Salmond strikes another blow with plan to abolish council tax

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Alex Salmond moved to widen the growing gulf between Scotland and the rest of the UK yesterday when he announced plans to scrap council tax north of the border within three years.

Mr Salmond set the scene for a bitter political battle with Westminster by announcing plans to replace the charge with a 3p-in-the-pound local income tax. He hailed the plans as "the biggest tax cut in Scottish history" and said millions would be better off.

But the prospect of Scots being relieved of the unpopular council tax while the rest of Britain still has to pay it will fuel suspicions that Scotland is benefiting disproportionately from devolution. Already elderly residents get free personal care while up-front university tuition fees have been abolished.

Last night ministers in London vowed to axe the £400m in council tax benefits currently paid to Scottish taxpayers if the changes go ahead.

Mr Salmond wants the money paid to the Scottish government, but Westminster says it would be unfair to subsidise a system different from the council tax regime south of the border. One Whitehall source said: "They should not assume they can have their cake and eat it."

The Scottish Parliament is braced for months of wrangling over the plans, with the minority SNP administration needing support from the Liberal Democrats and Greens to push them through.

Mr Salmond has continued the trend away from English policies in key areas since devolution in 1999. Scotland banned smoking in public places and fox-hunting ahead of England, as well as rejecting university top-up fees.

Scottish ministers are also considering plans to ban the sale of alcohol in off-licences to under-21s, although 18-year-olds would be permitted to drink in pubs. A health Bill may also contain plans to charge pubs for cleaning up drink-related disorder, while the announcement included plans to cut CO2 emissions by 80 per cent by 2050 – more than the 60 per cent proposed by Westminster. Mr Salmond says he is on course to win a referendum on independence slated for 2010. His party is riding high in the polls and is odds-on favourite to repeat its devastating victory over Labour in Glasgow East when the Glenrothes by-election is held later this autumn. An SNP poll released earlier this month showed more than half of people back Mr Salmond's performance as First Minister.

Mr Salmond has already used Scotland's generous funding settlement to freeze council tax and cut rates for small businesses. Detailed proposals for replacing council tax will be published later this autumn, with a Bill due early next year. If it is passed, the tax could be replaced by 2011.

"Abolition of council tax will lift 85,000 individuals from poverty," he said. "It will save the average Scottish family between £350 and £535 a year. I have no doubt Scotland will judge harshly any MSP who votes to keep the council tax in the face of the overwhelming benefit that would flow to millions."

Labour condemned the policy as the SNP's "tartan poll tax" and questioned whether it could be implemented, while the Conservatives said that the plans had been "comprehensively rubbished and ridiculed". The acting Scottish Labour leader Cathy Jamieson said groups from the Scottish CBI to the Scottish TUC opposed the plans. She said: "The SNP's tax plans will simultaneously make Scotland the highest-tax part of the UK and damage local services."

The Liberal Democrats oppose the SNP's plans for a flat-rate local income tax, but were careful yesterday to leave the door open to talks on scrapping the council tax. Green MSPs also said they were prepared to talk to the SNP about the plans. The Liberal Democrat leader Tavish Scott said: "We want to see the abolition of the discredited council tax. [We] want a genuinely local income tax and look forward to working with the Government to deliver that."

The Scottish reforms

* Free long-term care for the elderly. One of the first acts of the devolved Scottish Executive.

* University tuition fees. The Labour-led Holyrood administration abolished the £1,000 a year up front university tuition fees for higher education. The Scottish Executive also rejected English plans for university top-up fees of £3,000 a year. Last year the SNP administration abolished the remaining £2,000 fee paid by students after graduation.

* Prescription charges. Last year the SNP government in Edinburgh moved to cut prescription charges, pledging that they would be phased out by 2011.

* Council tax. Yesterday the SNP administration pledged the biggest change in local tax for nearly 20 years, promising to introduce a local income tax across Scotland. The SNP has already frozen council tax and cut business rates to boost jobs.

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