It looks like a hot spot which can be caused by any number of things. I think it happens a lot in light skinned dogs for some reason. My samoyed/golden cross used to get those, (although they were not itchy).
You're doing the right thing by keeping it clean, but a visit to the vet is in order to determine the cause. Does he brush the dog? Matted hair can cause irritation. So can bug bites. The vet used to shave a patch of hair off of my dogs hot spots so they could heal.