Council Tax (Abolition)

– in the Scottish Parliament at 10:54 am on 30th January 2003.

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Photo of George Reid George Reid Scottish National Party 10:54 am, 30th January 2003

The next item of business is a debate on motion S1M-3809, in the name of Tommy Sheridan, on the abolition of council tax, and one amendment to the motion.

Photo of Tommy Sheridan Tommy Sheridan SSP 11:01 am, 30th January 2003

Scotland is riddled with poverty. Obscene inequality of wealth and power still stalk every corner of our small nation. Despite a fantastic array of wealth and resources, far too many citizens still struggle to make ends meet.

Well over 200,000 pensioners are officially poor in Scotland. More than 330,000 children are officially poor in Scotland. We have a child poverty level that shames us in the European Union because it is the highest in the union. We have a vast army of workers who under Thatcher and Major were the unemployed poor but who under Blair and Jim and Jack are the employed poor.

In this country, 750,000 workers earn less than £10,000 per year. They are the hard workers who clean our hospitals, look after our elderly and clean our streets. Because of the prevalence of low pay in our country, those hard-working men and women live in poverty despite the fact that they have jobs.

Some members may know that 52.5 per cent of Scots earn less than £20,000 a year and that 72 per cent of Scots earn less than £25,000 a year. To highlight how completely unrepresentative MSPs are in income terms when compared with ordinary Scottish citizens, members should also know that 96 per cent of Scots earn less than £48,000 a year. We are in the top 4 per cent income bracket in Scotland.

Those points are important in the argument that I am making for change in the council tax. When members bear it in mind that those who benefit most from the council tax are those who are wealthy and well paid, that may explain the opposition in the chamber to changes to the council tax system.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

My question is a simple one. Is the Scottish service tax designed to pay for council services or is it simply to tax people who earn more than £25,000? Is it a fraud?

Photo of Tommy Sheridan Tommy Sheridan SSP

I might have expected a bit more from Mike Rumbles, but perhaps not.

Photo of Tommy Sheridan Tommy Sheridan SSP

Mike Rumbles knows the answer to his question—

Photo of Tommy Sheridan Tommy Sheridan SSP

It is twofold. If Mike Rumbles stops shouting from a sedentary position, I will answer the question.

First, the Scottish service tax will raise more money for local government jobs and services than the council tax currently raises. Secondly, it will raise that money in a fairer way, so that those who pay most are those who are able to pay most.

Photo of Tommy Sheridan Tommy Sheridan SSP

I have answered Mike Rumbles's question. The service tax will be for local government jobs and services.

The single most disappointing aspect of the Parliament over the past four years has been its failure to tackle poverty and the inequality of wealth. We need an independent socialist Scotland to effect a real, far-reaching reversal of the obscene inequality of wealth and power that haunts our country. However, here and now we have to make do with the limited powers that we have—the constitutional straitjacket within which we work. What we have power over is the form of local taxes that we can raise to pay for local government jobs and services.

My central argument today is that the council tax is an acutely unfair form of local tax because it pampers the well paid—such as MSPs—and the millionaires while it pummels the pensioners and the low paid. It takes a higher proportion from their incomes than from those of the wealthy and the millionaires. That is why replacing the council tax with a tax that is based on personal income will not only raise more money for local government jobs and services than the council tax currently raises, but raise it in a fairer way. It will also have an in-built protection for the poorest in our society.

Under our proposed system, we will employ the Inland Revenue as a collecting agent for our tax. It will, therefore, be some £130 million cheaper to raise the Scottish service tax than it currently is to raise council tax, given the mechanisms and codings that the Inland Revenue already has in place. Anyone with an income of less than £10,000 a year will automatically be exempt, including 82 per cent of single pensioners, many of whom struggle to make ends meet because of high council tax bills. They will be exempt and will have £20 to £30 a week extra in their pockets. The vast army of low-paid workers who struggle to make ends meet despite working hard in hospitals and schools throughout our country will have more money in their pockets. That is what tackling poverty is all about. The Scottish service tax takes all the rhetoric about tackling poverty and turns it into action.

