Burt blows £1bn hole in SNP tax plan

THE SNP's plans for government were coming under further pressure last night after the influential head of an independent review of council tax backed claims that the party has a £1bn hole in its plans to reform local government.

The Nationalists want to replace the council tax with a local income tax, with residents being charged according to their salary, rather than the cost of their house.

But Sir Peter Burt, the chairman of ITV, who led a recent report into local government funding in Scotland, has warned that the plans would require the SNP to pump in an extra £1bn to keep spending on schools, hospitals and local services at current levels.

Burt's commission found that to raise the same sums as under council tax, the local income tax would have to be set at 6.5p in the pound. However, SNP policy chiefs want to cap their proposed tax at 3p.

Burt backed Labour claims last night that this would leave a £1bn gap. He said: "They will have to find another £1bn from somewhere to keep the tax down to 3%. Or they would have to spend less somewhere else. A Scottish government has got its grant under the Barnett Formula. If they spend £1bn on one thing, you can't spend it on something else."

He warned: "A 6.5% tax on an income of £30,000 would be £3,250, so it would be quite a burden for people in two-income families."

Burt's claims were hotly disputed by the SNP last night, which insists that he has got his figures wrong and that its sums mean most homeowners would pay far less than at present.

Party chiefs point to other analysis, which estimates that the tax rate needed to meet the costs of local services would be much lower.

Burt's analysis does not include the near £500m a year that poorer Scots receive as council tax benefit. The SNP believe this sum would be transferred to the Scottish Executive, if it took up local income tax, thereby helping to fill the gap.

A party spokesman said: "We would be more than happy to have our figures scrutinised by independent experts."

But Burt's claims were met with delight by Labour party chiefs, who are hitting hard against the SNP's spending pledges, believing they can prove they are unaffordable.

Labour finance minister Tom McCabe said: "There is definitely a hole in their plans, unless they are saying people are actually paid twice as much as they are."

Last week, the SNP issued a number of ambitious pledges. Deputy leader Nicola Sturgeon said the party would freeze council tax increases prior to introducing the local income tax in 2009. Leader Alex Salmond also declared there would be no tax increases under an SNP government.

Burt, meanwhile, also insisted that his controversial plans for a property tax to replace a council tax had not been ruled out, as has been claimed by First Minister Jack McConnell. His committee suggested homeowners could be charged 1% of the value of their homes - greatly increasing the costs for those in expensive homes.