The Scottish Liberal Democrats could reach a deal with the SNP over a local income tax, party leader Nick Clegg said today.

The Scottish Liberal Democrats could reach a deal with the SNP over a local income tax, party leader Nick Clegg said today.

He said Lib Dems hoped to persuade the SNP to adopt a scheme which gave individual councils the ability to set the local income tax rate.

Mr Clegg's comments came when he visited Holyrood before heading for Glenrothes, where a by-election is looming.

Labour today suggested a "backroom deal" was in the offing between the SNP, who propose a uniform 3p local income tax rate across Scotland, and the Lib Dems, who want councils to have the freedom to set their own level.

Acting Labour leader Cathy Jamieson challenged Nicola Sturgeon, standing in for Alex Salmond at First Minister's Questions, to give an "absolute guarantee" that Scotland would not have 32 different tax rates - one for each council.

Ms Sturgeon did not give a direct answer to this but later said: "The SNP Government looks forward to having very constructive discussions with our friends in the Liberal Democrats under the new broom of Tavish Scott."

When he arrived at Holyrood, Mr Clegg was asked if he would support Mr Scott and his team if the Scottish Lib Dems managed to get a workable scheme.

"Absolutely - that is precisely what Tavish and his team are doing," he said.

"It's always been our stated aspiration to have firstly, the council tax removed and secondly, a fairer local tax based on the ability to pay.

"Where we presently differ from the SNP is that while the SNP's formal policy is still that it should be a genuinely local tax, their present proposal is much more rigid than than, a nationally set rate.

"That is precisely the issue on which we want to now persuade the SNP to go back to their better instincts, so that we are once again in line with each other."

Liberal Democrat MP Ed Davey said yesterday that there could be "difficulties" in introducing a local income tax in only part of the UK.

Mr Clegg said today there were "complexities" in introducing a new type of tax.

"But it's certainly not impossible, no, otherwise we would not support it," he said.

At First Minister's Questions, Cathy Jamieson urged the SNP administration to dump plans for a local income tax which she compared to the poll tax.

"Alex Salmond's tax plans have been roundly rejected by nearly every organisation which responded to the consultation," she said.

The tax would damage the economy and force councils to slash services, she said.

But Ms Sturgeon claimed widespread public support, pointed to last year's SNP election victory, and insisted a local income tax was "fair, progressive and based on ability to pay,", in contrast to a "deeply unfair and regressive" council tax.