Despite welcome news emerging recently, Alex Salmond’s controversial new tax plans could hit poorer students the hardest. Neil Pooran examines the Scottish Parliament’s latest rammy

If you plan to live in the UK after graduation, chances are you’ll look back on your halcyon student days with nostalgia for more than one reason. 

Not least of which is the fact that sooner rather than later you’ll be receiving whopping great council tax bills through your letterbox. After that you’ll probably start to wish those noisy students down the street would stop stealing the traffic cones your tax pounds are paying for.

Students currently get an exemption from local council tax, which is based on the value of the property you occupy. Generally, the more your property is worth, the more you pay.   

Yet, if new legislation passes through the Scottish Parliament, thousands of students could see themselves coughing up for the council.

First Minister Alex Salmond hopes to capitalise on a torrent of discontent with the current council tax system by replacing it with a 3p in the pound Local Income Tax (LIT) that will be based on earned income. The plans have yet to pass through the Scottish Parliament, but they have already set Scotland’s febrile political scene alight.

The SNP were forced into a sheepish admission earlier this year that up to 55, 000 students will be dragged into LIT. Two weeks ago saw something of a turnaround when Finance Secretary John Swinney announced that they would be ‘actively considering’ giving students an exemption from this tax, but proposals have yet to be finalised.

The students hurt by LIT would mainly be those who work during term-time and over the summer to pay for their studies, who often struggle to make ends meet between overdrafts and ever-rising accommodation rates. Meanwhile their counterparts who rely on generous parental support would continue to pay nothing, as well as receive the benefits of not having to juggle work hours with studying. These tend to be students from more well-off backgrounds, while working students are usually less financially comfortable.

And the principle argument in favour of LIT? It is a more progressive tax system, with richer people paying more.

The Scottish Government says LIT will be much fairer than council tax, but this may ring hollow to students forced to give up a chunk of their earnings which previously would have gone towards keeping them in education. 

If the SNP confirm that students will receive an exemption from the new tax it will no doubt be warmly welcomed around Scottish campuses, yet opposition parties will remain hostile. Alex Salmond has been able to push controversial legislation through Parliament before but even he will struggle to put LIT into action.

Scottish Labour derides it as a ‘Nat Tax’ which will leave Scotland the highest-taxed part of the UK. Their new leader Ian Gray fears it will drive away high earners while simultaneously failing to raise enough money to pay for local services. This has brought the unions out against it too, whose public sector members have already been on strike due to council cuts.

Gray has argued that the current economic turmoil means it is no time to risk alienating people in the banking sector who may take what remaining jobs are left south of the border.

The Scottish Conservatives say money earmarked for the LIT plan would be better spent on cutting existing council tax rates for struggling families.

The Liberal Democrats support LIT in principle, but point out that it is not ‘local’ at all; rather it is set by central government in Edinburgh. 

As such they are pushing for local councils to have the power to set the tax rates themselves. Lib Dem support will be vital if the minority SNP administration wants to avoid a humiliating defeat. 

For their part, the SNP claim to have popular support for the proposals. Council tax has long been a sticky political issue, with many finding its property band distinction to be arbitrary and an unfair way of collecting taxes.

In particular, pensioners tend to suffer with council tax bills as they have little or no income to spare. Since the LIT scheme is based on the ability to pay, the SNP argues pensioners will be among the many that get a better deal out of another income tax rather than a property tax.

Arguments for reforming the council tax system are compelling, but a new tax that has no exemption for students could only harm young Scots in higher education. Student representatives will no doubt put pressure on John Swinney to keep them exempt from LIT, yet another handout for Scottish students may be hard to come by.