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Scotland drops local income tax plan

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The Scottish government has dropped plans for a local income tax (LIT) for the mean time.

SNP finance secretary John Swinney told MSPs the proposals to replace the council tax with a 3p local income tax were not possible in the current financial climate.

Mr Swinney said: “The cabinet has decided not to introduce legislation to abolish the unfair council tax and replace it with a local income tax until after the election in 2011.

The move is likely to be welcomed by the Chartered Institute of Public Finance which has long raised concerns that a 3p LIT would leave an estimated shortfall of£750m in tax yield.

Mr Swinney added: “The financial context has changed,it would not be wise, and indeed would not be possible, to introduce a tax reduction of the scale we propose in the face of such swingeing Westminster imposed cuts.

“But make no mistake, this government will fight that election to win a parliamentary majority that backs the abolition of the unfair council tax.”

The Scottish Green Party welcomed the move.

Patrick Harvie (Green) MSP said: "This overdue decision from ministers simply reflects the unavoidable reality of their situation. Parliament's clear view is that neither a local income tax nor council tax is a fit response to the needs of local government finance.”

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