Scottish Liberal Democrats are campaigning to scrap the council tax and replace it with a fair system based on ability to pay.

Liberal Democrats across the UK believe that the council tax is an unfair system that penalises those on low incomes. The richer you are, the less you pay as a proportion of your income, making it a highly regressive and inequitable tax. Nationally, the poorest 10 per cent of the population pay over 4 times more of their income in council tax than the richest 10 per cent. Scandalously, the poorest 20 per cent of pensioners pay nearly 6 times more than the richest 20 per cent of non-pensioners, as a proportion of their income. Most significantly, the banding system puts a ceiling on what the richest pay, and a floor under what the poorest pay. This problem is made worse by the inefficient council tax benefit system and the fact that an individual’s council tax band is not sufficiently related to their income.

Liberal Democrats do not believe that revaluation is the answer, as it would cause council tax bills to soar, as has happened in Wales. It would hit pensioners hard - those on low and fixed incomes are again most likely to be penalised by revaluation because houses in lower bands are more likely to be moved up. The fact that someone’s home has increased in value has nothing to do with their ability to pay, and the impact of jumping up one or more bands could be devastating.

Scottish Liberal Democrats want a fairer tax system. We want to abolish council tax altogether and replace it with a fair local income tax, based on ability to pay. Under our plans, 70 per cent of households in Scotland will be better off and most pensioner households will pay nothing. The average household in a band D home would save hundreds of pounds a year – in fact more than 80 per cent of band D households would pay less. Local income tax is cheap to administer and tried and tested the world over, from Sweden to the USA.

Under a progressive system of local income tax everyone pays the same proportion of their income, and it remains a fairer tax throughout life. Council tax does not change when your income does, so when an individual retires or cannot work, their bills remain the same. In contrast, local income tax is fairer for families, young people starting out in employment, pensioners, and many other low income groups.

Scottish Liberal Democrats were pleased to see that Sir Peter Burt's independent review of local government finance, published in November 2006, was severely critical of the current system of council tax. The report agreed with the Liberal Democrats that no matter how the council tax system is adjusted, it will always be unfair and fail to reflect an ability to pay.

We will continue to push for the government to abolish the regressive council tax and introduce a fairer local tax where everyone pays the same proportion of their income.