THE first and only really substantive reform to council tax in Scotland since the creation of the Scottish Parliament has been rate changes implemented around seven years ago.
That is despite a Scottish Government cross-party group which recommended in 2015 that council tax “must end”.
For Marco Biagi, who convened the Commission on Local Tax Reform, the absence of any more substantial change since then underscores just how tricky it is to change council tax.
“If council tax was an easy problem to solve, someone would have done it by now,” says the SNP’s former local government minister.
Part of the problem, says Biagi (below, right), is that council tax is seen by most people as “illegitimate”.
“If you ask people what tax should be based on, people always say income,” he says.
“Council tax isn’t based on income, it’s based on the property. That makes council tax on its own always look really illegitimate.”
Having a tax which isn’t based on income is not in and of itself what makes it unpopular, though, Biagi adds.
“We tax alcohol and tobacco and there’s no means-testing of that, it’s simply that’s part of how we raise tax as a whole and some of it is taxed in ways that aren’t as progressive as others but it’s for a reason,” he says.
“This argument has been made that you should always have property tax as a small bit of that. But because council tax is so visible and it feels to the public like a thing that funds councils, and the only thing that funds councils, it creates a resentment that you should ever have a system that is based on a regressive tax.”
Biagi, now an SNP councillor in Edinburgh, points out that a very tiny amount of local authority income comes from council tax.
According to the most recent official statistics, just 19% of council funding came from the tax, with the rest coming from business rates, charges such as parking fines and a lump sum from central government.
But apart from its image problem, council tax reform also carries the risk of upsetting large numbers of people, according to Biagi.
Bands are currently based on the estimated value of properties from April Fool’s Day in 1991.
Properties built after that are based on an estimate of what a home would have been worth on that date.
With every year that passes, says Biagi, the rates get more out of date and revaluation – or setting the rates based on the contemporary worth of properties – could result in around 100,000 households being landed with massive council tax hikes.
If that came to pass, people would be “protesting like crazy”, Biagi predicts.
And while not exactly a disincentive to reform council tax, Biagi says that local authorities are more interested in getting more funding rather than tinkering with how it’s delivered.
One squeeze on council funding is the SNP’s council tax freeze, which critics say is a bung to better-off voters. Biagi retorts: “If council tax is unfair, why are people calling for it to be increased?”
He proposed a couple of “mini-reforms” he said could make council tax fairer.
Firstly, the Scottish Government could overhaul the system by which council tax increases are distributed along the scale. At present, the Scottish Government sets the rate at which Band D is increased.
If Band D goes up by 3% so does Band A for the cheapest homes, as it does for Band H properties, the most expensive.
Biagi says “gearing” the bands, so that a 3% increase in the middle triggered a higher rate of increase at the top end of the scale and a lower one further down, could mean the tax felt fairer.
Secondly, the Scottish Government could give income more of a role.
Biagi said that if more people got “income-based” discounts – currently only those with holiday homes or second homes in regular use – people would consider the tax “more legitimate”.
This could be done by capping the amount of council tax people pay as a proportion of their income, he said.
But Biagi notes that whatever the Scottish Government decides to do – or not – the difficulty of reform only grows “with every year that passes”.
