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Scottish Service Tax

– in the Scottish Parliament at 9:30 am on 30th March 2000.

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Photo of Patricia Ferguson Patricia Ferguson Labour 9:30 am, 30th March 2000

Good morning. The first item of business this morning is a Scottish Socialist party debate on motion S1M-700, in the name of Tommy Sheridan, on a Scottish service tax. There are two amendments to that motion. I call Tommy Sheridan to speak to and move the motion. You have 10 minutes, Mr Sheridan.

Photo of Tommy Sheridan Tommy Sheridan SSP 9:31 am, 30th March 2000

I am disappointed, given that the subject matter we will be discussing affects some 2.3 million Scots, at the turnout. I hope that we can encourage a debate that in future will inspire even more interest.

I am pleased and somewhat excited that we have the opportunity today to bring a motion to the Parliament that, from a socialist perspective, offers Scotland an opportunity significantly to redistribute the income of our country. Some members may be aware that, as an elected socialist, I stand for an independent, socialist Scotland in which our country's massive wealth and resources are commonly and collectively owned and controlled for the benefit of all our citizens.

Currently, society is horribly divided. Obscene wealth coexists with shameful poverty. Too many pensioners are poor; too many workers are low paid; too many children live in poverty. As a Scottish Socialist party representative, I stand firmly for a complete transformation of our society. My vision is of a democratic, socialist society based on provision for need and the promotion of human solidarity and co-operation, not the continuation of the creed of greed and the worship of profit.

The problem is the limitation of the Parliament. Unfortunately, instead of the adult Parliament that was envisaged by the Scottish Constitutional Convention, whereby Scotland would raise and retain all of its taxes, we have a sort of parental guidance Parliament that has to seek permission from its adult cousin, Westminster, if it wishes to spend more than its allotted block.

The beauty of the Scottish service tax proposal that is to be discussed this morning is that it would breach the restrictive fence. We have managed to get under the wire, so to speak, in that we have been able to make a proposal that concretely and clearly promotes progressive taxation and the redistribution of wealth, despite the restrictions of the Scotland Act 1998.

Many in Scotland say that they support income and wealth redistribution. Indeed, that used to be a cornerstone of the Labour party before its Blairite conversion to the market and to the worshipping of wealth and profit. Today, despite the restrictions and despite the limited resources available to our small party, we are able to present an academically researched proposal that would redistribute income in Scotland and drag the principle of progressive taxation and redistribution back on to the political agenda, where it should be.

Let us be clear: the council tax is deeply unpopular. It is regressive; it is extremely costly to administer and collect; and its associated rebate system is prohibitively complex. What does the Institute for Fiscal Studies say about it? Its figures illustrate that the richest 10 per cent in society pay a lower fraction of their income on council tax than the poorest 10 per cent. The richest 10 per cent pay 1.22 per cent of their income; the poorest 10 per cent pay 7.5 per cent of their income. Even after benefits are taken into account, the poorest tenth still pay 1.86 per cent. They pay more in council tax than the richest tenth.

In the past 25 years, there has been a massive shift in wealth and income from the poor to the rich. It is shameful, but the wealthy not only pay less in taxation generally, but pay less as a proportion of their income than the poor. Wealth has not trickled down over the past 25 years of increased growth. The rich have merely got richer while the poor have, unfortunately, got poorer.

The richest 1,000 list in The Sunday Times recently recorded a staggering statistic: over the past 12 months, the richest 1,000 in the United Kingdom increased their wealth by 27 per cent to a combined total of £146 billion. I repeat: £146 billion among 1,000. In this Parliament, we are trying to meet the needs of 5 million Scots and our total budget is £16 billion. The richest 20 people in Britain have a combined wealth of £14 billion; they have a combined wealth that is almost the same as the budget for this Parliament, which has to cater for 5 million people. It is no wonder that I am a socialist. We have to try to cater for essential services in health, education and local government, and we have to look after our children and our elderly, yet our budget is less than the combined wealth of the top 20 people in the country.

The wealthy are not paying enough in either income taxes or local taxes. With the Scottish service tax, we want to start to change that in Scotland. The Scottish service tax would replace the council tax. It would be levied on each individual according to their income; it would therefore be related to their ability to pay. It would be set nationally, collected by the Inland Revenue via the pay-as-you-earn system and then distributed to each local authority according to a much improved distribution formula that must be worked out in conjunction with the local authority, trade unions, the Convention of Scottish Local Authorities and community groups.

In return for the loss of the fiscal control that the council tax system offers—even though it is a very low level of control in the setting of the council tax—each local authority would be allowed, under the Scottish service tax proposal, to set its non-domestic rate and to keep its non-domestic rates. If such a system were in place in Glasgow, given the amount of non-domestic rates we collect, the city would be £64 million better off.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

The role of redistribution—redistribution is a good aim—should fall to national government rather than to local government, so does Mr Sheridan agree that his proposals are suboptimal to an extent? If every other country in Europe can do it through the national Government, that is what we should focus on in Scotland. We cannot do so because of the limited powers of this Parliament.

Photo of Tommy Sheridan Tommy Sheridan SSP

Andrew Wilson will be aware that the Scottish Socialist party's position is for an independent, socialist Scotland. We will fight tenaciously for that at the next election, but today I am addressing what the Parliament can do with its present limited powers. I agree that redistribution of wealth and income is the role of national Government through national taxation and policy, but we do not have power over that just now. We have power over local taxation, so let us have a progressive form of local taxation that redistributes income.

The return of control of non-domestic rates to local authorities in no way compensates for the 20 years of damage caused by continual underfunding and loss of fiscal control to central Government, but at least the Scottish service tax would be better for local authorities than the council tax.

The Scottish service tax would be cheaper to collect and administer than the council tax. It would also be progressive and redistributive. All 800,000 people in Scotland whose income is below £10,000 a year would be exempt. The 560,000 Scots whose pay is less than £15,000 a year would benefit automatically. An average couple with an income of, say, £17,500 per year, who live in a band C property—never mind the average band D property—would pay less under a Scottish service tax than under council tax. In other words, the disposable income—the key to growth and generation in our economy—of the poor and of the overwhelming majority of people in Scotland would be increased by the Scottish service tax.

High earners and the wealthy, of course, would pay more. MPs and MSPs like us would pay on average £1,000 more a year. My fiancée and I would pay £1,288 more under the Scottish service tax, and why not? We are well paid—overpaid—and it is about time we contributed more to local education, police, fire and cleansing services. I hope that other MSPs will endorse that view.

Why, under the council tax, does Scotland's richest individual—in the shape of Mr Souter, who seems to have more money than sense—with a personal fortune of some £565 million and an income last year of £650,000, pay £1,516 in council tax for his £1 million mansion in Perthshire? The richest man in Scotland pays barely twice in council tax what the low-paid council worker in Glasgow pays for a rundown tenement. If that is defensible, I would like to hear the defence.

Under our proposal, the wealthy would pay more. Instead of paying £1,516 a year, the likes of Mr Souter would pay £82,000 a year. He would have to struggle by, trying to make ends meet on his remaining income of £568,000 a year. We have to strike a blow for greater equality and stand up for the principles of progressive taxation and income redistribution, for the sake of our pensioners and our low-paid workers. For the ordinary people of Scotland, it is time to drag progressive taxation and income redistribution back on to the centre stage. If the Executive will not agree to a wholesale review of local government finance, I hope that it will support a further review of our proposal by the Local Government Committee.

