(Chancellor Alistair Darling speaks out against the plans whilst campaigning in Glenrothes)

The SNP government is investigating how to tax unearned income in a change to flagship plans to replace the council tax, it was revealed today.

Finance secretary John Swinney confirmed the policy shift to the proposed local income tax, a levy capped at 3p in the pound.

He told the BBC's Politics Show: "We're certainly considering that as an option, I'm very happy to confirm that.

"And if we decide to do this in due course and we all want to call it a U-turn, I'll call it a U-turn. I'm not fussed about that."

Mr Swinney also indicated he could allow councils to vary the charge down from the 3p limit.

He said the potential change was sparked by public consultation exercises.

And he said there was a "strong argument" to exempt students from the charge.

"We're a government that has to listen to the views of other parties because we operate in Parliament without a majority, so we've got to find a way of building consensus," he said.

The change of policy emerged in emails released to BBC Scotland's Politics Show under freedom of information legislation.

Officials wrote to HM Revenue and Customs seeking information on how investment income would affect the proposed tax.

In an email dated September 23, a Scottish Government official wrote: "You may remember that I got in touch with you over a year ago requesting information on Scotland for analysis we were carrying out re how much revenue we could raise from the local income tax.

"Following on from that we are now trying to assess how much money could be raised from investment income if a local income tax was applied to this."

The government previously decided it would be too costly and time-consuming to tax unearned income.

The move was criticised over concerns the richest would exploit the loophole by taking more dividends and pay less for local services.

Mr Swinney's indication that councils could vary the level is considered key to winning Liberal Democrat support, who approve of local income tax in principle.

Labour finance spokesman Andy Kerr said: "The SNP won't get their new tax through Parliament unless they can do a back room deal with the Liberal Democrats, who will serve as the hand maidens to a policy disaster even worse than the poll tax.

"The idea that to appease the Liberal Democrats we could have 32 different rates of income tax, one for each local authority, is madness. It will impose a massive new burden on employers."

The party's leader at Holyrood Iain Gray told the Politics Show: "Were they to try and levy the income tax on dividend income, that would be a huge U-turn from what's always been said before.

"Although it's not the U-turn we really need because it wouldn't address the fundamental flaw in this policy, that it's bad for working families because they'll pay more."