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Council tax freeze rewards richest Scots

SUBSIDIES to Scotland's wealthiest households are set to break the £100 million barrier next month as the SNP's council tax freeze enters its fifth year, prompting calls for a rethink of the policy.

The continuation of the freeze into 2012-13 means those living in Band H homes, the most expensive level, will rack up windfalls of more than £1130 each, while the smallest and poorest Band A homes save just £373 on average.

A Sunday Herald analysis of newly-released official statistics shows how the freeze has delivered massive reductions in bills for those at the top, despite the squeeze on public spending.

Between them, the country's Band G and Band H homes have been spared bills of £116.4m since the start of the freeze in 2008-09.

By the end of 2012-13, Band G homes will have enjoyed cumulative savings of around £103.2m, while the figure for Band H homes will be around £13.2m.

The figures take into account the rise in the number of Band G homes of about 7000 to around 112,700 last year, and the rise in the number of Band H homes of 800, to 12,060.

The freeze started as a short-term measure pending the introduction of Alex Salmond's local income tax (LIT). The bill for a Band D home was at that point fixed at an average £1149 a year.

The LIT plan later collapsed with the economic downturn, but the freeze remained in place.

It has since become a totemic policy for Salmond, and he went into the 2011 Holyrood election promising to maintain it to the end of this Parliament.

Initially, the Scottish Government paid councils a dedicated £70m extra each year in order to offset inflationary rises. But ministers now expect councils to find the money for the freeze from their general budgets, in return for the Scottish Government keeping council funding relatively high compared with the rest of the public sector.

The intention has been to help hard-pressed families by keeping at least one of their big bills static – a cut in real terms. However, the way council tax is structured means that the biggest cash savings go to those with the biggest houses.

The formula which prices the bands means the bill for a Band H home is always twice the bill for a Band D home and three times the bill for a Band A home within each council area.

And the savings from the freeze work in the same way: a Band H home saves three times as much in cash terms as a Band A home, thanks to the freeze.

The SNP argue that, relative to household income, the savings have the greatest impact on Band A homes, but the long duration of the policy means the cash savings for those who need them least have now become quite startling.

The residents of just one of Edinburgh's most desirable addresses, Ann Street – a favourite of judges and millionaires – will have been subsidised to the tune of £56,750 by the end of 2012-13 because almost all the properties are in Band H.

If the freeze continues on current trends, with subsidies offsetting the effects of inflation being felt elsewhere in household finances, then by the end of the Parliament in 2015-16, the country's Band G and H homes will have enjoyed a cumulative tax break of almost £300m, with Band H homes reaping around £33m of the savings, or £2800 each.

MSP Sarah Boyack, Labour's local government spokeswoman, said: "This is a very significant figure. Labour supports helping families through tough times, but freezing the council tax has to be fully funded and it has to be fair. If those criteria aren't met, it will damage services even more."

A spokesperson for Finance Secretary John Swinney said: "As a proportion of income, lowest income households gain most from the council tax freeze. A household in the average council tax band will have saved over £500 by the end of 2012-13 as a result of the freeze since 2007-08 – a key measure to help boost economic security and consumer confidence in tough times, when other bills, such as fuel, continue to go up."

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