I move,

That the Parliament supports the principle of progressive taxation on social, economic and moral grounds and, in pursuit of a redistributive and progressive system of local taxation, agrees to refer the Scottish Service Tax proposal to the Local Government Committee for inclusion in any further review it may conduct into local government finance.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat 9:44 am, 30th March 2000

My background in politics lies in local politics and local government. Indeed, I was first involved in local politics when the Layfield report, which is now over 25 years old, seemed fresh and new. I supported strongly much of what was said by the Layfield commission, and I campaigned in the 1980s during the rates revaluation crisis and, later, the campaign against the poll tax. I know the problems of local taxation systems and I do not pretend that the present council tax is perfect.

Although I would support a local income tax—which, as Tommy Sheridan and I were discussing before the debate began, is the policy of the Liberal Democrats—I would not support the Scottish socialist service tax. I shall explain why.

About 80 per cent of council expenditure is currently raised by central Government, which means that only 20 per cent is raised locally. Although shifting the balance has proved very difficult, it is desirable—but it should not be shifted to the extent of Tommy Sheridan's solution of 100 per cent central Government funding. We should increase the level of local control. Equally, such a shift in balance should not significantly change the total tax burden on individuals.

A person who pays more to local government should pay less to central Government. Under Tommy Sheridan's proposals, people would pay all their current central Government taxes to Gordon Brown and the Exchequer and, on top of that, pay a Scottish service tax to the Scottish Parliament. The Layfield commission suggested a local income tax with a reduction in UK Government income tax to balance out the burden on the individual locally.

For those reasons, I believe that the Scottish service tax is fatally flawed; it is an old-style, centralist, socialist solution which takes power away from local authorities and local people and centralises it. It is difficult for me to say this in relation to Tommy Sheridan, but his proposal is a return to the bad old days of centralising Thatcherism as it transfers power to central Government.

Photo of Tommy Sheridan Tommy Sheridan SSP

The minister talks about centralisation, but he has failed to respond to my point that, under my proposals, local authorities would be able to control non-domestic rates.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

I am talking about Mr Sheridan's service tax. Having examined the figures, I have come to the conclusion that it is a centralising measure and none of his comments has rebutted that view.

Under Mr Sheridan's proposals, central Government—in this case the Scottish Parliament—not local government, would set the service tax and distribute the revenue raised from it. In his speech, Tommy waxed lyrical about distribution and redistribution, but that point has not appeared in the document produced by the University of Paisley faculty of business or in his comments about the service tax in the press. One of the most sensitive political issues is how central Government distributes taxes to local government. Perhaps he will address that in his concluding remarks.

The Layfield commission suggested a local income tax with local variable rates of tax levied on the basis of the taxpayer's local place of residence. The Scottish socialist service tax would have national rates with national earning bands and would be fixed and distributed nationally. Claiming that it is a local tax is pure fantasy; it centralises all local government funding. At a stroke, it would remove a crucial—many would say the crucial—element of accountability between local councils and the electorate.

The tax has further fatal flaws. It would create a fortress Scotland. Let there be no doubt: it would have major economic consequences. The report from the University of Paisley faculty of business, which develops the tax proposals, mentions the phrase "fiscal flight". That is the wrong term; "employment exodus" would be more accurate.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

Not at the moment.

We want Scotland to play a growing and dynamic role in the global economy. There should be no barriers, no blocks, no backward thinking, no battering of business. We want high-quality, highly paid, high-added-value jobs—which the Scottish service tax would kill stone dead.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

In a second.

I do not want to exaggerate this; I do not believe that every new prospect or job would disappear, but most of them would.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I am gravely disappointed with the minister's tone. Although this tax can be legitimately criticised, employing the same sort of nonsense scare tactics that we used to hear from the Conservatives about the referendum goes down a very dangerous road. Let us have a decent debate, not this nonsense about flight.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

I would agree, if what we were talking about was a marginal or small change. The Liberal Democrats have suggested minor changes to the taxation system and the people voted for the Scottish Parliament to have the power to vote for a 3p variation in income tax, up or down. Tommy Sheridan's proposal is quite different. It would mean a massive increase over and above central taxation in taxes for some people.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

Tommy Sheridan agrees that that should happen. For many individuals, his proposal would mean an increase in taxation of 15p in the pound.

If the tax was imposed on top of existing central Government taxes, inward investment would collapse. Existing companies would choose to expand elsewhere and our small companies, which are the engine room of our economy, would take a hammering. The Scottish Executive's target of starting 100,000 new companies would simply not be achievable. In short, there would be a new brain drain of our best academics, inventors, investors and entrepreneurs. Very few would happily pay and stay.

That is not the new politics; it is not the new modern, competitive Scotland that we want to develop. None of us in the Scottish Executive wants to see the rich getting richer at the expense of the poor getting poorer. That is why we have policies to tackle exclusion, deprivation, disadvantage and poverty. However, it is also why we have policies to increase prosperity and to create jobs, opportunity and growth. That is why I ask members to reject the Scottish service tax. Local government finance is a significant and important issue, but it is complex and needs proper consideration and consultation. It is for that reason that I firmly believe that the Local Government Committee of this Parliament is the right place for the issues to be considered further.

I move amendment S1M-700.2, to leave out from "and, in" to end and insert:

"and welcomes the Executive's commitment in A Partnership for Scotland to keep under review wider issues of local government finance and notes that these matters fall within the remit of the Local Government Committee."

Photo of Andrew Wilson Andrew Wilson Scottish National Party 9:52 am, 30th March 2000

I congratulate the convener of the Scottish Socialist party, Tommy Sheridan, on his party's first debate in the Scottish Parliament. The party's proposals are a serious matter for debate and should be treated as such.

It is my general contention that issues such as the fairness of taxation and how we fund public services, redistribute wealth and tackle poverty and inequality should not be backed into inappropriate corners or burdened on local government. They are issues that a normal Parliament should address on behalf of a normal country. We should not lose sight of that simple fact.

The way in which the nation's wealth is allocated should be progressive and fair. We should target goals such as improved public services, reduced inequality and, of course, growth in the economy and jobs. The Scottish Socialist party's proposals target only one of those goals, which is why I believe it should not be addressed as a national tax. It is critical that the redistributive burden should not be placed on local government.

Tommy Sheridan's contribution should be welcomed as part of a debate, which we should have in Scotland, about how we make our tax system fair and progressive and how we allocate the nation's wealth to much-needed public services. I am disappointed that the Executive has sought to go down the road of nonsense scare tactics. When, during the elections to this Parliament, we proposed a freeze on income tax—with which Mr Stephen's party at Westminster agrees—people were led to believe that the earth would end if the proposal went through. Gordon Brown said that a quarter of a million jobs would be lost from Scotland. That was nonsense, as scare tactics on tax always are. This is a question of public choice: are we willing to allocate the nation's wealth to public services or not?

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I will take one in a moment.

The question is, are we willing to allocate the resources and how do we go about doing that. That is a legitimate debate, but it is not helped by nonsense scare tactics.

The right-wing regressiveness of the Executive's party in London, which is targeting a starting rate of 20p for the basic rate of income tax, should be condemned by Nicol Stephen on behalf of the Liberal Democrats. I will be interested to hear in the Executive's summation whether it goes along with the approach taken in London. The key point that we try to make in all debates is that we have no option but to go along with the general approach in London, which is a shift from direct to indirect taxation—from fair to unfair taxation—combined with a lack of funding for Scottish public services.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

As ever, I am more than willing to hear from the Minister for Communities.

