Scotland Finance

The Commission on Local Tax Reform: the problem of squaring circles


Picture: the members of the Commission on Local Tax Reform present their report at Edinburgh's Dynamic Earth

Professor Richard Kerley, Chair of the Centre for Scottish Public Policy covers the final report from the Commission on Local Tax Reform, which was presented today at Edinburgh’s Dynamic Earth.

It always used to be the case that the reports of Commissions and Committees were visually dull. Perhaps the odd map or table, very occasionally a chart – but never pictures.

And now? Always pictures; charts; diagrams; infographics. Today’s report from the Commission on Local Tax Reform has plenty of them – somewhere in the order of 30. All the location pictures have been taken in sunshine, as they always are in all such reports nowadays.

What is missing is the diagram showing the Commission trying to square several circles at once. Or, perhaps, trying to pretend the circles don’t need to be squared… but they do.

Some examples. Early on in the report they argue – and I agree with them – that neither council tax, nor the council tax freeze, can continue. One of the reasons is that ‘some people are paying more than they should’. Omitted here is the matching statement that some are paying less than they should. That is referred to later in the report, in research indicating that about 57% of properties appear wrongly banded, with those that should move up and those down about equal in number. It’s early recognition that as in all proposed tax changes, winners are often silent but losers always vociferous – look out for that.

The report also discusses studies carried out by different research teams examining aspects of local taxation in different countries.These indicate that concepts such as equity, fairness, ability to pay – and critically, how to apply these in practice – are things that governments in different countries struggle with. Balancing this problem with the near universal recognition that land and property are major assets that should not be left untouched by taxation leads the Commission to, in effect, suggest more than one form of local tax.

This seems to me to make a lot of sense – in principle – but as always with tax, the devil is in both the detail and in the implementation. And also, of course, in what is not considered.

So, for example, a chart that will clearly be helpful to readers shows that Council Tax pays for far less of local government (at about 12% of income) than many tax payers believe it does. It is, however, now outweighed in volume by Non Domestic Rates at 15% – a substantial slice of taxation that the report only mentions in passing, as it was not in their remit.

Some will be disappointed, some critically amused, that this report does not produce an agreed solution to a complex problem that has dogged us for more than 25 years now.

There’s a reason that the Commission did not do that, but instead outlined and discussed a range of options – and it is an advantage. Firstly, the preferred mix of solutions that one party may put to the electorate is probably not the preferred option for other parties. Secondly, when others have presented a ‘take it or leave it solution’, as has happened before, governments and opposition parties can often be overhasty in responding with a “We’ll leave it, thanks”. This is precisely what happened to the Burt report some 10 years ago – shamefully within about an hour of formal publication – as all the major political parties turned their thumbs down.

This report, at 89 pages (the Technical Annex is 245 pages, the assembled evidence 400), provides us with a lot to chew on over Christmas.

I have already asked my family for The Power Broker by Robert Caro for Christmas – that weighs in at 1300 pages. Fortunately I can read in parallel so will try and tackle both.