Why SNP have spent 20 years failing to ditch the council tax – and why it isn't going anywhere
As Yes Minister’s Sir Humphrey Appleby might say, it would take a courageous First Minister to propose replacing the council tax with a different system
This week councils across Scotland will continue to meet, as some did last week, to set their budgets and council tax for the coming financial year. Thus far, council tax increases have been set between 5 and 10 per cent, well in excess of inflation.
These rises should not surprise us. Even SNP councillors accept the Scottish Government is under-funding councils, with Ricky Bell, deputy SNP leader in Glasgow and the Convention of Scottish Local Authorities’ resources spokesman, saying the government grant to local authorities is “billions short”.
Against this backdrop, it’s not surprising that hard-pressed councils are looking to raise revenue elsewhere, hiking rents and parking charges and chewing over the introduction of visitor levies. Into this mix comes, once again, calls to replace the council tax, with Mr Bell saying the current system should be scrapped entirely and replaced with a new scheme altogether.
2007 SNP manifesto commitment
There is nothing new in these calls. In 2007 the SNP were elected on a manifesto commitment to scrap the council tax. In that first parliament, they might legitimately have been able to claim that they did not have the cross-party support to pursue that as a minority administration, but that excuse hardly applied from 2011 onwards.
We have seen changes to the council tax in the intervening period. More than a decade ago, the Scottish Conservatives asked the former CBI Scotland director Sir Iain MacMillan to bring together a panel of experts to look at tax reform, and his recommendation was that the council tax bands should be made more progressive, to raise additional revenue from those living in larger properties.
In effect, this is what then happened, and the SNP administration made further changes, allowing local authorities to charge council tax on empty properties and second homes. From April, councils’ power to do that will be unlimited.
Those arguing for change claim the council tax is regressive and hits poorer families harder. But there is still no serious and detailed proposal on the table for a replacement, and any which come forward are likely to face significant opposition due to perceived unfairness. The winners will quietly accept their good fortune while the losers will express their fury at the ballot box.
Born from ‘poll tax’ protests
It is important to remember the history of the council tax. It was back in the 1980s that a revolt against a domestic rates revaluation led the then Conservative government to scrap the rates, which were closely tied to the value of one’s property, with a per capita charge for local services, which would pejoratively become known as the poll tax. Whatever the merits of this in principle, it proved unmanageable in practice and was scrapped in the early 1990s and replaced with the council tax.
This new charge was never intended to be a straight replacement for the old rates, but introduced as a hybrid tax between a charge on property and a personal contribution for services. The ratio between the sums paid by those living in the largest properties, Band H, was set at no more than three times those living in the lowest at Band A.
In addition, individuals who lived in a house with single occupancy received a 25 per cent discount, recognising the fact that the consumption of local services depended on the number of adults living in a property, rather than its size.
This important principle reflected the concern that existed under the old rates, whereby a property with four working adults would pay exactly the same as an identical property next door with one retired person, notwithstanding the fact that the four adults would both have greater demands on council services, but also greater ability to pay their bills.
Ability to pay
The SNP government seem to have long since moved away from that principle, with charges on empty properties and second homes (which by their nature have low or zero consumption of local services), and the planned introduction of two new bands for properties valued over £1 million.
They seek to justify this on the grounds that it makes the tax more progressive, but these changes make no account of ability to pay. There are cases of individuals living in, for example, Edinburgh’s suburbs in what are now high-valued properties – bought 50 or 60 years ago for a modest sum – on fixed-income pensions who simply do not have the resources to pay rapidly accelerating tax demands.
The other aspect of council tax reform often discussed, but never tackled, is the thorny question of revaluation. All properties in Scotland are currently assessed for council tax based on notional 1991 values, leading to the absurd situation where a new-build property has to be assessed on what it would have been worth more than 30 years ago. This also leads to considerable anomalies whereby properties in areas of the country where prices have risen faster than others since 1991 have not seen upwards revaluations to reflect that.
When the council tax was introduced, it was originally intended that there would be regular revaluations, but unsurprisingly no government since has pursued that. Given the current uproar at the non-domestic rates revaluation hitting properties such as hospitality and self-catering, where we’re seeing unaffordable rises in bills not reflecting the ability of the struggling businesses to pay, we can only imagine similar protests should there be a widespread revaluation of people’s homes. Moreover, such a process would be lengthy, expensive and time-consuming.
If tackling a council tax revaluation is deemed too difficult, a wholesale replacement is simply not going to happen. In the words of Sir Humphrey Appleby, it would take a courageous First Minister to propose such a thing. Despite all the noise, we are going to have the council tax with us for a long time to come.
Murdo Fraser is a Scottish Conservative MSP for Mid-Scotland and Fife
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