Photo of Wendy Alexander Wendy Alexander Labour

Talking of right-wing policies, the member may want to reflect on why the Scottish National party was unprepared to support the windfall tax, which has raised £5 billion and contributed to a reduction of 70 per cent in youth unemployment and 40 per cent in long-term adult unemployment in Scotland. Why did the SNP not regard that as a measure of progressive taxation?

Photo of Andrew Wilson Andrew Wilson Scottish National Party

A range of issues surround the Labour proposals. Our key concern over the windfall tax approach does not relate to the tax itself, but to the predicating of funding on a one-off tax, which we do not think is sustainable in the long term. The tax itself is not something that I am particularly het up about.

Today's debate, though, is focused on the Scottish service tax, and I would like to raise the SNP's concerns about it.

The Deputy Minister for Enterprise and Lifelong Learning mentioned the breaking of the link between the citizen and the council. That is a grave problem, and I do not think that the restoration of business rates is the route to follow. Business rates place an undue burden on small companies and, in a way, raising them could be seen as regressive, given that so many of the people who are affected by them are at the lower end of the business scale. I do not believe that it is democratic for the one link between the citizen and the council to be made via a business—it should be directly with the citizen.

Perhaps more important, the tax in no way tackles the crisis in local government funding; it raises an extra £100 million—not a nightmare scenario, minister. That sum in no way bridges the cut included in this year's settlement, which the Convention of Scottish Local Authorities has analysed. The cut is more than twice that amount, so the tax does not tackle the problem of service funding. As the minister correctly said, there is no clear method of distribution to the poorest areas.

I would like to cover some of the anomalies of the tax. I do not do so lightly—there are problems with the structure of any tax. Is it fair, for example, that a couple on average earnings, living in a bought former council flat in Glasgow, would pay £916 in service tax, but would have paid only £729 in band A council tax last year? For such a couple, that would be an increase of 25 per cent. It is therefore clear that, while the aims behind the service tax may be just, the actuality of its structure is not fair and does not favour the poorest earners.

Is it fair that four young gentlemen, newly graduated from Glasgow University, doing part-time bar work and earning £11,000 a year each, would pay less towards the council's services than the pensioner living next door in the same building, whose revenue is £15,000 a year? The pensioner's household income would be 65 per cent less than the one next to him, but his tax would be 26 per cent more under the SSP's proposals.

I think Mr Sheridan will take on board that there is still work to be done on the service tax proposal. It is not something that I would dismiss out of hand, but something that could be part of a normal, mature debate which this Parliament and this country need to have with regard to how we allocate wealth to Scottish public services.

We believe that local government finance is a much bigger question: of how we fund public services at a local level; of how we make the taxation system fair; and, most important, of how we make local councils accountable. The question should be addressed through an independent review. That is something which COSLA supports, which the Local Government Committee supports and which my party included in its manifesto.

Our amendment enshrines the principles of progressiveness and fairness that the Scottish Socialist party's motion proposes, but suggests that that could be made part of a more general independent review. I urge the chamber to support our amendment.

I move amendment S1M-700.1, to leave out from "on social" to end and insert:

"and calls for an independent review of local government finance to take account of this principle along with the need to support adequately local government services and local democratic accountability."

Photo of Keith Harding Keith Harding Conservative 9:58 am, 30th March 2000

In a public meeting with Tommy Sheridan some weeks ago, I actually agreed with him—and jokingly said that his political career was over. I can assure him that that will not happen again today.

The Scottish Conservatives stand for and believe in an enterprise economy, which is the best way to ensure the prosperity of our people and high-quality public services. We are determined to ensure that people and businesses in Scotland are not penalised by having to pay higher taxes than those elsewhere in the United Kingdom. Like the tartan tax, the Scottish service tax would make Scots pay a higher rate of income tax than people residing in other parts of the United Kingdom.

I will show how damaging the proposed tax could be. The tartan tax would make the average Scottish family around £250 a year worse off; the proposal before us today would be even worse for many families. Unlike the maximum rise of 3p in the basic rate of income tax, which applies to the tartan tax, there is no ceiling for the Scottish service tax. Mr Sheridan makes much of the 800,000 people who would be exempt, but nearly 400,000 people are already exempt from council tax, and almost a further 200,000 people receive partial council tax benefit.

The service tax proposal would destroy the local basis for funding councils. It is anti-democratic and would reduce accountability. By allowing the Scottish Executive to determine taxes for local services, councils would have no autonomy—apart from determining spending priorities. Much of their autonomy has already been eroded by ring-fencing and hypothecation of grant settlements by the Scottish Executive. That runs contrary to the principle of subsidiarity and reduces the already limited accountability of local government.

Mr Sheridan's proposal would mean, in effect, that people would pay income tax twice: a Scotland-wide levy according to income and a UK-wide income tax levy. Local authorities already get approximately 80 per cent of their funding from national sources via the Exchequer as a block grant from the Scottish Executive. Indeed, 50 per cent of their expenditure is accounted for by the revenue support grant that is paid for from Government taxes, the most important of which is income tax.

The SSP's proposal discusses only the effect of its tax in relation to council tax. It takes no account of the other progressive taxes that people pay that contribute to local government services. The argument about the proportion of income paid in council tax by households in different income deciles is spurious as it takes no account of the total contribution from gross income to council services.

Photo of Tommy Sheridan Tommy Sheridan SSP

Will Mr Harding tell us what the other progressive taxes are?

Photo of Keith Harding Keith Harding Conservative

I am sure that Mr Sheridan is as well aware of them as I am so I will not waste time on that point. I have only five minutes in which to speak.

People would move to avoid the tax. The introduction of a Scottish service tax would have serious adverse disincentive effects on the Scottish economy as compared to the rest of the UK. An exodus of those who were required to pay much higher rates of tax would reduce the tax take and place the burden firmly on middle and low-income earners, making the tax regressive.

The UK is a complete monetary union. People have the power to order their tax affairs to suit their needs without penalty and it would be impossible to force people to stay in Scotland to pay additional Scottish taxes for local services that were being paid for by a different system elsewhere in the UK. In Scotland, the average levy paid by a household for services, through the council tax, is well above the rest of the UK.

Even in London, the levy is much lower, when we compare bands of charges. That is not a serious problem because the tax is levied on a stationary asset: housing. If the tax is levied on something that is mobile—for example, people—taxpayers will vote with their feet, as they already do in the United States of America, where state Governments are forced to avoid setting taxes too far out of line with their neighbours.

Once variation is allowed across the tax bands, the difference can be immense—much greater than house price changes—and there is an obvious incentive for relocation. The variations according to council tax band are also substantial, but houses are not mobile and the higher levels of council tax in Scotland are incorporated in the lower market price of the housing.

The proposal is ill considered, as is Mr Sheridan's proposal for a minimum wage of £8 an hour. The Scottish service tax would make local services reliant on an inefficient tax base, which would create distortion and produce poverty and unemployment traps for those on benefits—precisely the opposite effect of what the chancellor claims he is aiming for. It would also seriously distort the savings industry and penalise the Scottish financial sector and capital markets.

I cannot support the proposal. If Mr Sheridan is serious about implementing his measures, he should look to countries such as Cuba and North Korea, where his proposal would be received in a more favourable light—but it is not for Scotland.

