If the views of professional associations on the Scottish Government's plans for a local income tax (LIT) are to be heeded, then the SNP administration at Holyrood will need to think again about its proposals. The period for comments on the Government's consultation paper ended on 18 July, and the responses show that those bodies which represent officers who are experts in local government finance believe plans for a centrally-set LIT of 3p in the pound are flawed. One of the latest organisations to give its comments is the Institute of Rating Revenues and Valuation (IRRV). The institute echoes the concerns of other local government professionals when it refers to a ‘gaping hole' in the funding proposals for LIT. SNP ministers admit there will be a shortfall that will need an ‘adjustment' to council funding. The IRRV calculates this shortfall at £281m. In addition, there is a potential loss of £400m a year currently paid in council tax benefit. In calculating a 3p in the pound LIT, the SNP included this sum, arguing it was part of the Scottish funding block, and ought to be retained in the Scottish Budget. Not surprisingly, ministers at Westminster, who finance the Scottish Budget, disagree. The IRRV warns a funding shortfall would have serious implications for local government services, and says the new system would lead to increased collection costs and greater opportunities for legal avoidance. The institute believes a reformed property-based tax is the way forward. Inevitably, it will be open to the accusation that it is trying to protect the jobs of those who work in revenues, benefits and valuation. But its warnings should not be dismissed on that basis. Its members are experts in revenue collection. Their views should be seen as an objective assessment of a change which could, in their own words, ‘risk the destabilisation of the Scottish local government finance system'.
