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Alternative to council tax freeze is out there

THE worsening impact on public services of the long-running council tax freeze was highlighted by two separate bodies this week.

The association of council chief executives warned that holding bills at 2007 levels was becoming increasingly "challenging" and could only be achieved by cutting spending, and the Accounts Commission reported that charges for everything from social care to parking and leisure centres was rising to help plug the gaps in council budgets. Looking more generally at the council tax, the Institute for Fiscal Studies think tank said in a new report the system was "ripe for reform" and noted that the Scottish Parliament had failed to make even the "simplest and most obviously desirable" reforms. The comments prompted fresh calls for the Scottish Government to bring forward proposals - promised since before the last election - for a fairer alternative to the council tax. By accident or design (I suspect the former) its concise response went to the heart of the long and sorry saga of Holyrood's continued failure to tackle the issue of local government finance. It said the council tax was "unfair," it said freezing bills was "overwhelmingly popular," and it said efforts to sort things out would start "later".

The Scottish Government's enthusiasm for the council tax freeze, now in its seventh year, has rather obscured the fact it began life as a stop-gap measure until the planned local income tax could be introduced. Before then, successive Labour/LibDem administrations had taken the view that while the council tax wasn't too broke (people weren't rioting, at least) then it didn't really need fixing. When then-First Minister Jack McConnell was presented with sensible plans for a more progressive levy (under former Bank of Scotland chief Sir Peter Burt's proposals you'd have paid an annual bill equivalent to about 1% of the value of your house) he rejected it before the ink was dry on the report.

A year later the SNP were brave enough to say the council tax was broke and came to power promising the local income tax. It proved a disaster. Wealthy people living on "unearned income" from share portfolios would not have to pay a penny, it was claimed, and the question of what might happen in a recession, when income tax revenues nosedived, was never addressed. It later emerged, only after a lengthy freedom of information court battle, that the SNP's proposed 3p in the £1 rate would have left a £770million hole in council coffers. Facing near-universal opposition it was shelved in 2009. It's left us with a broken council tax and no plans to fix it. Only it's worse than that. Despite its faults the council tax has become extremely useful thanks to the decision to keep freezing it. John Swinney's 2007 stop-gap has since been retro-fitted with a cod-philosophical justification. It's become a pillar of the Scottish Government's "social wage". It's even mentioned by ministers in the same breath as "the great gains of devolution" such as free care for the elderly. The council tax freeze will have saved those in Band D properties £1200 by 2016, Alex Salmond trumped at First Minister's Questions. He didn't, by the way, say how much more people lucky enough to live in big Band H houses will have saved over the nine years of the freeze. No wonder the council tax freeze looms over every election fought in Scotland. Labour, despite misgivings felt by many in the party, have been no less guilty than the Nationalists when it comes to the hard-nosed business of campaigning.

And so the problems continue. By and large the better off continue to benefit disproportionately from freezing bills while councils face a growing problem providing services which, by and large, the less well off rely upon.

The SNP have promised to bring forward their alternative to council tax, which may yet be a tweaked version of local income tax, by 2016. We are unlikely to see it before the referendum, however, for the same reason Jack McConnell ducked change before the 2007 election - that any reform will create losers as well as winners. Labour have voiced tentative support for a land value tax, a levy on the value of the land you occupy rather than the house standing on it. The IFS, meanwhile, commended a Peter Burt-style property value tax. Is it worth dusting off his report? Whatever proves best, the debate should start sooner rather than later.

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Local government

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