Photo of Des McNulty Des McNulty Labour 10:04 am, 30th March 2000

I was interested to hear Andrew Wilson commending Mr Sheridan. To an extent, I agree with Andrew Wilson: if a proposal is brought before the Parliament, it should be considered seriously.

Tommy Sheridan has put forward a detailed set of proposals and has provided additional information to go along with them. It is interesting that Andrew Wilson is prepared to endorse some of the principles behind Tommy's proposal whereas, in practice, he has refused, week after week, to provide us with the same level of detail of information on the economic proposals of the SNP. If he accepts the logic of his own position, I would welcome a debate on the SNP's economic and tax proposals in more detail than he has been prepared to give us up to now.

I accept that Tommy Sheridan's proposal should be considered seriously. There are a number of different strands within it. There is a commitment to social redistribution, which seems to be the focus of what Tommy is seeking to achieve, and the proposal argues that there should be significantly increased investment in social infrastructure. I recognise those as the premises from which Tommy is starting out. There are, however, aspects of the proposal that go against those principles, on which I would like to focus.

First, it is clear that the implementation of this proposal would result in a much more intense process of means-testing right across the system. The basic premise of the Scottish service tax is much more interventionist in making assessments, and would set wage limits that would be part of the tax banding system. The report on which this proposal is based makes certain assumptions about the distribution of unearned income relative to the UK as a whole, about income banding and about the Treasury's behaviour. Those issues are unknowns and are not justifiable. Any implementation of the proposal that Tommy Sheridan has suggested would be dependent on a fusion of the welfare and taxation systems, creating major administrative burdens.

Photo of Des McNulty Des McNulty Labour

Sorry, I would like to outline the three issues that I have identified as problems. I shall take an intervention afterwards.

The second issue that stands out clearly is the proposed reduction of local accountability. The fact that the tax would be paid to the Parliament, which would decide the bases for its redistribution, removes from local authorities even that vestige of financial control over tax levels in their local areas that currently exists. In the context of a revision of the council tax system, or whatever system of finance is in operation in Scotland, I would like to allow local authorities greater control over the gathering of taxes. Tommy Sheridan's proposal would involve a reduction of local accountability for taxation.

Thirdly, the proposal would involve the removal of the explicit property tax element. That idea was introduced by the Conservatives, when they brought in the poll tax. Obviously, Tommy wants to achieve a very different purpose from the poll tax.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

Does Des McNulty believe that this proposal is fairer or less fair than the poll tax?

Photo of Des McNulty Des McNulty Labour

I assume that Tommy Sheridan's intention is to take a broadly redistributive approach, whereas the intention of the poll tax was to move the tax burden on to poorer people. The real issue is whether the Scottish service tax would achieve the desired redistribution.

Photo of David Davidson David Davidson Conservative

Would Mr McNulty not agree that the Labour party's policy of indirect taxation has an greater effect on the low paid than on others, and that the Chancellor of the Exchequer has moved way beyond where the Conservatives ever intended to go?

Photo of Des McNulty Des McNulty Labour

Frankly, that is rubbish. The move to a single system of gathering taxation, as is proposed, and the removal of the property tax element represent a distinct shift in the balance of taxation. I believe in the retention of property tax as an important element in the overall tax package; as such, we should seek to maintain it.

Photo of Patricia Ferguson Patricia Ferguson Labour

We now move into the open part of the debate. As time for the debate is limited, I ask members to adhere as much as they can to the four-minute limit for speeches. I apologise in advance to those members whom I will be unable to call.

Photo of Sandra White Sandra White Scottish National Party 10:10 am, 30th March 2000

I congratulate Tommy Sheridan for securing this important debate, which I welcome, and on the hard work that he has obviously put into the debate.

The SNP has always advocated fair and progressive taxation. We have also consistently argued for a full review of local government finance, as everyone who has read our leaflets will know. I hope that they support that review, which is also supported by COSLA and by local government.

While I admire Tommy Sheridan's stance—I believe that I know where he is coming from—my party and I have some concerns about his proposals. I will not scaremonger in the same way as Labour and Tory speakers have done, but I have two concerns that I ask him to address later.

First, the proposal to raise moneys for local services through a business rate puts a heavy burden on local businesses and on small businesses in particular. In my view, there are already enough obstacles facing local businesses and a business rate would be one obstacle too many. We are trying to encourage local businesses, but such a tax would discourage and hinder them.

Other speakers, including Andrew Wilson, have mentioned my second important point, which is that the proposals sever the link between the public and local councils and do not provide for accountability. That worries me, as does the embracing of a more centralised form of government, which is non-democratic. I ask Tommy Sheridan to address that point in his closing speech. Local councils must be democratically accountable to local people if they are delivering local services.

The way in which local government finance is delivered goes to the very heart of what people expect from local government, and it needs desperately to be reviewed. I think that we all agree on that point. People want and expect good services, but they need to know exactly what services they are paying for and exactly what they will receive from those services.

Tommy Sheridan's proposals are commendable and pave the way for future debate on local government finance. I ask him to support, if he is able to, the proposal in the SNP amendment to have a full review of local government finance, which is necessary to return local government to the people of Scotland.

Photo of Kate Maclean Kate Maclean Labour 10:13 am, 30th March 2000

I read "Time for redistribution of income: the case for a Scottish Service Tax" last night in my hotel room, which is a bit of a sad admission to make. The document is worthy of further examination.

Today's debate is about how we fund local services, on which I hope members will concentrate. No one in this chamber should disagree with the first three points made in the document, which are:

"This research report identifies the need for higher public investment . . .

The current system of local government finance is unable to deliver" services effectively, and

"The devolved powers for Scotland offer new opportunities for addressing these concerns innovatively."

Before reorganisation, there was a difference of approximately 10 per cent between the highest and lowest council taxes in Scotland, based on local spending decisions. That difference is now around 130 per cent, based on nothing more than a seriously flawed distribution formula.

We must have a serious debate in this chamber, probably preceded by work in committees, on what we want from local government, how much that should cost realistically and how we will pay for those services. Although it is not the position of the Executive, it is well known that I support an independent review of the way in which local government services are financed. I have no doubt that a local income tax would be examined in that review, along with other options.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

Given what she has just said, will Kate MacLean be voting for our amendment, which says just that?

Photo of Kate Maclean Kate Maclean Labour

I will address Andrew Wilson's question later.

The review would include an examination of the method of collection and distribution of non-domestic rates. However, I do not support the system that Tommy Sheridan suggested, whereby collection and distribution of non-domestic rates would make up the difference between central grant and expenditure, because I believe that that would detract from local accountability, which ought to be increased rather than diminished.

My concerns are not addressed either by the motion or by the two amendments. Nicol Stephen's amendment says

"that these matters fall within the remit of the Local Government Committee."

If that can be interpreted as suggesting that the matter be remitted to the Local Government Committee, I will support Nicol Stephen's amendment, as the committees lend themselves well to that type of examination, even though I am tempted to support Andrew Wilson's amendment.

Photo of Donald Gorrie Donald Gorrie Liberal Democrat 10:16 am, 30th March 2000

This debate shows the merits of proportional representation, which has brought into the Parliament representatives of two smaller parties. Whatever one may think of their ideas, their presence enriches the whole of Scottish democratic life. It is an encouragement for those of us who would like proportional representation in local government, which could greatly benefit from the same richness and diversity.

