Scotland Finance

Council Tax: There’s safety in numbers


Photo Credit: Images_of_Money via Compfight cc

Richard Kerley, Chair of the Centre for Scottish Public Policy, reflects on the council tax ‘freeze’ in Scotland and the changes ahead.

Across Scotland, as in the other countries of the UK, councils are getting down to setting budgets and thinking about what the Council Tax levels for the next financial year might look like.

How unusual is that? Well, here in Scotland very unusual. Remember, council tax levels have been at a standstill following a deal agreed in 2007 between the SNP government and COSLA.

I don’t think anyone believed that the so called ‘freeze’ would last as long as it has done. It’s not a freeze of course, but is technically a decision by each council encouraged by cash incentives from the government to hold the local Council Tax at a standstill. It’s just that ‘freeze’ sounds tougher and more determined.

We were promised that it would last until a new form of local income tax could be introduced; and when this did not happen, the government seemed to run out of any other idea for tackling local domestic taxes.

The recent Commission on Local Tax Reform was clearly charged with trying to find a way to tackle this and it did a very good job of collecting evidence though balked at actually proposing something firm and definitive as a replacement for the Council Tax.

What the Commission did say – perhaps the most important thing it said – was that the Council Tax had outlived any usefulness and has to be replaced.

That statement alone was rather like the first stone falling off the dam. Set alongside that the perception that local government is going to get a raw deal out of the Scottish budget this coming year, and the possibility that at least some Scottish councils might walk away from the ‘freeze’ gets stronger.

The most surprising aspect of this movement is that it appears to have been led by The Moray Council. Now, if Scottish councils were regiments I am not sure Moray would be the one you’d expect to be first over the top but with their discussion of an 18% Council Tax increase they certainly led the news last week.

Other councils such as Highland, Fife and Aberdeen are also publicly discussing lifting the council tax rate this year and even more are doing so as part of wider budget discussions .

This lively debate shows that the standstill in council tax has always been about calculation. Councils have been incentivised through additional payments not to increase Council Tax; they have not been instructed to freeze it because the government has no power to do that across the board.

What councils are all doing now is working out whether the incentive that might be withdrawn is worth as much as might be raised by a Council Tax increase. That calculation is specific to each council, though it might be in the order of 3-5 % for some of them – the kind of range that various councils are discussing.

The calculation that officials and councillors (and ministers) will have to make is based on various key factors:

  • Whether the kind of increase they might decide upon will outweigh any loss of grant from the Scottish Government
  • Whether it will be acceptable to local residents
  • Whether it will be preferable to greater service cuts.

They also have to assess whether the Scottish Government might try to stop any Council Tax increase in a particular council – which they have the powers to do. Minds will really be concentrated with the Deputy First Minister now giving councils more time to think about budgets.

The best way to proceed for those councils wanting do something seems to be: go for a ‘reasonable’ Council Tax increase – and ‘reasonable’ is always hard to judge. And also hope that other councils do that as well so that no one council is isolated.

So safety might just be found in smaller numbers as well as larger numbers.