As Ministers consult – again – on reforming the council tax, Brian Taylor explains why the exercise may be doomed
Perhaps Ministers felt emboldened by Hallowe’en – but this week the Scottish Government dipped a decidedly tentative toe into the Stygian depths of council tax reform. Not that you would notice. The Finance Secretary, Shona Robison, stressed that the entire exercise would be “revenue neutral.” That is, no change to the overall amount of cash raised from householders. Maybe, possibly a redistribution of the burden. But even that was played down.
Ministers were not advocating any specific reform. Anything that did emerge would need full consensus, “a long delivery period” - and, thus, would not be completed “in this decade”. Way to kill a story, Shona. Still, one can understand. After all, it was reform of local government finance which ousted Margaret Thatcher from Downing Street. Remember the poll tax? Course you do.
SNP Ministers have spent much of their prolonged period in office uttering sundry promises to shake up the council tax, which replaced the poll tax. When he was Finance Secretary, John Swinney looked at Local Income Tax – which had occupied SNP (and Liberal Democrat) thinking for aeons. He looked, he pondered – and concluded it was an even bigger stinker than the council tax. Not that he quite put it that way, of course. But that was the verdict in practice. Too great a burden on those in employment. Too inflexible for local authorities. Too cumbersome and bureaucratic to collect.
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Which brings us to this week’s consultation paper, the joint endeavour of Ministers and COSLA, the local authority body. May I congratulate the authors on a model of dry understatement? It notes that council funding has “been the subject of debate over two decades”. It succinctly tracks recent efforts.
In 2014, there was a Commission on Local Tax Reform, with cross-party representation. They looked, they pondered. They advocated keeping, but amending, the existing system – although there was no consensus on detail.
In 2018, there was a Holyrood motion to replace the council tax altogether. It fell, again for want of consensus. That was followed by cross-party talks and, in 2021, by a working group involving the SG and COSLA. Still, no deal. This week’s publication notes that “while there is agreement across the political spectrum on the need for reform, there are disparate views on the nature of reform.”
In short, each party eggs the others on – while quietly neglecting the inconvenient fact that their own policy cupboard is empty. However, let us be charitable. Ask yourself this. Can you come up with a funding system which raises enough for key council services – and is universally regarded as fair? Exactly.
The problem lies with fundamental imbalances in the overall system. Firstly, house valuations are now hopelessly out of date. Unchanged since the tax was introduced more than 30 years ago. Property values in Scotland have risen by more than 350 per cent since that date. Which argues for a revaluation. But would that be fairly operated – or broadly welcomed? Remember it was a pending rates revaluation in the late 1980s which prompted Scots Tories to demand change. Result? The poll tax.
Now, of course, reform need not involve such a drastic step. But politicians are understandably cautious. The system can still work on notional figures. But are the calculations fair? Frankly, they are not. Council tax is said to be regressive in that lower value homes tend to pay a higher share of the notional property rating. Equally, what about cash-poor pensioners who inhabit relatively highly valued homes? What if your notional value takes you just a fraction into a higher band? The change in your bill can be substantial.
There are a few exemptions and there is a council tax reduction scheme to help those who are struggling. But is it fairly operated? If there are to be changes, there will need to be mitigation schemes to assist in implementing those alterations.
Next year, council tax is expected to raise more than £3bn for local authorities from more than 2.5m chargeable homes. Sounds a big sum. Is a big sum. But it is only around 19 per cent of total funding for local authorities. The rest is set Scotland-wide. Some 63 per cent comes from a General Revenue Grant paid by the Scottish Government – and thus primarily derived from income tax. Plus around 18 per cent from Non Domestic Rates paid by businesses.
Those sums create basic problems in themselves. They form a gulf between council tax payment and local authority revenue. Arguably, it is a democratic deficit. However, there can be problems of practicality and equity if efforts are made to link local services directly to individual, local charges. Again, poll tax anyone?
Further, how about NDR or business rates? Those are collected by councils – but set centrally. Businesses have no direct democratic say at all. They must simply lobby and cajole, with varying success. Again arguably, that is taxation without representation.
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The current system is designed to even out differences in income across council boundaries. With inevitable complaints. Some critics also say that big city councils should perhaps think twice before seeking to extract extra cash from their leafy suburban neighbours. After all, those areas may already be contributing substantial sums through income tax.
Then there is the question of what councils do – or should do. Their most costly responsibility is education, with social work placed second. There is constant tension. Ministers set Scotland-wide guidelines for schools and have only just sidelined plans for a National Care Service.
We have 32 councils of disparate sizes. Is that too many? Probably. But reform would waste money and time, while potentially threatening accountability links which are already weak.
The real problem is that with each of these issues – local funding, social care, schooling – there is an absence of empirical collective thinking. Attempts to reach agreement always subside into partisan division. Ross Greer of the Greens tried again with the FM this week – urging John Swinney to scrap the council tax. Snag is Mr Greer was imprecise as to alternatives, suggesting only that Parliament should back “whichever option” emerged from consultation. Mr Swinney politely swerved that one – instead urging a continuing search for consensus. Loadsaluck.
Brian Taylor is a former political editor for BBC Scotland and a columnist for The Herald. He cherishes his family, the theatre – and Dundee United FC
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