Local Government Finance

Alison McInnes (North East Scotland) (LD): I am not sure that I have been much enlightened by the debate. When I first read the Conservative motion, I was reminded of my childhood Saturday mornings at Woolies pick-'n'-mix: "Oh dear, we really can't decide what we want, but that's okay-we can have a wee taste of everything." I realise that I am a newcomer to the Parliament, but it is the first time that I have come across the pick-'n'-mix, multi-option bill, and I am glad to hear that Brian Adam-who is far more experienced than I-is also perplexed by that suggestion.

Of course, during the debate, the Tories confirmed that their favourite sweetie would be the retention of the council tax. I do not think much of their choice. Under that option, people on the highest incomes would benefit more than pensioners and low-income families. The proposal may be superficially attractive, but it would leave many of the poorest in our society out in the cold.

The Labour Party has been vociferous in its opposition to local income tax based on the ability to pay but, as yet, less than forthcoming about how it plans to tackle the gross inequities of the council tax system, under which the poorest 10 per cent pay four times more of their income than the richest 10 per cent do. The Labour Party has confirmed its membership of what Mr Swinney referred to as the council tax club, but it has not yet come up with a workable alternative.

Hugh Henry criticised our proposals by saying that they would burden local businesses with collection charges, but he failed to point out that, for many years, his Government asked local businesses to collect tax credits and that, with one week's notice, they were asked to change VAT-a heavy burden on them. Thousands of low-income households struggle under the punitive burden of the council tax. Does Iain Gray still believe, as he did two months ago, that that system is unfair? If so, when will he tell us what he wants to replace it with?

Earlier this year, a survey of 30,000 users of the internet service MSN money put council tax as the most hated tax-above fuel duty, inheritance tax, VAT and income tax. We know that it is a regressive and unfair tax that simply cannot be fixed. We want to replace it with a fairer local income tax that is based on the ability to pay.

Hugh Henry: What did the Liberal Democrats ask the wider public about what they believed the implications of a 6p local income tax might be, and what were the results?

Alison McInnes: The survey was not ours; it was carried out by MSN money, as I said.

The Scottish Liberal Democrats are prepared to work with the Scottish Government to abolish the council tax and introduce a fairer system. However, as Jeremy Purvis said, the current proposals do not address some key issues, including the protection of students, the accountability of local councils, support for small businesses and appropriate taxation for people who receive high levels of income from dividends. We will continue to pursue those issues with the Government and make constructive proposals.

Changes to the council tax are overdue, but it contributes only a small percentage to the pot of local government funding, and other inequalities in the local government settlement need to be addressed. Local authority discretion and accountability should be strengthened. Unfortunately, the council tax freeze and that audacious con, the concordat, have weakened those principles. This year, local government is even more dependent on central Government hand-outs. That is an unhealthy relationship, as it allows central Government too much control over what happens locally and leads to less local transparency in decision making and less local accountability. I am sure that there must be a fairer and more transparent way of allocating resources to local government.

The Liberal Democrats would like the vagaries of the local government formula to be addressed. If Aberdeen City Council was funded at the same level per head of population as Dundee City Council, it would have an astonishing £104 million extra every year to spend, so it is little wonder that Aberdeen City Council is struggling to cope with its budget allocation. A fairer system must be found.

We want a fairer system of taxation that is based on the ability to pay. It must be truly local and address issues such as the protection of students, support for small businesses and appropriate taxation for people who receive high levels of income from dividends.