By Steve Bargeton, political editor

THE SNP yesterday unveiled plans for “the biggest tax cut in a generation,” promising to scrap council tax and replace it with 3p on income tax across Scotland.

If the party forms the Executive after the Holyrood elections on May 3 they will freeze council tax levels at 2007-08 rates until local income tax is implemented in two or three years.

The SNP said that under their plans only the highest wage earners—the top 10%—would be worse off.

They calculate that taxpayers on low and middle incomes, some 60% of the Scottish population, would be between £260 and £350 a year better off.

Pensioners on fixed incomes could find themselves between £650 and £900 a year better off, depending on their current council tax banding.

The SNP say that pensioners who pay no income tax at present—around half a million people—will pay no local income tax.

Launching the policy in Edinburgh yesterday SNP deputy leader Nicola Sturgeon said the cross-over point at which people would be worse off under the SNP was about £33,000 for a single earner or £64,500 for a two-income couple.

The party’s finance spokesman John Swinney said council tax currently raises £2.131 billion in Scotland.

Council tax benefit costs £381 million, so the net yield of the council tax is £1.75 billion.

The Institute of Fiscal Studies estimates a uniform 3p on income tax would raise £1.25 billion.

Another £50 million would be raised from second homes and empty properties—in the case of second homes, by levying business rates.

The annual gap between council spending and income—some £450 million—would be met by cash from the Executive through “smaller, more efficient government and redirected spending”.

Householders would continue to pay water and sewerage charges under the SNP plan.

These are at present collected by councils but the SNP expect that under their scheme they would be collected directly by Scottish Water.

Mr Swinney said the cost of collecting the council tax is £65 million and that the cost of administering his party’s income tax plans would be £25 million a year.

Ms Sturgeon said the SNP’s plans were fully costed and independently assessed and she challenged the Labour Party to produce their local taxation plans.

“Our proposals have been independently assessed by the Institute of Fiscal Studies and shows that every family type is better off and completely discredits the Labour Party scaremongering about the impact of the local income tax,” she said.

“Instead of telling lies about our policy, Labour should tell us how they plan to reform the council tax.”

But Labour said the SNP’s plan is a “tax on jobs”.

Labour finance minister Tom McCabe said, “After their disastrous ‘penny for Scotland’ campaign, we thought the SNP had learned their lesson.

“But in today’s announcement the SNP have announced their first new tax hike—a 3p rise in income tax for every hard-working Scot.

“The SNP have still failed to fill the £1.1 billion black hole in their plans. For the first time in history a political party is campaigning on a pledge to raise taxes while simultaneously cutting services.”

Scottish Tory finance spokesman Derek Brownlee said, “Nobody believes that the SNP’s sums add up.

“Even independent experts don’t think they have credibility on their tax and spending plans.

“Local income tax would hammer hard-working families, small businesses and pensioners. Nobody believes that it would only be 3%.”

He went on, “The Nationalists claim that many pensioners will not have to pay a local income tax since they do not pay income tax.

“Many of these pensioners don’t pay full council tax either, as they get means- tested support or exemption.”