Of course, in any system—as has been said before—there are winners and losers. Under the Scottish service tax system, 77 per cent of Scottish households will be winners: 77 per cent will pay less in service tax than they pay currently in council tax. Some 7 per cent of households will pay neither more nor less, and 16 per cent will pay more. Every one of us MSPs will pay more. We will pay more because we can afford to pay more. That is what redistribution of wealth is all about.

That is why the Scottish service tax will be at the forefront of the Scottish Socialist Party's election campaign. It is time to place redistribution of wealth and anti-poverty policies at the forefront of the Parliament. It is time to effect a wealth transfusion in Scotland, from those with plenty to those with little. That is what the Scottish service tax would effect, and that is within the power of the Scottish Parliament. The tax will raise more money and it will raise it in a fairer way. That is why I recommend that the Parliament support the Scottish service tax as a system that will improve the livelihoods of the pensioners and the army of low-paid workers in this country.

I move,

That the Parliament believes that the council tax is a fundamentally unfair and regressive tax; believes in social justice and the redistribution of wealth from the rich to the poor; therefore agrees to abolish the council tax and replace it with the Scottish Service Tax which is based on an individual's income and is inherently fairer, more efficient and redistributive; notes that this tax would raise more revenue than the council tax and that it would remove the burden of paying for local government jobs and services from the shoulders of low-paid workers and pensioners and place it firmly on the shoulders of the well-paid and the wealthy, and believes that the introduction of this tax should be complemented by the return of the right for local authorities to raise and retain their business rates and a thorough investigation of land value and speculation taxes to supplement local authority revenue.

Photo of Peter Peacock Peter Peacock Labour 11:10 am, 30th January 2003

I recall having a strong sense of déjà vu at last year's debate on a similar motion. Today is, I understand, the fourth time that Tommy Sheridan has introduced a debate on the abolition of the council tax. Sitting next to Robin Harper has clearly had benefits for Tommy Sheridan in that he has signed up to recycling and getting best value from old parliamentary motions.

In terms of the substance of the arguments, comparatively little has changed since this issue was debated last year. However, one thing that has changed is that the Local Government Committee published the report on its inquiry into local government finance. That major inquiry took over a year and took a huge amount of evidence from people all over Scotland and further afield.

The Local Government Committee concluded that council tax was a sound system of taxation, but its conclusion on a Scottish service tax was less favourable. The committee said:

"having examined in detail the proposals for a Scottish Service Tax, the Committee sees no merit in this option. The proposal as outlined ... in written evidence to the Committee would replace Scotland's only local tax with a new, national tax; leave councils in Scotland wholly dependent on central government for their funding; and would, in the Committee's view, destroy local accountability for councils' spending decisions."

That is a damning indictment of Tommy Sheridan's proposal. I whole-heartedly agree with what the committee said.

As I set out in last year's debate, a Scottish service tax is not a local tax. People would pay all their current central Government taxes to the Exchequer and their Scottish service taxes to the Scottish Executive. In one fell swoop, Tommy Sheridan would remove a vital element of accountability between councils and their electorate, and destroy the principle that people who live in an area should contribute towards the costs of local services.

Photo of Tommy Sheridan Tommy Sheridan SSP

Could the minister square something up for me? If a Scottish service tax would destroy accountability, what does that make the Scottish Parliament? We do not raise our money either. We get it in a block grant.

Photo of Peter Peacock Peter Peacock Labour

I think that we all feel accountable as we run towards an election.

In addition, a Scottish service tax would undermine the financial stability that we have provided councils with, through the Parliament. We have provided a property-based council tax with stable and predictable levels of income. With the 3-year grant allocations to local authorities, we can give the local electorate certainty over a 3-year time horizon of the council tax levels that they will pay. The councils can plan their budgets and service improvements over longer time scales. However, with an income-based tax, such a high level of predictability and certainty would be lost.

