Wee chat on a big issue
It will be a meeting of minds, certainly, but also a convocation of uncertainty.
This evening the Finance Secretary John Swinney is due to have a wee chat with his LibDem opposite number, Tavish Scott.
On the agenda? Whether or, more strictly, how to replace the council tax with a local income tax.
The political snags? Legion, as recounted previously here. In sum, they are these.
• SNP Ministers favour a fixed 3p tax on income for all councils; the LibDems want local variation.
• Even if they do a deal, that doesn’t add up to a majority in the Holyrood chamber: Labour and Tories will oppose; Greens favour taxing property
• Even if they surmount that, the Bill would have a rough ride in committee
• Even if the Bill gets through, UK Ministers say they would withhold council tax benefit if council tax is scrapped.
But, hey, welcome to minority government. Welcome to Scottish politics. This is perhaps particularly challenging but ministers have, so far, won more battles than they have lost, including the Budget.
However, there is another small matter to be considered. Should they win this battle? Is this the right policy for Scotland? Firstly, the upside.
• Local income tax is based, by definition, on ability to pay – with exceptions (see below)
• Ministers say most people would pay less – but that’s partly because they plan to peg the rate of LIT at 3p in the pound, by providing an extra £450m from the Scottish Government budget (also, see below)
• Those on low fixed incomes (such as pensioners) who pay their whack in council tax would gain
• Those with savings income would gain. That wouldn’t be taxed
• Those with income from stocks and shares would gain. Ditto. (See below)
• LIT isn’t the council tax – just as council tax wasn’t the poll tax
Next the downside:
• That “local tax cut” of £450m comes out of money for other services in Scotland
• Fixed rate LIT means there is no local accountability by councils for what they raise
• Higher income tax is, arguably, a disincentive for employment
• Lifting a tax on property might inflate the housing market
• LIT might be a problem for employers – especially if there’s a variable rate
• Those exceptions: no LIT on the seriously wealthy, those whose money comes from savings and stocks
• If council tax benefit is scrapped, that’s another £400m to find in Scotland
Finally, is it fair to remove council tax benefit? Yes and no. Again, by definition, LIT is designed to be fairer to those on low incomes.
It is designed to alleviate the very distress which council tax benefit addresses. Why should the benefit still be paid if the problem has gone? No pain, no gain, as the DWP might say.
Then again, council tax benefit is paid en bloc to local authorities, not to individual recipients.
It could, arguably, be viewed as an integral part of council finance, not a benefit.
It has in the past, on the margins, been varied according to the Barnett Formula, not simply individual need. That means, say ministers, it’s formulaic, not demand led.
So, why not use the Barnett Formula permanently to provide Scotland with continuing cash, post the abolition of council tax?
An intriguing debate. Join in, please. With the customary appeal – which will no doubt be ignored – for evidence-based contributions rather than partisan bickering.