Martin Hannan: Local income tax is only fair option

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You have to hand it to Andrew Burns and Sandy Howat, they have certainly caused a stir with their idea for what the Evening News rightly dubbed a mansion tax.

Edinburgh council’s leader and his deputy, respectively the Labour and SNP group leaders, were successful in doing what politicians often do – switch the debate away from possible embarrassment they are facing.

For as a result of their mansion tax proposal, Burns and Howat have managed to get a lot of the media to take their attention off the monumental budget problems that the two leaders and their group colleagues face on Thursday.

Make no mistake, the council tax issue must be addressed and is being addressed. But in asking for the Scottish Government to pre-empt its own decision and give councillors the power to change council tax rates for different bandings, Burns and Howat have been a bit naughty and have certainly deflected attention from the big decisions that must be taken on Thursday.

Yet the council tax issue has to be dealt with, so look at it in simple terms – the idea was always flawed, but it was the only political fix available that the Tories would wear when their hated poll tax “experiment” was abandoned in the wake of London street battles.

There was no way the Conservatives could go back to the old rates system as a way of raising local government finance, so in came the council tax, sustained by block grants from central government which have grown as a proportion of local authority income thanks to the ever-welcome council tax freeze.

The successor to the council tax should be a land or property tax, say many experts. Yet that can be so unfair to so many people.

The problem for those who want a straight property tax with the annual payment calculated on the notional value of a house is that there are plenty of people in Edinburgh and across Scotland who are living in houses that were left to them by parents or other relatives, or perhaps they invested shrewdly as young people and now live in a house that’s worth far, far more than they could afford to buy now. They are housed beyond their means, and one of the implications of any property tax is that people who can’t afford the tax may have to sell their home and downsize.

Conversely there are plenty of people who earn a lot of money but choose to live in modest homes when they could easily afford much more expensive houses – so do you force them to trade up?

Forget it. There is only one genuine way of raising finance for local government that is fair and applicable to all, and that is a local income tax.

Scotland’s taxation system is changing anyway, so why not go the whole hog and let local councils set their own income tax rate. Then we really would have taxation that guaranteed representation at a local level, because every penny councils spend would be rigorously scrutinised.

Yes, I know that income tax can be unfair, too, and plenty of people with lots of money somehow seem to avoid it, but it’s the only fair option.