Mr Sheridan said that the council tax is unfair to those on the lowest incomes and that it is not progressive. Most societies recognise that there is a broad correlation between property values and wealth and ability to pay. However, we recognise that that is not a precise science. That is why there is a discount system for single home occupiers, for example. It is also why those with less ability to pay get help with their council tax—around a quarter of households receive full or partial council tax benefit. The combination of property value and the benefits system makes the council tax system fair.

As I also pointed out last year, a Scottish service tax would put at risk around £300 million worth of council tax benefit that people in Scotland receive each year to help meet their council tax commitments. We would lose our ability to obtain that support. That money is targeted at the poorest in our society, who are most in need, but the money would be lost to Scotland under Mr Sheridan's proposals.

Mr Sheridan also asks for the income from business rates to be retained locally. Such a system used to exist in Scotland. In fact, the Tories abolished it during their time in office. I experienced that system, as did many other members in the chamber, as a councillor. However, all local government grant is distributed on the basis of relative need. That is a good socialist principle, which I would have thought Tommy Sheridan might have supported rather than rejected. His system proposes that councils that are the wealthiest based on business income alone should keep that income. However, he does not tell people about the other side of that equation, which is that under a needs-based system, which any reasonable Parliament would have to approve, whatever was gained by keeping business rates would be lost in redistributed grant. That is the fact of the matter, if one believes in the redistribution of wealth across the whole of our country.

Photo of Peter Peacock Peter Peacock Labour

Tommy Sheridan clearly opposes that. The local impact of his proposal would therefore be entirely neutral.

As we know, the council tax supports vital public services. Tommy Sheridan's proposals do not provide a credible or sensible alternative. They would cost Scotland vital income—around £300 million—which would be lost to the poorest in our society. The proposals would also diminish the accountability and the role of local councils. They would break the link between local electors and the taxes that they pay for local services and would diminish local democracy.

The Parliament, through its Local Government Committee, has considered the issue and rejected it comprehensively.

I move amendment S1M-3809.1, to leave out from first "believes" to end and insert:

"notes that the Local Government Committee, in its 6th Report 2002, Report on Inquiry into Local Government Finance, published in March last year, saw no merit in the Scottish service tax as outlined in evidence to it."

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party 11:15 am, 30th January 2003

This is groundhog day for January, as the minister indicated, and I will be brief, as I believe that the next debate is more important.

The council tax system certainly contains a significant element of unfairness. In the most recent debate on this subject, last January, Keith Harding said:

"The council tax may not be perfect, but it is fair"—[Official Report, 24 January 2002; c 5687.]

I would have to disagree with him. It might be less unfair than the poll tax, but it is still unfair. It bears no direct relation to the ability to pay. Property possession can be based on all sorts of historic reasons rather than current reasons and, in the same way as we recognised that we had to reduce the need for people to sell their house in order to pay for their personal care, we do not want them to be in a similar position in relation to their council tax.

However, we need to examine the feasibility of the replacement of the council tax with a local income tax. There might be problems with the introduction of that system too because, as we heard in the previous debate, it is easy to come up with a good idea, but it is often less easy to put it into practice.

The Scottish service tax has significant problems, which have been rehearsed in the chamber before. It does not have a local link, as the Local Government Committee pointed out. The distribution mechanism is unclear. I suspect that it would be complicated to administer—as we discussed in the previous debate, simple ideas can easily become complex. Further, the proposal is part of a package of tax-increasing measures, as it is all about putting tax rates up.

The motion says that the system would "raise more revenue" and talks about local authorities being able to

"raise and retain their business rates".

One wonders, in that context, whether "raise" is used in the sense of levying or in the sense of increasing. The motion also says:

"the introduction of this tax should be complemented by ... a thorough investigation of land value and speculation taxes".

If we were to adopt the proposals, therefore, Scotland would be in danger of being perceived as being a high-tax environment. That would not be good for the Scottish economy and, more important, especially given the name of the tax, it would not be good for the Scottish public services that we are trying to enhance.

