Council tax rates are to be frozen across Scotland, First Minister Humza Yousaf announced at the SNP Conference in Aberdeen on 17th October. Councillors across Scotland are very angry about both the decision and the way it has been handled.
A promised Council Tax freeze in 2007 probably helped the SNP to win the highest number of seats on the Scottish Parliament that year. This appears to be a desperate attempt to replay 2007, following on from their resounding defeat in the Rutherglen and Hamilton West by election.
No one likes paying Council Tax. In the whirlwind of a cost of living crisis partly created by world events but exacerbated by the decisions of the Tory UK Government, no one wants to raise Council Tax. However, essential services must be paid for. Local Authorities need adequate funds to deliver things like education, health and social care, to keep waste collection going, roads and pavements in order, and to provide bereavement services.
If the Scottish Government adequately funded local authorities, a Council Tax freeze would not matter. But the Scottish Government does not adequately fund local authorities.
Year on year since 2007 the Scottish Government has received increased Central Government Funding and reduced its contributions to Local Government Funding.
The Accounts Commission Financial Overview of Local Government in Scotland 2020/2021 said: “councils have seen a real terms reduction in funding from the Scottish Government of 4.2 per cent since 2013/14. This is a larger reduction than the rest of the Scottish Government budget over the same period.”
Mr Yousaf announced the Council Tax freeze during his closing speech at his party's conference in Aberdeen, without giving forewarning to local authorities which are required to collect the Council Tax. Local Councils get around 13 per cent of their overall funding from Council Tax. Around 80 per cent of their cash for essential services comes from Scottish Government funding, with some coming from Council Tax and fees and charges. The budget gap – the amount of cuts Falkirk Council needs to deliver to balance its budget – is £67 million over the next four years. However, that estimate was based on the assumption that Falkirk Council would raise Council Tax by at least five per cent each year. If prevented from raising the Council Tax, it needs to find a further £4 million in cuts each year to balance the budget.
The Scottish Green Party was warned hours before the announcement of what Mr Yousaf was going to do. Even though they are supporting the SNP minority administration in Holyrood, their views were not sought. The Greens have said: “As we have repeatedly highlighted, council tax is a ludicrously broken system.”
In July 2023, the Scottish Government issued a consultation paper proposing increasing Council Tax by 7.5 per cent to 22.5 per cent on bands E to H. This proposal is simply a repeat of the 2017/2018 increase. The Consultation closed to respondents in September 2023, but there was no announcement of the outcome. If this proposal had been implemented, it would have raised an extra £176 million.
When Falkirk Council implemented that increase in 2017/2018 it raised an extra £2.3 million but lost £6.4 million in Scottish Government funding. Falkirk Labour Group was opposed to the implementation of this proposal as it would have perpetuated the inherent unfairness of the Council Tax scheme.
As the Fraser of Allander Institute put it “Tweaking around the edges of Council Tax does not fix its fundamental flaws”
You might think we would be pleased that the proposal has been abandoned, but our view is that there should be a revaluation, and/or replacement of the Council Tax with a fairer system – as promised in 2007 and again in Yousaf’s Conference 2023 speech.
Mr Yousaf did not set out how the government would make up the budgetary shortfall for councils who would have raised taxes. But if the SNP do as was done before and compensate Councils to the tune of three per cent it would cost £100 million. If the Scottish Government has a spare £100 million, why, oh, why could they not have given that to local councils to prevent the need for such swingeing cuts in the first place? Local Authorities should be allowed to make the decisions best for their local area – not a centralised power hungry Holyrood Government hellbent on a sound bite.
Until the last two years, Council Tax has been either frozen or capped at three per cent since the SNP came to power in 2007.
In those last two years councils were allowed to use new powers to set their own rates, with most areas setting rises of between four and seven per cent this year – the SNP administration on Falkirk Council raised the Council Tax by seven per cent with the support of the Conservatives.
In 2007, the SNP manifesto promised scrapping and replacing council tax. It said “We will scrap the unfair Council Tax and introduce a Local Income Tax set at 3p.” In 16 years that has not happened. Nor has the SNP followed the lead of the Welsh Government, where homes were revalued to make the tax fairer. In Scotland and England the tax is based on 1991 valuations of property, which are now meaningless. Identical properties in different parts of the Falkirk Council area can be in different Council Tax bands, paying very different amounts.
The history of Council Tax in Scotland:
- 1991 Introduction of Council Tax based on 1991 property valuations
- 2007 SNP Manifesto commitment to freeze Council Tax then to replace it with a fairer alternative. SNP won 47 seats, and with the support of the Green Party set up a minority Scottish Government. They have been in control of the Administration ever since.
- 2007 to 2021 Council Tax frozen or capped at three per cent. SNP Scottish Government gives local authorities an extra three per cent to compensate, but year on year reduced core funding.
- 6th April 2016 Scottish Income Tax was introduced at a rate of 10p in the pound. No change was made to the Council Tax Scheme
- 2017 SNP increases Council Tax on Bands E to H by 7.5 per cent to 22.5 per cent
- 2021/2022 All Councils agree to freeze Council Tax to help with the COVID Crisis and the Scottish Government gives three per cent uplift.
- July 2023 SNP proposes increasing Council Tax on Bands E to H by 7.5 per cent
to 22.5 per cent . - 2022/23 and 2023/4 Councils are permitted to raise Council Tax.
- 30th June 2023 The Verity House Agreement is published. This is a partnership agreement between the Convention of Scottish Local Authorities and the Scottish Government setting out a vision for a more collaborative approach to delivering our shared priorities for the people of Scotland. It forms the first part of the New Deal with Local Government.
- 18th September 2023 The Scottish Government’s proposals for updating council tax are mere “tinkering” and “effectively pointless”, says Reform Scotland. They also said the consultation on increasing bills for better-off homes was a missed opportunity when replacing the tax in its entirety was required.
- 5th October 2023 Rutherglen and Hamilton West by election, where Labour won with 58 per cent of the vote, knocking the SNP candidate into second place with
28 per cent of the vote . - 16th October 2023 Poverty and Inequality Commission says that revaluation of homes for Council Tax is one of a series of measures needed by the Scottish Government to improve the tax system to enable child poverty targets to be met.
- 17th October 2023 SNP First Minister announces he is abandoning the proposal to increase Bands E to H, and a Council Tax Freeze is to be imposed.
- 18th October 2023 On BBC Breakfast, Mr Yousaf says that the freeze will be “fully funded” by Holyrood. Previous uplifts have been limited to three per cent. Most Local Authorities have been anticipating rises in excess of five per cent for coming years.
- 18 October 2023 COSLA Presidential Statement says there is “real anger” at the way this has been handled, and that “there is no agreement to freeze council tax next year, the decision to freeze council tax is one which can only be made by Councils.”
At the time of writing COSLA is seeking a meeting with the Scottish Government to discuss this announcement and to find a way forward. Humza Yousaf may have been given a standing ovation by the party faithful in Aberdeen, but he has succeeded in annoying the previously supportive Scottish Greens, Scottish Local Authorities, including many SNP led authorities, and COSLA which is SNP controlled.