Salmond's local income tax'will hamper bid to retain HBOS jobs'

THE local income tax proposed by Alex Salmond will damage Scotland's chances of retaining jobs and headquarters functions when Lloyds TSB takes over HBOS, Labour said yesterday.

Iain Gray, the new Scottish Labour leader, used his first confrontational exchange with Mr Salmond at First Minister's Questions to demand the Scottish Government drop its local income tax (LIT) plans.

Mr Salmond insisted, however, that not only did Scots want a local income tax but the "vast majority" of workers in the financial sector would be better off under the new levies.

This was Mr Gray's second appearance at First Minister's Questions since he succeeded Wendy Alexander earlier this month, but it was the first time he and Mr Salmond had clashed on policy.

Last week, the chamber was united in trying to find out what would happen following the HBOS deal and all the party leaders stayed away from party- political attacks.

By yesterday, that consensus had disappeared and Mr Gray used the takeover to lambast the SNP government's controversial plans for a replacement for the council tax.

In an assured and combative performance, Mr Gray said Mr Salmond had promised to "strain every sinew" to retain HBOS headquarters functions.

"We have to make Scotland as attractive as possible to do that," Mr Gray said.

"There is a consensus that his Scottish national income tax plan will do the opposite."

The Scottish Government has promised to push ahead with its local income tax plans in the face of heavy criticism, particularly from the business community.

The CBI has said the tax could damage hopes of growing the economy and attracting talent to Scotland, and other business bodies and unions agreed.

"There is a consensus," Mr Gray said. "Will the First Minister strengthen Scotland's case for the HBOS HQ right here, right now, by committing today to ditch his damaging local income tax plans?"

The First Minister replied: "Local income tax carries a consensus support of the Scottish people. We will see in due course whether it carries the support of the Scottish Parliament.

"The vast majority of workers in the financial sector would also benefit from fairer and local taxation.

"Iain Gray should join the consensus of the Scottish people, who think the days of the council tax should be over and local income tax should come in," he added. Mr Gray retorted that recent polls suggested only 46 per cent supported the new tax, not the "consensus" of the Scottish people, Mr Salmond claimed.

"There are thousands of jobs at stake," Mr Gray said. "Those workers are concerned that if we fail to keep those jobs here in Scotland, they won't be paying any tax, certainly not income tax, because their jobs will have been lost.

"I say to the First Minister, think of the signal this would send to Lloyds TSB and to those workers about how serious he is about making this case.

"Does he care enough, is he big enough? He said he would strain every sinew, but in reality, he is standing idly by on this. I ask again – will he drop the discredited local income tax now?"

Mr Salmond denied he could be accused of doing little over the past week. "The reality is that we have sought to build a consensus," he said.

The HBOS jobs and HQ issue was "absolutely fundamental", said Mr Salmond.

"I think I should demand as First Minister for this chamber to unite behind the positive Scottish case we are presenting to HBOS."

The current state of affairs had come about under the watch of UK authorities, he claimed.

Mr Salmond said: "How much better it would be, in making the argument to any corporate headquarters, if we could make the argument for a competitive corporation tax in Scotland that would bring jobs, investment and real decision-making into this economy."