28 September 2007
Plans by the Scottish government to freeze council tax and cut business rates will cost more than £1.3bn over the next three years, according to a leading public finance commentator and former adviser to Holyrood's finance committee.
Professor Arthur Midwinter, of the Institute of Public Sector Accounting Research at Edinburgh University, accused the Scottish National Party administration of not accurately costing its package of proposals for a tax freeze and, ultimately, the introduction of a local income tax.
In a paper presented to a local government briefing seminar at the university's Institute of Governance, he claimed the SNP's proposals did not assess the fiscal, political or economic impact in a rigorous way.
'This reliance on assertion and ideology is a poor substitute for evidence and analysis and has all the hallmarks of a policy mess in the making,' he added.
Midwinter was recently appointed by the new Scottish Labour leader, Wendy Alexander, as financial adviser to the shadow Cabinet. He told Public Finance this week that his main concern was the way the Scottish government was being driven by a tax-cutting agenda which would use up funding intended by the Treasury for public investment.
He said: 'This will make it very difficult for them to argue for further access to [Treasury] reserves. It's particularly worrying that once again, the sums don't add up, so we don't have a clear picture of the cost of these reforms.'
In his paper, Midwinter estimated that the cost of a council tax freeze would be £70m in the first year, £140m in the second and £210m in the third, making a total of £420m.
The SNP's plans to reduce rates for small businesses would cost £366m, while a reduction in all Scottish business rates to the same level as those in England would cost £540m over three years, a figure that had not been included in the Scottish government's calculations.
Taken together, the cost of the council tax freeze and business rates cuts would amount to £1.3bn, Midwinter calculated.
Doubt has also been cast on the SNP's plans to reform council tax by an Edinburgh-based think-tank, the Policy Institute. It has claimed that a local income tax would damage local government, undermine the property market and force high earners to leave Scotland.
The think-tank has written to the main party leaders urging Holyrood to abandon the idea.
PFsep2007
