Scottish Parliament economists calculate how much a local income tax would cost after the First Minister tells a radio phone-in that he would introduce the levy in an independent Scotland.
Families with two earners face a £550 hike in their bills for council services under Alex Salmond’s plans to introduce a local income tax in an independent Scotland, the Telegraph can disclose today.
Impartial economists in the Scottish Parliament’s Information Centre (SPICe) calculated the levy would have to be set at 5.4p in the pound to replace the revenue raised by council tax – almost double the rate the SNP originally proposed.
A worker earning the average Scottish salary of £25,729 would pay £849.37 per year, according to the calculations, meaning a family with two average breadwinners would face a bill of £1,698.74.
This is £549.74 more than the average Band D council tax bill of £1,149 for the same financial year. If council tax benefit was used to supplement revenue from a local income tax, the family would still have to pay £266.62 more per year.
A nurse earning an average salary for the profession would pay £746.55, a teacher £1,046.20, a police constable £1,152.41 and a firefighter £982.75.
Labour asked SPICe to calculate how much ordinary Scots would have to pay under the levy after Mr Salmond disclosed last week that he would like to replace council tax with a local income tax if there is a Yes vote in September.
His SNP administration originally promised to introduce a local income tax set at 3p in the pound when he won power in 2007 but he was forced to drop the plan after the recession helped create an £800 million shortfall in the revenue it was projected to raise.
He then spent more than £100,000 of public money twice going to Scotland’s highest civil court to prevent the Telegraph disclosing details of the levy’s financial implications.
His comments during the Forth 2 phone-in were the first time he has confirmed that the local income tax plan had been revived. The SNP’s 2011 Holyrood election manifesto merely promised to consult on a “fairer system based on ability to pay”.
“SNP plans would see huge cuts to local authorities, even further job losses and increased charges unless they doubled the tax from the original level they proposed,” she said.
In 2012/13, the most recent year for which SPICe had information, total council tax income was £2.3 billion. This included nearly £2 billion from the levy itself and £371 million from council tax benefit.
As with the SNP’s original proposals, the economists assumed the new levy would apply to salaries above the income tax personal allowance but not to income from savings and share dividends.
They calculated that a local income tax set at the SNP’s original rate of 3p would generate only £1.29 billion and warned this would leave a financial black hole of more than a billion pounds in local authority finances.
To replace all council tax income, including benefit, they said the rate would have to be set at 5.4p. A household with three workers all earning the average salary would pay £2,548.10 per year, they warned, more than double their council tax bill.
If council tax benefit was used to supplement the revenue from a local income tax, the economists calculated the shortfall would still be £657 million. This would require the levy to be set at 4.5p in the pound, 50 per cent more than the SNP’s original proposal.
A worker earning the average salary would pay £707.81 per year at this rate, meaning the total bill for a family with two breadwinners would be £1,415.62. This is £266.62 more than the average Band D council tax for 2012/13.
A nurse taking home normal wages for the profession (£23,825) would hand over £622.13 per year, a teacher (£29,374) £871.83, a police constable (£31,341) £960.35 and a firefighter (£28,199) £818.96. A household with three average earners (£77,187) would pay £2,123.42.
Ms Boyack used last week’s First Minister’s Questions to challenge Mr Salmond about his phone-in comments supporting a local income tax.