I welcome the fact that Tommy Sheridan has put forward a constructive idea. The Liberal Democrats and other parties sometimes find considerable difficulty with the irresponsible populist agitating of the Scottish Socialist party. All parties have their defects, and the Scottish Socialist party is not without them. On this occasion, however, Tommy Sheridan has produced a constructive idea, which is welcome, as is the motion that we shall hear Robin Harper propose later this morning.

I regret the content of the Executive amendment and the tone of the minister's speech, which seemed to me redolent of the old politics that we were supposed to be getting away from. Mr Sheridan's motion does not suggest that we have to embrace his idea, but merely that it be put on the table with other ideas. I do not see why we should not accept it.

The service tax, as the minister said, has serious defects. It is a national tax and not a local one, and the redistribution is extreme. However, it at least produces interesting ideas, such as banding, and addresses the question of a progressive and redistributive tax. We must consider how we can achieve more redistribution than we do at the moment, without destroying the whole fabric of society, as the minister suggested that we might do. The current tax system is not progressive enough, and we should make local and national taxation more progressive. Along with my Liberal Democrat and SNP colleagues, I voted at Westminster against the 1p reduction in income tax, because that seemed to lead us in the wrong direction.

The issue is important and Tommy Sheridan's idea is welcome. For years, the Liberal Democrats have argued for a local income tax that is determined locally but collected through the national machinery. There are various ways of doing that and I am sure that other people can improve on our suggestions. That is an important way of producing a reasonably progressive tax and of giving more power to the local community. If the local community has a decent voting system, it can vote out people who raise or reduce the tax too much, and more tax will be in the hands of the local community. That is anathema to the centralisers in Government circles throughout the world, who have the power and want to keep it.

A local income tax is important, and the first stage towards getting it is to have an independent review of local government finance, which virtually all of us in this chamber, apart from a few ministers, are committed to. By hook or by crook we wish to get it. Before someone intervenes to ask how I will vote, it will depend on the order in which the motion and amendments are taken. However, I could not vote against any proposition that called for an independent review of local taxation, because that is a fundamental first stage. We must put all the ideas on the table, such as a local income tax, Tommy Sheridan's idea and any idea from any party, and we should sort this matter out. That is my message to the Executive.

Photo of Johann Lamont Johann Lamont Labour 10:20 am, 30th March 2000

I am happy to be part of any debate that reasserts the importance of fair and progressive taxation and the importance of local government services. We all know that the many debates on what Scotland needs, generated as much by the Tories as by anyone else in the chamber, have acknowledged the efficiency and importance of public expenditure. Whether road building, railways, schools or health, we know that the most efficient way to deliver those services is to do so collectively, and we will all benefit from them.

One consequence of the poll tax debacle was that the understanding that the poll tax was unfair somehow collapsed into a view that tax was unfair. I am happy to be part of any debate that reasserts the importance of taxation as an enabler for our society, rather than something to be feared.

We have to look at what is being said in local government. There is a consensus across the country about local government finance issues, but I say to Tommy Sheridan that those views do not concentrate on the problems of the council tax formula. They concentrate far more on the level of local government resourcing and the ability of local government to determine its own priorities.

It is important that at some stage the Executive acknowledges the almost universal demand for a review of local government finance. I have said publicly that I am in favour of such a review, and I can assure members that, as a non-Executive member, I am beavering away doing everything I can to persuade the Executive of its importance.

Equally, the Local Government Committee has said that should a review not be granted, we will do everything in our power to ensure that such a review takes place in the committee. Tommy Sheridan's views on a service tax will play a part in any such review, and I have no problem with his service tax report coming to the Local Government Committee.

I have anxieties about a local income tax and the suggestion that it should be raised centrally and that distribution should be determined centrally. One of Tommy Sheridan's documents says:

"It will be efficiently collected centrally and distributed by the Scottish Parliament to each local authority according to need."

One of the strongest messages from local government discussions that we have had is the importance of covenant and partnership with local government. Too often in local government there is a feeling that it cannot be responsive to local needs, and that too often local needs are determined centrally. We also have to recognise the long-held view that local taxation should acknowledge the importance of taxing property. That is a complex area, and we cannot debate it fully here. We should be relaxed about what the Local Government Committee is allowed to look at in this area.

In such a debate I could not miss the opportunity to talk about Glasgow, because in Glasgow it is clear that the debate is not really about council tax; it is about what happens when council tax has to meet the shortfall in provision from central Government. Glasgow knows more than anywhere the problems of defining need, which is at the heart of our critique of Tommy Sheridan's position. I welcome the fact that the Government has begun to acknowledge the importance of deprivation factors. We know in Glasgow that there are disproportionate levels of poverty among our pensioners and those who have disabilities; disproportionate problems with drug addiction, not just for drug addicts but for their families; and consequences for service provision for young people being brought into care.

A report by Glasgow City Council has identified how Glasgow has not been treated fairly in the grant distribution system. I call on the Executive to look at that. Glasgow is sometimes presented as a huge black hole into which loads of money falls and somehow is inefficiently spent. The reality is that in Glasgow there is huge poverty, but it is among even greater wealth.

I call on the Executive to consider allowing the business tax that is generated in a community to remain there. That would mean that an extra £60 million could be used to address Glasgow's problems. I understand that there are difficulties because where communities are poor, business taxes are not generated, but I ask the Executive to examine that. Equally, I would like the Executive to target money for health and so on in other areas.

I join other members in welcoming the fact that any debate that generates greater understanding of the importance of local government is to be welcomed. Any debate on local government must have at its heart the importance of partnership and delivery of services to those who are most in need.

Photo of Fergus Ewing Fergus Ewing Scottish National Party 10:25 am, 30th March 2000

I am pleased to support the SNP motion, which calls for an independent review of local government finance. My clear impression is that if Labour members were to vote with their hearts and for what they believe in, they would vote for our amendment, but I suspect that that will not happen.

We are all engaged in the search for fairness. I agree with Johann Lamont that there is much unfairness in the current system for folk in Glasgow who are on low incomes. Would it not help, however, if a system of rebates was introduced in respect of water charges? There is no rebate on water charges for people on low incomes despite the fact that the Labour party has said that there should be one. They have had three years in power in which they could have introduced such a rebate, but they have done nothing about it.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Not yet.

People on low incomes in the Highlands must pay water charges that have increased by a staggering 43 per cent. Band D households will pay £300 in water charges because Labour thinks that that is a fair policy. I say that it is completely ridiculous. It is deeply resented and it is a source of great anger in the Highlands. The Executive will find that out during the coming months, as people realise how unfair the system is.

I was surprised that Mr Harding made no reference to the poll tax—perhaps that was because of natural shyness—or to the fact that Tories brought in the council tax. He would not take an intervention from me: I was going to ask him to explain why, when the Tories brought in the council tax, they decided that the regime in Scotland would be different from that in England. There are two banding structures—a house that is worth £60,000 in Scotland is in band E and a house worth the same in England is in band C.

Mr Harding admitted that council tax bills in Scotland are higher than in England, but he put forward the puzzling argument that that is perfectly acceptable. It is not acceptable. I thought that the Tories were the party of the union and the party that argued against unfair taxes on Scottish householders. It seems that Mr Harding thinks that it is perfectly in order for people in Scotland—some of whom vote, perhaps, for his party—to have higher bills that people in England.

Mr Harding mentioned the position in London. Parliament might be interested in some research that I have done on the council tax liability of a gentleman called Gordon Brown. The Chancellor of the Exchequer has a property in Great Smith Street in London that was valued at about £160,000—band G—in 1991. We do not know exactly what the flat is worth now, but it might be between £300,000 and £400,000; it is in one of the poshest parts of London's west end.

