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Could council tax be on the way out in Scotland?

Scotland’s Commission on Local Tax Reform has concluded that council tax “must end” north of the border. How would such a shift impact Scottish councils and UK local authorities across the board?

The alternatives

The cross-party commission was asked to explore ways to improve Scotland’s local taxation system, and recently proposed three council tax replacements based on land, income and property.

While the three systems are quite different, all options would follow the 'general tax' principle, meaning that households would no longer be charged for a specific list of council services.

The first proposal is to implement a property tax based on the combined value of sites and buildings, while the second is to raise taxes on land value only. The third and final route would involve a tax based on householders' taxable incomes.


The commission is yet to formally back any of the alternatives,however its representatives have made their opposition to the current tax clear. The report explicitly concluded that "a better system" can be implemented, and noted that "there is now a real prospect...of beginning a programme to make local taxation fairer".

Doing away with council tax might sound like a radical step, but survey data indicates that the public would welcome changes to the current arrangements. Poorer households could pay less under the income-based tax proposal, for instance, and some commentators view the commission's proposals as a chance to rid Scotland of its Poll Tax legacy.

While an overhaul could lead to positive outcomes, the birth of a new system in Scotland would inevitably invite a cry for change in England and Wales too. Many local authorities are banking on stable council tax incomes to take the edge off austerity, and the fiscal uncertainty introduced by the possibility of a Scottish tax revolution may be unwelcome in this context.

Only time will tell if the commission's report will spark widespread reform. Even if action is taken, there's a strong likelihood that a drawn-out debate will precede the construction of a new system. In the meantime, local authorities can continue to protect essential public services by maximising council tax recovery and minimising council tax arrears.

If you work for a local authority that's facing tough times, contact one of our expert Dukes Debt Advisors to discuss your options today.

Scottish councils calling for power to tax

The Convention of Scottish Local Authorities (COSLA) has published calls for a raft of new taxation powers in its submission to the Commission on Local Tax Reform. The organisation, which represents most of Scotland’s 32 councils, agreed on the submission during COSLA’s summer convention.

Addressing fiscal deficit Scottish flag

One of COSLA’s core arguments is that “effective local tax reform is key to addressing Scotland’s local fiscal deficit”. In particular, the group advocates wide-ranging council tax reform. This would involve removing the council tax freeze introduced by the SNP in 2008, which has cost a cumulative £2.5bn.

COSLA also suggests that council tax bands should be widened by the addition of new bands at the top and bottom of the scale, and that properties be revalued every five years to ensure that council tax accurately reflects their value.

‘Local flexibility’

As well as solving the widespread problem of fiscal deficit, COSLA contends that the increased powers would “allow for local flexibility, empowering local authorities to raise local funding for local priorities.”

Currently, councils raise 18% of their £10bn budget through council tax, but COSLA contends that 50% of the budget should be raised locally. This would be achieved by giving councils the power to set business rates, and to be able to “raise additional income by levying a tax… on either residents, occupants, property owners or visitors in the local authority or within a discrete area of the local authority.”  In other words, setting local taxes independently of central government.

‘Clear mandate’

The COSLA submission also emphasises that the “intention is not to increase taxes, it is simply to empower local government to set and raise taxes that are suitable to the needs of the local community where there is clear local mandate to do so.”

COSLA is confident councils will receive public support due to Ipsos MORI opinion poll findings suggesting that 71% of people are willing to pay higher taxes if the money's spent on local services.

From our perspective, enforcing tax payments in such situations will represent a significant challenge. It will require sensitive handling and local knowledge to ensure devolved powers retain support and understanding.

The Commission on Local Tax Reform is due to complete its report on a ‘fairer local tax system for Scotland’ by September 2015.

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