SNP tax plan is branded 'a double whammy for first-time buyers'

MINISTERS were accused of imposing a punitive tax on young first-time house buyers last night, after new figures showed that tens of thousands of people who are living with their parents will be hit by the new local income tax.

John Swinney, the finance secretary, has announced plans to replace the council tax with a local income tax, imposing a 3p rise in income tax on everybody earning a wage in Scotland.

Official Scottish Government statistics show there are 265,198 people aged between 20 and 34 in Scotland who are living with their parents, many of whom will be working and have to pay the new tax.

Last night, Labour politicians claimed many of these young people were living with their parents in an attempt to save money to get themselves on to the property ladder for the first time. And they warned the SNP's new tax would hit them for the first time, making it more difficult for them to save enough for a deposit on a home of their own.

The local income tax would be based on the income of each individual in a household, rather than imposing a set charge on each household, as the council tax does.

While it is impossible to know how many of the households in Scotland with grown-up children in them would be worse off, the accountants Pricewaterhouse- Coopers calculated that households in band D for council tax would pay more when their combined income hits £49,000 and Band G homes when their income hits £75,000 a year.

Households with three and possibly four income earners would hit those thresholds in greater numbers than houses with just one or two earners.

According to the latest figures, of the 265,198 young people still living with their parents, 31,718 are aged over 30, 67,338 are between the ages of 25 and 29 and the remainder are aged 20 to 24. It is not known how many of these are still in full-time education and therefore exempt from local income tax, but those who are earning will have to pay.

The row is the latest in a series of blows to the Scottish Government's plans for a local income tax, which were unveiled last week and unified Labour, the Tories, the business community and some unions in opposition to them. The tax was branded unfair because it would not raise any money from those living on unearned income, and ministers were accused of hiding the true cost, with claims of a £1 billion black hole in their financial calculations.

Accountants KPMG then warned that the new tax might drive out some of Scotland's wealthiest business people, who would see their local tax liability go up from a couple of thousand pounds a year to more than £100,000 a year.

Yesterday, Wendy Alexander, the Scottish Labour leader, accused Alex Salmond of hiding the true cost of implementing the tax, claiming it could cost as much as £380 million more over four years than the Scottish Government has forecast.

Now that the figures have emerged for the number of young people who live with their parents, ministers are under more pressure to justify their plans because of the effect the tax would have on multiple-income households.

Richard Baker, Labour's spokesman on higher education and student support, said: "More young people are staying in the family home specifically to save money and get themselves on the property ladder.

"What the SNP is proposing is a double whammy. Many of these people will not pay the council tax but they will have to pay the local income tax and it will make it harder for them to get on the property ladder."

Derek Brownlee, the Scottish Tories' finance spokesman, said that the younger generation was already being hit harder than their parents because of less job security and higher house prices.

He added: "This is a disincentive to work and it's another burden that people of this generation don't need.

"This is another example of the local income tax unravelling once we get at the detail."

However, a spokesman for Mr Swinney defended the local income tax plans and criticised opposition MSPs for trying to protect their own incomes.

The spokesman added: "Labour and Tory MSPs are united in trying to stop hundreds of pounds of savings for people on low and medium incomes – people who are being hammered by rising fuel prices, rising food prices, and are only now being protected after a decade of huge Labour council tax rises."