What is Mr Brown's council tax liability? His headline liability this year is £583. We understand, however, that he also has a property in Dunfermline, so he is able to nominate the Westminster flat as his second home. If he were to do that, as he is entitled to do, Gordon Brown's council tax this year would be £292.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I will be happy to take any intervention, but I would prefer to take one from a minister who is prepared to argue whether Gordon Brown's council tax bill of £292 is fair.

Photo of Wendy Alexander Wendy Alexander Labour

Can we take it that Fergus Ewing endorses Westminster City Council's policies and their council tax bands? Council tax is related to the services that are provided, and given the choice, I would choose the services that are provided by Fife Council rather than those that are provided in Westminster.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

If that is the best the Wendy Alexander can do, she should try again. She has admitted that the council tax system is grossly unfair, but she supports it. Her Government will not even amend it for the low paid in Inverness, who are having to pay £300 this year for their water, with no rebate, when the Chancellor of the Exchequer will be paying about £8 less for his luxury flat in London. It is hardly surprising, because the worst piece of scaremongering in political history was Gordon Brown's prediction at the Scottish general election that a 1p difference in income tax would cost 250,000 jobs in Scotland, which was complete and utter nonsense.

I am pleased today to have been able to introduce the facts about Gordon Brown's council tax into this debate.

Photo of John McAllion John McAllion Labour 10:30 am, 30th March 2000

I agreed with Fergus Ewing's statement "complete and utter nonsense"—it summed up his whole speech.

At decision time, Nicol Stephen's amendment will be taken first, and members do not need a crystal ball to suspect that it will be carried, and Tommy Sheridan's motion, in its pure form, will never be put to this Parliament. I will therefore begin by registering my support for some of the elements in that motion: the principle of progressive taxation; the on-going pursuit of a redistributive and progressive system of local taxation; and the suggestion that the Scottish service tax should be included in the review of the way in which we finance local government in Scotland. I share many criticisms that Tommy Sheridan and others have made about the present distribution of wealth. I like to think of myself as a socialist, but one does not have to be a socialist to share in many of those criticisms.

A new book called "What If?" was reviewed yesterday in the press. It contains 15 visions of change for Britain's inner cities and includes amongst its contributors Gordon Brown, so it must be taken seriously, even by Fergus Ewing. Another contributor is Will Hutton, who is the chief executive of the Industrial Society and a contributing editor to The Observer. He states that there is a gaping inequality of wealth and that inequality in our society is increasing. He argued that it makes a mockery of the claim, made by all parties in this Parliament, that we have a comprehensive system of education or a national health service that gives comprehensive health coverage to people on the basis of need. We cannot make that claim while such great inequalities exist in our society. Anyone who argues for the fiscal status quo is arguing for the continuation of inequalities in our society. I hope that nobody—other than the Tories, whom we expect to argue for that—will argue for that.

The council tax is part of that status quo. Representing half of Dundee, I would be in trouble if I spoke in defence of the council tax because it is in serious trouble. We, as the Parliament responsible for the council tax, must recognise that. Year on year, Dundee has been forced to reduce its level of spending on the services that it provides, yet at the same time it is forced to increase its council tax every year. Dundee now spends below the expenditure guidelines issued by the Scottish Executive for fear of the council tax rises it would cause if it reached the expenditure guidelines.

Dundee now has the highest council tax in Scotland, yet the city contains some of the poorest and most deprived communities that can be found anywhere in Scotland. If members consider the other concentrations of poor and deprived people in Scotland, in places such as Glasgow and West Dunbartonshire, they will see that they are in the same position as Dundee. They are having to cut spending on services and set the council tax higher every year.

Photo of John McAllion John McAllion Labour

I have not got time to take interventions.

Fiscal flight has been mentioned. I am not concerned if the likes of Brian Souter leave Scotland; it might be a better place if that happened. However, council tax is causing fiscal flight in Dundee. People who have enough money can choose to live in Angus, Perth or north-east Fife, places where they pay a much lower council tax, and commute into Dundee to work and to use all the services that the city provides as a regional centre, which are paid for by Dundee's council tax payers. That is wrong and it must be changed. If we do not recognise that that is wrong and must be changed, there is something wrong with this Parliament.

Some members have said that this proposal is centralising. I am against centralising as well, but I did not hear many objections when the non-domestic rate was centralised. Nobody got on their feet to say that was wrong. We all want to defend the centralisation of the non-domestic rate without doing anything about the poor council tax payers. I want to see local taxes locally levied as well as locally collected and I criticise the Scottish service tax on those grounds. Nevertheless, it is one of the few practical attempts being made to address the inequalities in our society. For that reason it should be taken seriously.

Photo of George Reid George Reid Scottish National Party

We will now move to the wind-up speeches.

Photo of Trish Godman Trish Godman Labour 10:35 am, 30th March 2000

Tommy Sheridan said that there were very few members in the chamber this morning. Please note that most of the members of the Local Government Committee are here.

The Labour amendment welcomes the Executive's commitment to keep under review the wider issues of local government finance. The Executive is refusing an independent review at this time, but we should acknowledge that Jack McConnell, Wendy Alexander and Frank McAveety are taking on board some of the concerns expressed by local authorities. For example, at the COSLA conference last week, Jack recognised the dissatisfaction with the way in which resources are allocated and distributed.

The system by which the Executive determines and distributes resources for local government must be modernised. The Executive should not dictate how that is done, but facilitate debate—Jack McConnell is beginning that process. Steps that have been taken after listening to local authorities include the proposals for three-year budget planning and the introduction of a programme by which the appropriate parliamentary committees will look at the budget for 2001-02. As the convener of the Local Government Committee, I am meeting the clerk today to plan how we will take evidence and report to the Finance Committee on that.

Photo of David Davidson David Davidson Conservative

Will the Local Government Committee be considering not just how money is delivered to local authorities but exactly what those authorities should be doing? Will it look at the overlap in various areas in Scotland that leads to additional bureaucracy and waste?

Photo of Trish Godman Trish Godman Labour

We will look at everything that is relevant to local government finance and service delivery.

Like Johann Lamont, I have put on record my belief that we should have an independent review of local government finance—and when the two sisters turn up at the Executive's door saying that that is the way forward, evidently people tremble. The Local Government Committee is committed to a review of local government finance because of councils' outstanding concerns, including on the funding of pay increases—it is clear that efficiency cuts will not always cover pay awards. Tommy Sheridan mentioned the distribution of non-domestic rates, but I am concerned about councils that do not have a strong business base, so we should look again at redistribution. On hypothecation, ring fencing and special grants, officials have told the committee that, when they put in a bid, they do not know why they do or do not get the grant. I hope that ministers will address those issues.

The SNP amendment calls for an independent review of local government finance; the Executive does not want one at this time. However, I have said that the Local Government Committee will review finance—the committee is not a limb of the Executive.

Tommy Sheridan's motion asks the Local Government Committee to consider his proposals for a Scottish service tax. I cannot comment specifically on the proposals today but, as convener of the committee, I am sure that I speak for other committee members in saying that we will read his paper with due care and diligence and consider it alongside others when we begin our review. I reiterate that I am still of the view that there should be an independent review of local government finance. If that does not happen, the Local Government Committee will undertake a review and open it as widely as possible to all relevant issues, including Tommy's proposals. I have no problem with Tommy's request that we do that, but I have problems with the first part of his motion.