Clearly, there is an argument for redistribution in the tax system, at a local and a national level. There has been a movement from direct to indirect taxes over the past few years. We need to shift a proportion of the total tax take back from indirect to direct taxation. However, we will do that not by simply putting tax rates up but by growing the economy. Tommy Sheridan's proposal would not grow the economy; it would simply try to take more out of the existing cake, which would not get larger—indeed, because of the disincentivising of wealth creation, it might get smaller.

Photo of David Davidson David Davidson Conservative 11:18 am, 30th January 2003

No matter what way Mr Sheridan wraps up his proposal, it would simply lead to an increase in central taxation and a reduction in local democracy and accountability. The Local Government Committee and other speakers have already said that.

The proposal represents a huge risk to an economy that has already been hit—

Photo of David Davidson David Davidson Conservative

By 53 new taxes since Labour came to power, I inform Mr Fitzpatrick. We really ought to be considering ways of growing the economy and giving people opportunities to share in wealth creation. Without wealth creation, we are in deep trouble. The growth of our economy is slipping behind that of the rest of the UK. If we want to attract investment and highly trained people—which is important because of the developing skills gap and the length of time that it will take to train people internally—we should not slap huge amounts on to income tax, because that is what those highly skilled people will see, not where that money would end up.

I am not convinced by anything that Mr Sheridan has said about the ways in which his proposal would benefit local services. I do not think that he answered Mr Rumbles's question, but perhaps that was because Mr Rumbles did not give him an opportunity to speak clearly. However, in real terms, the proposal would result only in the central pot getting more money. We would be back to a system of block grants to councils from the central pot, and yet all the councils in Scotland, regardless of their political persuasions, are complaining—

Photo of Tommy Sheridan Tommy Sheridan SSP

Does Mr Davidson agree that, if the central pot gets more money, there might just be a chance that local councils could also get more money?

Photo of David Davidson David Davidson Conservative

We still have the issue of what the councils do with that money when they get it. How do we control the councillors? Where are they accountable? Are local people saying what they want, and are the councillors prepared to prioritise locally? That is what local decision making is about.

Once the Conservatives are back in power, we will work with councillors to reduce the rate of increase in council tax. In Aberdeenshire, where the Liberal Democrats have been in power for a while, we have seen an increase of twice the rate of inflation in the past year, and services have still not been delivered.

There is a radical argument to be had on local government. From a taxation point of view, I cannot see how the Scottish service tax would have any benefit for local services. To talk about public services in general is one thing. Some of those services, such as the health service, are run through the centre, partly through grant.

Mr Sheridan is not going do anything to cause young people to stay in Scotland, work here and try to make progress. The Conservatives will most certainly not support his tax.

Photo of Robert Brown Robert Brown Liberal Democrat 11:21 am, 30th January 2003

Tommy Sheridan's motion has the unique distinction of starting with a premise that is substantially correct—that the council tax is regressive, penalises the poor and favours the better-off—and ending up with a remedy that is flawed, economically illiterate and totally destructive of local democracy.

The council tax is least satisfactory on the most important point—ability to pay. Its banding system is unsatisfactory, and council tax benefit goes to more people than any other benefit while still managing to miss too many. It is substantially regressive.

That is why Liberal Democrats argue for a local income tax, which is a tax according to ability to pay, is now—although it was not always—administratively easy to collect, and does not tax the poor.

Photo of Robert Brown Robert Brown Liberal Democrat

In this debate, I have no time for interruptions.

It appears that Tommy Sheridan is against the local income tax and has invented his own. It has a splendid name—I will give him that—but the reality is that the Scottish service tax is a con. If it were ever introduced, it would be a disaster.

Tommy Sheridan is into bureaucracy. His tax would require an entirely new system that is different from council tax and income tax. It could not simply be collected under the pay-as-you-earn system. It would require an army of civil servants to administer the tax and would cause a number of anomalies in its wake.

As has been said, the Scottish service tax would be a national tax that would at a stroke wipe out local democracy and accountability. That is another characteristic of so-called democratic socialists throughout the years.

