-named leader Iain Gray (a man so lacking in charisma he makes Ed Balls look like Barack Obama) have noted that the Holyrood arithmetic is even more unfavourable to an independence referendum than council tax was and have urged him to drop the idea. In contrast, former Lib Dem leader Paddy Ashdown has urged the referendum be held as soon as possible.

But the other effect of the caving in over council tax has been to focus attention on the issue of local government finance. And here I think there is a real opportunity for the Scottish Lib Dems. Although we rightly believe that local income tax is a better alternative than the hated council tax, as it’s more related to ability to pay, I think we need to recognise it’s far from perfect. There are difficulties over its implementation, such as the £400 million sum which currently is spent on council tax benefit which would not be available under local income tax. It also doesn’t address the issue of local councils only being able to raise a tiny proportion of their funds locally.

So I think it’s time for some radical thinking on the subject. For a start, we should be highlighting our support for returning business rates to local control. But we should be going much further than that and giving local authorities much more control over their own finances.

I think there are two possible ways to do this. Firstly, rather than just focusing on replacing one tax with another, we should be pressing for local authorities to have the right to raise revenue from a defined range of local taxes. In addition to a local income tax, these could include a tourist tax (which might be a significant source of funds in somewhere like Edinburgh) or a local sales tax (which could particularly benefit somewhere like Glasgow). Local authorities could also be given the right to borrow or issue bonds for major capital projects.

The other option would be to introduce a Scotland-wide system of land value taxation as the main source of funds for local government. And to retain local control, this could be set up with a system of bands which local authorities could choose to adopt.

Neither of these ideas are particularly new. Indeed, the issue of giving local councils the ability to choose from a range of taxes is one I’ve raised with Tavish Scott personally. But now that introducing a local income tax won’t happen for the next few years at least, it’s the right time for us to look at them again.

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This entry was posted in Op-eds and Scotland.
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2 Comments

  • Hi Bernard, a couple of comments on some of the points raised:

    I’m in favour of bed taxes but you are looking at provoking the industry if you tried that one in the UK (see here for a post I did on this a while ago).

    Would you support the Scottish Government having the ability to issue debt as well as the councils? If not, why not?

    What safeguards would need to be in place if councils were allowed to issue debt? I’m not sure I would have complete confidence in a lot of cases that they wouldn’t make an expensive hash of it.

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