Nicola Sturgeon breaks her promises as council tax to rise

Council tax bills are now set to rise by almost five per cent in April, taking the charge for an average Band D home to £1,266, an increase of £58.

The bill for an average Band H home is expected to rise by £142 a year to £3,102.

Faced with the threat of the first Budget defeat in a decade at Holyrood and demands for more powers from councils themselves, the Government also agreed to empower councils to levy a tourist tax on overnight visitors.

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One tourism body called it “beyond disappointing” and a significant blow to the industry.

Councils will also be allowed to tax workplace parking spaces, except those in the NHS.

Some English councils charge employers £400 a year per space to help cut congestion. 

The charges come on top of higher income tax bills relative to England announced in December.

Bills for middle-class Scots will be around £1,400 higher than south of the Border.

The Scottish Tories said the SNP had dropped a “triple tax bombshell” on the country, while the Federation of Small Businesses said the changes would “erode trust” in the Government. 

The minimum plastic bag tax is also set to double from 5p to 10p, with councils set to get a portion of the revenue, and there will be a charge on disposable drinks cups.

The Government also agreed to cross-party talks on abolishing council tax altogether, with legislation on an alternative scheme by the end of this Parliament.

However, it would be up to the next Parliament to pass such a law, and previous attempts to overhaul local government finance have ended in failure.

The Government will also devolve an element of business rates to councils, letting them set empty property reliefs after the next revaluation in 2022, a move the Greens see as a first step to more sweeping local powers over rates.

The cross-party council umbrella group Cosla welcomed the late changes to the Budget and said funding for public services was now “in a better place”, although some cuts remained.

The changes were laid out by Finance Secretary Derek Mackay after days of intense talks with the Greens, who had demanded better council funding and tax reform.

He confirmed a deal just 15 minutes before MSPs began debating the budget before a vote on its general principles. 

Mr Mackay said the revisions were worth an extra £187m for councils, including £47m from higher council tax bills and £50m of extra flexibility around previously ring-fenced funds.

There will also be £90m of extra cash courtesy of the UK Treasury via the Barnett formula. 

Many of the changes had been demanded by Cosla, which had warned of £237m in cuts across local government next year. MSPs passed the Budget Bill by 67 votes to 58. 

Mr Mackay said: “The Scottish Government has continued to ensure our partners in local government receive a fair funding settlement despite further cuts to the Scottish budget from the UK Government.

“These additional measures will deliver the most significant empowerment of local authorities since devolution and provide additional funding to support local services.

“This enhanced package offers up to £187m of increased funding and flexibility to councils, on top of the £11.1bn local government settlement. In total, overall spending power for local authorities next year will be £620 million higher than it is currently.”

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The SNP fought the 2016 Holyrood election with a promise to cap any rise in council tax “to a maximum of 3 per cent a year” until 2021. 

However that pledge is dead after two years, with the cap now set at 4.79%, the equivalent of 3% plus inflation, compared to a 5% cap south of the border. 

It will be up to councils to decide whether to raise bills by the maximum allowed, but past experience suggests all 32 local authorities will do so.

The workplace parking levy will be tagged onto a Transport Bill currently at Holyrood.

The Tories said the SNP’s alliance with the “anti-growth, anti-business Greens” would hike tax and harm an already underperforming Scottish economy.

MSP Murdo Fraser said: “Thanks to the SNP, Scots across the country are about to be hit by a triple tax bombshell. We will pay the highest income taxes in the UK, council tax will go up, and you might even be taxed hundreds of pounds a year for taking your car to work. 

“Derek Mackay has torn up the promises he and Nicola Sturgeon made to voters at the last election on tax. They said they would cap the council tax at three per cent and protect low paid workers. All that has been dumped. This disgraceful betrayal of Scottish voters shows once and for all that Nicola Sturgeon’s government simply cannot be trusted.” 

Green MSP Patrick Harvie admitted the budget was not perfect, but said the concessions his party extracted would go a long way to protecting council services.

“We have for the first time a clear, definitive timescale for publishing legislation to abolish and replace council tax during this session of Parliament,” he said.
He also criticised other parties for failing to engage in the budget process, accusing them of preferring to see the budget collapse and “chaos for the sake of chaos”.

Citing independent research by parliament officials, Scottish Labour said councils still faced around £230m of cuts.

MSP James Kelly said: “The only thing the SNP-Green stitch up will deliver is cuts.” 

Scottish LibDem leader Willie Rennie said: “The Greens have accepted a budget that fails to scrap the council tax and delivers a cut of £50m for social care. This limp, underwhelming budget fails to deliver on mental health, education and local government finance.”

Cosla President Councillor Alison Evison said: “Whilst challenges still remain, we are now in a better place than we were with the original budget proposal.

“I welcome the commitment to the introduction of discretionary taxation (Transient Visitor Tax) and the Workplace Parking Levy – it is right that local authorities across Scotland should be able to raise revenue locally to address local issues.”

Andrew McRae of the Federation of Small Businesses said: “Instead of Brexit help for firms, we see more tax changes, including a levy on our vital tourism industry.

“Ministers repeatedly promised firms that they would not pave the way for tourism taxes without industry support. They’re breaking that promise.

“We are also concerned that the decision to allow local authorities to control empty property rate relief sets a worrying precedent, could lead to the full localisation of the rates system and eventual higher bills for local businesses.”

David Lonsdale, director of the Scottish Retail Consortium, said the plan to give councils new tax-raising powers posed a risk to consumers and businesses alike.

He said: “Higher council tax can eat into customers disposable incomes, reducing spending and ultimately growth. Introducing extra costs on businesses through further levies is unlikely to lead to sustainable revenue in the long term. We will be very interested in how these powers are actually used by town halls across Scotland to support local economies.” 

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He also raised concerns about the tweak to business rates, the carrier bag charge, and said retails would oppose the workplace parking levy being applied to shops and malls.

But Gavin Thomson of Friends of the Earth Scotland welcomed the parking tax. 
He said: “This policy can be used to discourage car use whilst encouraging public transport use, with benefits for air pollution and climate emissions and so should be welcomed by all.”

The Scottish Tourism Alliance attacked the plan for a tourist tax or Transient Visitor Levy (TVL), pointing out a national consultation on the idea ended only last week.  

It said: “A decision of such importance and one which has the potential to cause significant negative impact, not just to businesses who provide visitor accommodation but to all businesses that benefit from tourism economic activity, has been reached prematurely.

“It will only serve to undermine the confidence that thousands of tourism businesses operating across all sectors of the industry has had in the Scottish Government.”

Scottish Chambers of Commerce boss Liz Cameron said:  “The additional announcements will provide councils with added revenue raising powers, however, business communities will be alert to how local authorities approach the potential use of these new powers. 

“A transient visitor levy may not be suitable for each individual business community, and companies will be carefully considering the costs and benefits of introducing this measure.”