The tax would also have perverse and disastrous economic effects. Its ethos of soaking the rich would fail, because anyone with any money and mobility would flee the country instantly, taking their wealth, their companies and their jobs with them. No one in their right mind would stay in Scotland if they had even a little wealth to pay Tommy's tax at rates of up to 125 times the level that others would pay.

The Scottish service tax fails almost all the classic tests of a good tax. It is like the poster of Lord Kitchener during the first world war: it is a great slogan but it has no substance. Tommy's tax is only possible in a totalitarian command economy. It is like the defunct regimes of eastern Europe. It has no place in modern Scotland, and I urge the Parliament to reject it outright.

Photo of Trish Godman Trish Godman Labour 11:24 am, 30th January 2003

The thrust of the motion is a proposal to abolish the council tax and replace it with the Scottish service tax, which is based on an individual's income, and to return to local authorities the right to raise and retain their business rates.

As Peter Peacock said, the Local Government Committee reviewed the matter over 18 months. Although we shared some of the questions that Tommy Sheridan poses on the council tax and business rates, we did not and do not share his remedy.

I will discuss the council tax briefly. I believe that the system of council tax needs to be revalued on a regular basis. One of the messages that came out loud and clear during our 18-month inquiry is that people who live in the lowest-value homes but who do not qualify for benefits pay too much council tax, while those living in the highest-value homes pay too little. Clearly, the system needs to be reviewed.

We also need to consider a revaluation of properties, which has not been done since 1991. The Executive did not accept the Local Government Committee's recommendations, but it undertook to carry out further, detailed analysis of the implications of the revaluation throughout Scotland and to explore how best to tackle the matter. I spoke to the minister yesterday, and was informed that it was still being examined.

I believe, as did the Local Government Committee, that business rates should be returned to local control, or that, at the very least, cities such as Glasgow and Edinburgh should not lose out if they collect more in business rates than is returned to them from the Executive. I was disappointed by the Executive's position but, on behalf of the committee, I continue to raise such issues with the relevant ministers.

There is also the question of the loss of council tax rebate, which is a reserved matter. Evidence submitted to the committee suggested that as much as £300 million could be lost, and I question how that gap would be closed under Tommy Sheridan's proposals.

After examining the Scottish service tax in some detail, the nub of the matter becomes clear. The option of the service tax has no merit, because it would replace Scotland's only local tax with a new, national tax, leaving councils wholly dependent on central Government for their funding. That would destroy local accountability for councils' spending decisions. That is not acceptable. Although I have some sympathy with it, the motion does not provide the remedy.

Photo of George Reid George Reid Scottish National Party

We now move to winding-up speeches, starting with Mr Brown for the Liberal Democrats.

Photo of Robert Brown Robert Brown Liberal Democrat 11:27 am, 30th January 2003

I was not aware that I had a comeback, Presiding Officer. In that case, I might take an intervention.

I do not think that there is much more that I want to say on the subject, but—

Photo of Tommy Sheridan Tommy Sheridan SSP

Could Robert Brown tell the Parliament what someone on £20,000 a year would pay under the local income tax that the Liberal Democrats have worked out?

Photo of Robert Brown Robert Brown Liberal Democrat

As with all such things, that would depend on the rate at which it was introduced. That is the bottom line. We are not arguing for a local income tax as such in this debate; I am simply saying that that is the obvious alternative if we are looking for a tax based on ability to pay that can be set at an appropriate rate.

There are issues to do with the balance between central Government taxation and local government taxation, which most of us feel has shifted too far towards taking away power from local government and placing it in the hands of central Government.

Tommy Sheridan mentioned the taxation powers of the Parliament. In the longer term, it would be more satisfactory if the Parliament had a dedicated tax of its own, which would increase the Parliament's accountability. However, that is a debate for the future, as we see how the federal arrangements of the United Kingdom work out over time.