Photo of Bill Aitken Bill Aitken Conservative 10:39 am, 30th March 2000

Tommy Sheridan began, quite properly, by highlighting the sparse attendance this morning. He went on to say that the council tax is deeply unpopular. I know from past experience that he was not exactly ecstatic about the poll tax. In that respect, he finds himself with a strange bedfellow, Benjamin Disraeli, who once memorably stated:

"The ability to tax and please is a gift not given to Man."

We should be examining the funding of local government under three headings. First, it should be fair; secondly, it should be practical; and, thirdly, it should be consistent with the sensible running of a mixed economy. Tommy Sheridan is coming forward with what are, basically, redistributive proposals; he is open about that. He feels that the existing system is not fair, as it is not related to ability to pay. I would argue strongly against that.

First, the council tax is related to the possession of property, which is usually indicative of the wealth of individuals.

Photo of Bill Aitken Bill Aitken Conservative

I ask the member to let me finish my point.

Secondly, the vast majority of the funding of local government comes from central taxation, which is related totally to the ability to pay.

Photo of Tommy Sheridan Tommy Sheridan SSP

Does Bill Aitken think that the inhabitants of Balmoral Castle have a decent standard of wealth? If they do, can he comment on what their council tax was last year?

Photo of Bill Aitken Bill Aitken Conservative

I am sure that, like me, Tommy Sheridan never asks a question to which he does not know the answer, so he will no doubt provide the figure when he is summing up. The existing system—although I concede fully that it is imperfect—is fair.

The second element is practicality. I remember attempting, some years ago, to persuade the Conservative party to hold an inquiry into whether the local income tax, much beloved by the Liberals, was the answer to the problem of local taxation. I was told that it was simply unworkable, despite the arguments about individual postcodes and so on. Perhaps that is a wider debate for another day, but practicality must be a key component of any method of funding local government.

Thirdly, the funding of local government must be consistent with the sensible running of a mixed economy. I am sorry to have to say that the SSP's proposals are completely flawed in that respect. The scheme that Tommy Sheridan is seeking to introduce would bring about his own version of the Highland clearances. People would not be willing to stay to pay high taxation when they could easily find a bolthole down south where they would pay much less. The knock-on effect of that would be that middle earners and, perhaps, those with below-average earnings would have to make good the shortfall.

Photo of Johann Lamont Johann Lamont Labour

Does the member agree that people are choosing to move away from areas such as the one that he represents, the city of Glasgow? Would he support calls for metropolitan status for Glasgow, which would be acknowledged in a distribution formula, to prevent people choosing for financial considerations to move outside the city boundary while continuing to use services located within that boundary?

Photo of Bill Aitken Bill Aitken Conservative

Naturally, I would say that people are fleeing Glasgow because of the effects of the policies that are being pursued by Johann Lamont's colleagues on Glasgow City Council. That, again, is an argument for another day.

I am running out of time, but I would like to make one or two further points.

Photo of Bill Aitken Bill Aitken Conservative

The SSP's proposals are redistributive, but they would have wider consequences, which have not been thought through. They are merely an extension of the thinking of Tommy Sheridan's mentor, Leon Trotsky—no doubt Tommy learned about Trotsky during his time at Stirling University, where he took a degree in economics. As someone who worked hard to finance Tommy's studies, I want my money back.

Photo of Kenneth Gibson Kenneth Gibson Scottish National Party 10:44 am, 30th March 2000

From today's speeches, it is clear that there is virtual consensus in this chamber that a review of local government finance is imperative. On the Labour side, that consensus now extends to the Minister for Finance, who last week advised COSLA that, although the Executive would not carry out a review,

"The full resources of the Scottish Executive will be made available to the Local Government Committee if they decide to undertake a review of local government finance."

The SNP welcomes that.

Much of what has been said today relates to local government finance in general, rather than to the details of the proposals by the Scottish Socialist Party (Convener Tommy Sheridan). That is why we have chosen to amend the motion. We have concentrated on the substance of the concern, rather than supporting a proposal that is not yet fully worked out. We have not yet heard how the Scottish service tax would fit in with other demands from the Scottish Socialist Party (Convenor Tommy Sheridan), such as buying back council housing at market value so that tenants could live rent-free after 15 years' occupancy, the maximum income proposal, or the plan to allow the transfer of public sector discounts to the private sector. Those pledges cannot be sustained or paid for.

We are amending Tommy Sheridan's motion to make a serious point about the crisis in local government finance. To do otherwise would be to let the Executive off the hook. To allow the debate simply to be about populist notions that fall apart on scrutiny would be to let the people of Scotland down and to turn our back on local government, which is struggling under the weight of the coalition-created financial crisis.

The ideas that have been presented do not move the debate on; they have little weight and no substance. They would undermine democratic financial accountability but barely increase the resources that were available to local government. If one considers the impact of Tommy's proposals relative to the top rate of tax on earned and unearned income under Dennis Healey's chancellorship, Tommy begins to look very new Labour.

Mr Sheridan's plans do not hold the Executive to account and they do not aid the cause of local government—they simply allow the Executive to walk away. Let us have a debate on the future of local government and consider the options, but let us not be sidelined into discussing ideas that have been worked out only superficially.

Tommy's critique of the regressive and unsustainable council tax set the scene very well, but the proposal—which Johann Lamont seemed to support—that all non-domestic rates should be retained by the local authority that raises them causes me concern about the Scottish service tax. The proposals would inject only another £100 million into local government; Glasgow would indeed gain £64 million, but that would leave only £36 million for the rest of Scotland's councils. Some councils would suffer greatly. I would like to hear how Tommy would square that circle.

As the minister pointed out, the SNP supports a local income tax, which would ensure local accountability and a sustainable yield; the Government should examine that proposal in great depth. Andrew Wilson described a number of cases in which the Scottish service tax would make life more difficult for families on low incomes. I hope that Tommy will address those issues when he sums up.

I was curious about the support given by Des McNulty, who is no longer in the chamber, for a property tax. Property taxes are not necessarily progressive, which is one reason why we believe in a local income tax. As John McAllion pointed out, inequality is rising under new Labour. That must be addressed sooner rather than later.

In conclusion, we are pleased that Mr Sheridan has tried to be constructive in this debate. As a disciple of Leon Trotsky—a poster of Trotsky was always on display in his council office and even the family cat is named after him—Mr Sheridan may have endorsed the cult of personality, but at least he has not called today for the dictatorship of the proletariat, forced collectivisation of agriculture, liquidation of religion, the deportation and mass murder of political opponents, the surrender of our most productive land to the forces of German imperialism, or even the enslavement of the working class through, as Trotsky demanded,

"coercive forms of economic organisation".

We should be grateful for small mercies. Members should support Andrew Wilson's amendment.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat 10:49 am, 30th March 2000

I am sure that this will be the first of many debates on reform of local taxation. I have no doubt that local taxation will be reformed over time, but a new central tax is not the solution.

Andrew Wilson says that higher taxes are no threat, as if they have no economic consequences. However, minor changes in taxation have minor consequences, and major changes can have major consequences and can do real damage to the economy. I want to press him again on his position. These are questions of judgment, so I ask the SNP what its judgment is. What increase in taxation would the SNP criticise? Does it support the increase that Tommy Sheridan proposes? Does it have any concern about the impact that Tommy Sheridan's proposals would have on the Scottish economy? If it believes that there should be a different increase, what is that?

