Local tax is crying out for a radical overhaul

Local tax is crying out for a radical overhaul
The National, by Lesley Riddoch
03.03.16

 

Nicola Sturgeon is the most popular politician in the UK – not just Scotland – and perceived to be one of the most progressive. Her party cleaned up at the General Election and looks set to sweep the board in the Scottish elections this May. Such a victory would give the SNP an unprecedented opportunity to make long overdue changes to the archaic structures of governance which abound north of the Border – some of them relics of feudalism, others the products of centuries-old, centralist UK thinking. Three terms in office has its drawbacks of course, but it does promote continuity and a familiarity between politicians and civil servants, which makes tackling thorny issues easier. Indeed, since Labour and the LibDems finally seem able to support progressive policies instead of opposing for opposition’s sake, Scotland should be set fair for some genuinely reforming years.

 

But yesterday’s announcement on local tax reform suggests that won’t happen – without constant pressure by unpaid campaigners and a substantial Green presence in Holyrood. Yesterday Nicola Sturgeon passed up the chance to modernise local government funding and free councils from central control by creating a fairer, broader tax base. Instead there will be tinkering with a council tax system based on property values that haven’t been updated since John Major was Prime Minister, Scotland was run by Ian Lang and Monty Python’s Always Look On The Bright Side Of Life topped the singles charts.

 

It’s so long since council tax bands were based on an accurate valuation that 57 per cent of homes are now in the wrong band – half too high and half too low. The council tax is also massively regressive. According to research by the Commission for Local Tax Reform (CLTR) – a cross-party group set up by the Scottish Government and Cosla – someone in a posh Band H house pays just three times more than someone in a poor Band A property, even though that Band H House is worth 15 times more. The commission said that for the council tax to be progressive and proportionate it would have to tax the wealthiest properties at 15 times the rate of the poorest.

 

But the new bands announced by the First Minister only slightly improve the current situation.

 

Could she have done more?

 

You betcha. Sturgeon could have made good on her comments in opposition when she said “the hated council tax is totally unfair and any tinkering with bands would not make the system any fairer”.

 

The SNP’s 2007 manifesto promised to abolish the council tax. She could have done that.

 

Of course the sixty-four thousand dollar question is what to replace it with.

 

When the CLTR reported in December it also recommended that the current council tax system in Scotland “must end” and backed a mixture of land, property and income-based taxes. Their reasoning was simple; if you only have a local income tax, folk with creative accountants get away with it and a very reluctant HMRC has to get involved. If you only tax property there are more asset-rich, cash-poor households and revaluations.

 

If you shift wholesale to a land tax, whilst ultimately transformational, very few folk will understand it immediately and that could weaken acceptance. But a combination of these taxes might work better as we transition to something more progressive.

 

That beefier combination ain’t going to happen though, unless the bill put forward by the new (probably SNP) government is amended and that won’t happen unless the new parliament is feistier than the present parliament.

 

That’s why I’ll be voting Green with my second vote in May.

 

Of course, the SNP say their decision to assign part of the new Scottish income tax to councils means local authorities will oon control 75 per cent of their revenues. That’s a cheeky wee claim similar to Westminster’s assertion that assigning (giving) VAT revenues to Scotland will increase the amount of money under John Swinney’s control. In each case the amount is pre-determined and cannot be varied or raised – councils will have no more control over income tax than John Swinney has over VAT.

 

There could also be problems calculating what income tax is due from the inhabitants of each council area and collecting it.

 

Sure there will be rebates for pensioners trapped in large houses – but that was originally a Labour proposal and doesn’t tackle the inherently unfair system – and abandoning the council tax freeze but capping rises at 3 per cent harks back to the days of the Tories. Finally, as the Scottish TUC points out: “It is scarcely credible reforms will not be accompanied by a revaluation.”

 

Why was a revaluation not offered? Computerisation means the task should be easier than it was 25 years ago and it cannot be indefinitely postponed. Political will is missing – and with the unprecedented opportunity that lies ahead for consensus on this big supra-party issue, that’s unforgivable.

 

Ever since Margaret Thatcher was (partly) felled by the hated and uncollectable Poll Tax, radical change in our creaking local government system has looked risky and unpopular.

 

But if not now, then when?