As I indicated in my previous speech, I remain of the view that the Scottish service tax would do nothing for the poor. It is a con on the poor— [Interruption.]—and it would not achieve anything in practice. Tommy Sheridan may laugh if he wishes, but this is too serious a matter to laugh about. It is about how we raise money for properly funding services on which so many people rely. Frankly, it is not satisfactory to come up with ducks-and-drakes ideas that play merry hell with the potential of local government to run itself. I urge the Parliament to have no truck with the Scottish service tax.

Photo of Bill Aitken Bill Aitken Conservative 11:28 am, 30th January 2003

One does not have to risk being bitten by a goose, to refer to Robin Harper's rather charming analogy, to realise that it is not easy to devise a local government taxation system that will be universally popular, or indeed acceptable. History is littered with failed attempts. What the Scottish Socialists fail to recognise is that, at the moment, well over 80 per cent of local government expenditure is funded by general taxation, of which income tax, which is obviously directly related to earnings and income, is the principal component.

As has been pointed out in the chamber before, one of the effects of the Executive's policies has been to reduce local autonomy. What Tommy Sheridan has put forward today would reduce local autonomy even further, because councils would be reliant on a centrally allocated funding approach, which would inevitably be a matter for conflict.

The present system may be imperfect, but it is based to some extent on the ability to pay. Peter Peacock was right to say that personal income is usually related to the value of the property that the person owns, which determines the amount of taxation that is paid. There is a safety net not only for single people, but for other people who fall into various categories. That aspect of the issue is dealt with adequately.

The proposed service tax is simply unworkable. It would be expensive to collect and would involve a significant reduction in the housing benefit that is paid to the poorest people. By advancing this proposition, Tommy Sheridan will fail to achieve what he seeks. He is advancing outdated, Trotskyite thinking that is impracticable and unworkable. I am afraid that Tommy's Trot tax is not a goer.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party 11:31 am, 30th January 2003

Although we oppose the motion, I must contradict Trish Godman's statement that the loss of the council tax rebate, which is a reserved matter, is an argument against introducing a Scottish service tax. It is not an argument against introducing a Scottish service tax, but an argument against the current constitutional arrangements. Those arrangements are not simply putting a spoke in the wheel of a Scottish service tax, but are upsetting many other things that the Parliament might like to do—most notably, as we heard this week, Malcolm Chisholm's efforts to pay compensation to people suffering from haemophilia who acquired hepatitis C from faulty blood products. The first step towards getting a taxation system that will help the Scottish economy to grow and will improve Scottish public services is for us to get control of the complete fiscal system in Scotland.

Photo of Peter Peacock Peter Peacock Labour

As I indicated earlier, Tommy Sheridan's proposals are neither realistic nor credible. I do not believe that they are deliverable, notwithstanding the constitutional arrangements that exist in Scotland. As Robert Brown and others indicated, the proposals would undermine the principle of local accountability and local democracy, by breaking the crucial link between local electors, councils and services.

The service tax would mean potentially significant increases in bills not just for the mega-rich to whom Tommy Sheridan refers, but for people on average incomes. Robert Brown hinted at that. The estimated Scottish service tax yield is based on the wholly unrealistic assumption that there would be a 100 per cent collection rate. No taxation system anywhere in the world, at any point in history, has had a 100 per cent collection rate. The whole proposition is flawed.

As Tommy Sheridan indicated, people with an annual income of less than £10,000 would be exempt from paying the Scottish service tax. However, people on average or even below-average earnings could be worse off. A couple, both of whom were on around average earnings, might have to pay more than £1,300 in Scottish service tax—a sum well in excess of band E council tax payments. Such families might have to pay £600 more than they pay at present. As Robert Brown said, no one should be conned about what these proposals mean for people on average earnings.

The current taxation system has the great virtue of being well understood and comparatively simple to administer and collect. It produces predictable tax yields and, together with the associated benefits system, is capable of supporting those who are least able to pay—the people whom Tommy Sheridan purports to represent. For those reasons, when the Local Government Committee examined in detail proposals for a Scottish service tax it saw no merit in those. Today the Parliament should reach the same conclusion.