Photo of Andrew Wilson Andrew Wilson Scottish National Party

If the minister examines our manifesto, he will see clearly what we propose, within the powers of this Parliament. We propose a freeze in the basic rate of income tax. The Liberal Democrats joined a coalition with a party that went through with a right-wing cut in income tax. Why do the Liberal Democrats say one thing here and another in Westminster?

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

We do not say one thing here and another in Westminster. We do not have powers over the UK Government's spending plans. As Andrew Wilson knows, in London, the Liberal Democrats voted with the SNP on the cut in the rate of income tax.

Let us be clear: under Tommy Sheridan's proposals, it is not the super-rich who will be hit. As Andrew Wilson pointed out, there are serious consequences for individuals on average income. A couple on average income would be hit significantly.

I give Tommy Sheridan credit where credit is due. On this issue, he is putting his head above the parapet and saying what he believes in; I am doing the same in my response. Middle-income earners should not be hit in this way by the Tommy Sheridan socialist tax. However, the SNP has been far from clear in its response. I believe in fair and progressive taxation but I also believe in local democracy with local accountability, which the proposed tax would remove.

I mentioned economic consequences and I said that it would be wrong to exaggerate the consequences of Tommy Sheridan's tax. However, I repeat that there would be consequences. I did not suggest that the whole fabric of society in Scotland would be destroyed; I said that the consequences of taxation at that level, on that scale, would be less inward investment, a reappraisal by existing companies in Scotland of whether to expand and an impact on the start-up and development of new businesses.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

Does the minister think that Tommy Sheridan has forgotten what local taxation is for? It is for local services. Far be it from me to protect Brian Souter, as I am sure he does not need it, but does the minister not think that for Tommy's tax proposal to hit Tommy Souter as—

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

I beg Tommy's pardon—Brian Souter. Does the minister not think that to hit Brian Souter with a tax of more than £80,000 for emptying his garbage is a bit too steep even for him?

Photo of George Reid George Reid Scottish National Party

To allow Tommy Sheridan a reasonable run-up, I would be grateful if Nicol Stephen would keep his remarks fairly tight.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

I thank Mike Rumbles for that. I agree in broad terms with every word that he has said. Modern politics is about new ideas from new parties. I welcome Tommy Sheridan's contribution, although I am not sure how new and fresh his ideas feel when he has been compared with Thatcher, new Labour and Leon Trotsky. Modern politics is all about strong arguments and beliefs, but it is not about accepting old-style centralism and an old-style approach to taxation. It is about recognising that redistributing and reducing revenue is no good to anyone. That is the danger in all this. We are not just talking about a penny increase in taxation; we are not just talking about hitting the very rich. The proposals would hit middle and low-income earners hard.

In short, we welcome Tommy's initiative and his contribution, but sadly his proposals are not practical, realistic or deliverable. They are centralising, they will punish middle-income earners and they will have economic consequences. The issues that the motion highlights should be considered further, but the right place for that is in the Local Government Committee. Clearly, that is not my decision; it is a decision for that committee and for the Parliament. The Scottish Executive is not proceeding with a review at this time, but Jack McConnell has not ruled out such a review altogether.

Photo of George Reid George Reid Scottish National Party

Under the business motion, the knife falls at 11 o'clock precisely. I have no discretion to allow overruns, so it would be helpful if Mr Sheridan would keep his eye on the clock.

Photo of Tommy Sheridan Tommy Sheridan SSP 10:53 am, 30th March 2000

I start with a quick question to Nicol Stephen: did he read the document?

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

I read the document. I spent a significant amount of time, yesterday and this morning, reading the document.

Photo of Tommy Sheridan Tommy Sheridan SSP

May I encourage him to read it again? Johann Lamont quoted from the document in relation to the distribution formula that we envisage for centralised collection and localised distribution. Johann may or may not agree with that formula, but the minister said that there was nothing in the document about distribution. I ask him to reread the document.

The minister talks about the practicality of the proposals. In fact, what we have had today—probably for the first time—is a concrete alternative to Executive policy. I was asked what we would do in relation to local government if we were in power, and I was asked how much more money we would be able to raise. We have said that we would implement a Scottish service tax, that we would tax the wealthy and that we would generate at least £100 million more on current incomes. As average incomes rise, the amount raised through the Scottish service tax rises accordingly.

The Executive has come up with no reason to oppose that set of proposals other than to say that it does not want to tax people too much. Of course, the people that the Executive is talking about are not the low earners who were specifically mentioned by Nicol Stephen. No low earner would be disadvantaged by the Scottish service tax. Anyone who is on an income less than £15,000 a year would automatically gain under the Scottish service tax.

Des McNulty talked about increased means-testing, but the Scottish service tax would undermine means-testing. We would introduce automatic exemption. There would be no more embarrassment, no more filling-in of rebate forms, and—for our pensioners—no more jumping through two or three hoops to get council tax rebates. If a person has an income of less than £10,000 a year, he or she is automatically exempted.

I do not know whether this example will accord with the average earnings that Nicol Stephen talks about, but in an average band D property in my city of Glasgow, an employee on £22,500 with a partner on £17,500—who are currently paying £1,094 in council tax—would pay, under the Scottish service tax, £1,024. Even at that level of income, that couple would be saving £70 a year under the Scottish service tax.

The problem may be that the Executive has misread the document. I was speaking to some Labour members who quoted figures to me. They seemed to have combined people's incomes, looked at the table and found a figure that related to the combined income, forgetting of course that the Scottish service tax is an individual tax. That is why the local government review is welcome. I am sure that the guarantee that Trish Godman gave is sincere and that the committee will look at these proposals in more detail and accord them the respect that they deserve.

However, one thing is correct—perhaps I should be accused of being a moderate. Members will remember Mr Healey, who used to be considered to be on the right wing of the Labour party. He once famously said that he would squeeze the rich "until the pips squeak". The 1974 to 1979 Labour Government had a marginal rate of top tax at some 93 per cent. I am asking for a marginal rate of top tax at 55 per cent. Perhaps I am getting moderate in my old age.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

I am loth to praise the Conservatives, but I will do so at this point. Does Mr Sheridan accept that, when they reduced those horrendous levels of Labour taxation, the tax take increased?

Photo of Tommy Sheridan Tommy Sheridan SSP

Marginal rate taxation has to be effective. I am arguing that the marginal rate of taxation that we would introduce would be effective. If, as has been argued, the Scottish service tax meant that there would be a massive flight from Scotland of multimillionaires and politicians such as Bill Aitken, perhaps people would vote for it—perhaps that would be something positive.

On the property element of taxation, I asked about Balmoral Castle. As Bill suspected, I know the answer. Balmoral Castle's council tax last year was £1,436. That bears no relation to income or wealth. The council tax, as a form of local taxation, is no longer sustainable.

Johann Lamont talked about Glasgow. Glasgow would benefit more than any other city in Scotland from the introduction of the Scottish service tax, which would increase the disposable income of literally hundreds of thousands of pensioners, low-paid workers, students and others who are caught up in the council tax nightmare.

The argument against the Scottish service tax that has been put by Nicol Stephen is a very poor one—I thought that it was going to include blame for the bad weather in Scotland. The Scottish service tax is an excellent start in the review of local taxation. Yes, there are things that can be ironed out and improved, but the Scottish service tax is a marked improvement on the council tax. It is a redistributive and progressive tax. If members believe in the redistribution of income and wealth, they are duty-bound to support the motion on the Scottish service tax.