Now Salmond wants to axe Scottish council tax - but it will leave the English with an £800m bill

Alex Salmond launched an audacious bid to scrap council tax in Scotland – and leave English taxpayers to fund an £800million shortfall.

In a clear sign he is spoiling for a showdown with the British Government he despises, Scotland's First Minister outlined plans to replace the 'unfair' council tax with a uniform 3p-in-the- pound local income tax.

The Nationalist leader hailed it as the 'biggest tax cut in Scottish history' and said it would lift 85,000 out of poverty by saving the average Scottish family between £350 and £535 a year.

Council tax currently raises about £2.1billion a year in Scotland. But Mr Salmond's proposed 3p local income tax would claw in only about £1.3billion.

He thinks he can save £400million of the shortfall by shifting around money from the £30billion-a-year subsidy awarded to Scotland by Chancellor Alistair Darling.

But in a move of startling arrogance, the SNP leader pledged to keep his hands on the £400million a year of Council Tax Benefit currently paid in Scotland – even if the charge was abolished.

The scheme fuelled resentment in England where the hard-pressed public would be forced to put their hands in their pockets to fund it.

Families are already facing soaring food, fuel and mortgage costs as the economy flounders.

The plan reignited anger over the way the devolved Holyrood government is using subsidies from south of the border to offer Scottish voters advantages denied to the rest of the nation.

Prescription charges will be axed for Scots in 2011 and they already enjoy free eye care and dental check-ups, free access to cancer drugs and free care homes for the elderly – perks all denied in England.

Two days ago, in another populist move, the SNP scrapped hospital parking charges north of the Border.

Ben Wallace, the Tory spokesman for Scotland, said of the tax plans: 'This is simply about Alex Salmond's determination to stoke up nationalism.

'This is more about his desperation to set up a constitutional showdown than it is about seeking the best value for money for the taxpayer. It is mischief-making of the worst kind.'

Matthew Sinclair, policy analyst at the TaxPayers' Alliance, said: 'If Scotland wants to move to a local income tax, they should pay for it themselves, not keep coming cap in hand to Westminster.'

The local income tax legislation is likely to be introduced in 2009 – but there is no certainty it would get as far as a Holyrood vote before the next summer recess.

But setting out his government's law-making programme for the coming year, the First Minister told the Scottish Parliament: 'I have no doubt Scotland will judge harshly any MSP who votes to keep the council tax in the face of the overwhelming benefit that would flow to millions of Scots.'

But Cathy Jamieson, the acting Labour leader, said: 'Alex Salmond says he didn't mind Thatcherite economics. Now he is bringing forward his very own tartan poll tax.

'Whatever Alex Salmond decides to call them, the SNP's tax plans will simultaneously make Scotland the highest-tax part of the UK and damage local services.'

Tory leader Annabel Goldie said the proposed local income tax had been 'comprehensively rubbished and ridiculed'.

The Liberal Democrats favour a local income tax, but insist that it should not be set nationally, as in the SNP plans, but by council.

Mr Darling is understood to be completely against Mr Salmond's cash grab, arguing that Scotland could hardly claim benefit for a tax that no longer exists.

Last night the Treasury refused to comment but a senior Scotland Office source accused Mr Salmond of a 'con trick'.

The source added: 'Alex Salmond tells people that local income tax is fair because it's related to the ability to pay. But he needs a £400million benefits payment to make it work.

'Either he is ignorant or he is trying to mislead people.'