Photo of Tommy Sheridan Tommy Sheridan SSP 11:33 am, 30th January 2003

Today's debate has been the same as the previous debate on this issue, and the same arguments have been made against a Scottish service tax. I am glad that I highlighted the fact that the chamber represents 4 per cent of earners in Scotland, rather than the 96 per cent of earners who earn less than members of the Parliament, as the motion has received the response that I expected. Why would any member want to vote for a system that would tax them more? Such a system would be fairer, more efficient and more transparent than the current one, but under it members would pay more.

It is incredible that statements— [Interruption.] Mr Fitzpatrick appears to have lost the crèche. Would he like to say something?

Photo of Brian Fitzpatrick Brian Fitzpatrick Labour

I am interested in what Mr Sheridan is saying about the ability of other members of the Parliament to contribute to taxation. Would he care to inform us of the position in respect of his earnings?

Photo of Tommy Sheridan Tommy Sheridan SSP

That is great. I am glad that Mr Fitzpatrick asked a question instead of just mumbling all day. I would pay £1,500 a year more under our system than I currently pay. Mr Fitzpatrick would probably pay roughly the same, or perhaps a wee bit more than that. That is probably why he is opposed to it. I say to those who say that it will not help the poor that that is incredible. It will exempt anyone on an income of less than £10,000 a year, which means that 725,000 people in Scotland will save in the region of £20 to £25 a week—yet members say that it will not help the poor. Perhaps the reason why they do not know how to help the poor is that they do not recognise policies that help the poor—perhaps that is the problem.

People talk about high rates of taxation that will lead to entrepreneurs fleeing. Mr Davidson talked about a lack of inward investment. He might not know that inward investment in Scotland in the past five years has plummeted by 91 per cent, but not because of high taxes. What is the situation with top-rate taxation? Denmark, a small independent country with a poverty level of less than 5 per cent, has a 63 per cent top rate of taxation for the rich and a rate of 77 per cent for the super rich. Austria has 50 per cent, Belgium 55 per cent, Finland 56 per cent, France 52.75 per cent, Holland 52 per cent and Sweden 56 per cent. Where are all the entrepreneurs going to go, because they are not going to go to any of those countries, are they? The fact is that we have low taxes on the wealthy and high rates of poverty. All those countries have high taxes on the wealthy and low rates of poverty. That is the position for which we should be striving.

Photo of Phil Gallie Phil Gallie Conservative

I thank Mr Sheridan for the courtesy of giving way. Will he tell us what the unemployment levels are in the countries to which he has just referred?

Photo of Tommy Sheridan Tommy Sheridan SSP

The unemployment levels in Denmark, Sweden and Finland are all under 5 per cent. That is the point. There are high levels of employment, a high standard of living, high taxation for the wealthy, a much lower level of inequality and, most important of all, a low level of poverty. That is what this small nation should be striving for. Alasdair Morgan says that the policy is all about tax rates going up, but tax rates will go up for only 16 per cent of the population—77 per cent of Scots will pay less under the system that I propose.

Peter Peacock talked about the loss of council tax benefit. It is a disgrace that Westminster would claw it back, but Peter Peacock should know that under the Barnett formula, 8 per cent of the money that was clawed back would be returned immediately to Scotland, amounting to £22 million, based on 2001-02 figures. If we add to that the savings in collection costs and extra money generated, the tax would still raise £160 million a year more for local government jobs and services than the council tax raises currently. I do not know whether those who ask how that will improve services have worked this out yet, but if we have more money to spend on services, we can improve services. That is what the tax is all about.

I am glad that Peter Peacock was not able to answer the point about local accountability. How can we have accountability if people in local authorities do not raise the tax? Peter Peacock is right: we do not raise the tax here in the Scottish Parliament, but we are supposed to be accountable as well. Members should wake up to the reality that after four years the Parliament has done nothing to address the gross and obscene inequality in this country. The Scottish service tax offers a major policy weapon against poverty and for the redistribution of wealth in this country. That is why it will be popular at the Scottish Parliament elections, as it is what the people of Scotland want. They want fair taxation and that means that the wealthy pay more. That means us in here. It is time that we paid more as well.