10 November 2006
Council tax in Scotland should be replaced by a new property tax requiring householders to pay 0.9% of the value of their home annually, the Burt committee on the future of local government finance has proposed.
In its long-awaited report, A fairer way, published on November 9, the committee rejected the continuation of the council tax, saying it was not sufficiently progressive and that the banding system could lead to anomalies.
The committee, chaired by Sir Peter Burt, former chief executive of the Bank of Scotland, was set up by the Scottish Executive in 2004.
Its proposals will be highly controversial in the run-up to next year's Scottish Parliament and local government elections.
The Labour Party, which leads the Executive, wants to retain the council tax, with changes to the banding system, while its Liberal Democrat partners favour a local income tax.
Burt said no tax was popular. He added: 'We are proposing a fairer way than the current system. Our local property tax is based on property values and is fair, stable and transparent.
'LPT would raise the same amount of money as the current system – but in a fairer way. In fact, if introduced today, two-thirds of households would pay the same or less under the LPT than under the council tax.'
The committee recommended that under its new plan, property should be revalued. Ideally, this should take place annually, it states. The current council tax is based on 1991 property values. There are currently no plans to revalue property in Scotland.
According to the committee, the new tax would be calculated on 0.9% of property values per year. A property valued at £100,000 would incur an annual tax bill of £900. There would be no cap placed on the tax for homes at the higher end of the market.
However, the committee considered assistance for households on low incomes who live in expensive homes and have proposed a relief scheme.
Burt said property taxes were better suited for use as a local tax than income tax. 'They are difficult to avoid and suitable for local collection. They are also relatively stable, which is a major advantage for local authorities, whose costs are fixed in the short term.'
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