News analysis Election pressures keep Scots local taxes down

15 Feb 07
Scots council tax bills are to rise by less than the rate of inflation. A number of factors, including a generous funding settlement and fears of the impact at the ballot box, have all played a role

16 February 2007

The announcement of council tax rises is seldom, if ever, good news. But in Scotland, councils believe that the figures for 2007/08, which have just been finalised, are the best news since the tax was first introduced in the early 1990s.

With almost all of Scotland's 32 councils having declared their charges, the average Band D council tax increase is a below-inflation figure of 1.9%. This follows large year-on-year increases in excess of inflation. Recent Scottish Executive statistics show that since 1996-97 the tax has soared by almost 60%.

The latest figure is the lowest rise since the tax began in 1993 and compares with a projected rise of about 4% for England.

In Scotland, one factor has clearly influenced the outcome. The taxes have been agreed less than three months before the Scottish Parliament and local government elections on May 3.

With the political pressure to keep tax increases down, councils have been helped by one of the most generous funding settlements since devolution in 1999.

Finance Minister Tom McCabe found an extra £250m for local government. This windfall resulted in a funding deal of £8.7bn – an increase of £396m, or 4.8%, on the amount given the previous year.

Professor Arthur Midwinter, a leading public finance expert, said the average tax was what he would have expected once the Scottish Executive had finally acknowledged it had been underfunding local government for the past two years.

Midwinter, visiting professor at the Institute for Public Sector Accounting Research at Edinburgh University, and budget adviser to the Holyrood Parliament finance committee, said that without the extra funding from the Executive, the average council tax increase would have been about 5%.

'Providing extra money at this late stage has allowed councils to achieve manageable targets,' he told Public Finance. 'Savings are having to be made, but councils have been able to set reasonable tax increases in the run-up to the election.'

Angela Scott, head of CIPFA in Scotland, said the figures were not simply the result of good levels of financial support from the Executive, but also of the efforts made by local authorities in managing their costs. She said: 'Councils have pursued the efficient government agenda and there is general acceptance that they have achieved the targets set for them over the past two years.'

Council decisions on budgets and tax levels come at a time when a 'new partnership' has been forged between councils and ministers. Last year, Scottish councils fought a bitter battle with the Executive over claims that local government was grossly underfunded.

McCabe decided to build bridges and respond with a more generous financial settlement, albeit in election year. But he also won some significant concessions from local authorities, including a guarantee that they would 'continue to exert downward pressure' on council tax.

McCabe said councils had enjoyed 'unprecedented rises in funding', with the grant to local government up by almost 58% since 1999. He added: 'There is no such thing as a popular tax but councils are exercising downward pressure on rises. I expect that to continue for each of the next four years.' Pat Watters, president of the Convention of Scottish Local Authorities, said partnership working between the Executive and local government had delivered results. 'Every year since devolution council tax in Scotland has been lower than in England and Wales, but this takes us a step further,' he said.

Of the 32 Scottish councils, the biggest authority, Glasgow City, has ended its unenviable reputation of having the highest council tax in Scotland by freezing bills for the second successive year. Increases range from 1.5% in Edinburgh and East Ayrshire to 3.9% in South Ayrshire.

The new average Scottish Band D tax is £1,151. This compares with a 2007/08 figure of £1,268 for England. A snapshot survey recently carried out by the Local Government Association showed that, overall, the 2007/08 council tax rises for England are likely to be less than 4.4%.

Although a rise of around 4% would be twice the percentage rise in Scotland, it suggests that English councils might also have managed to keep their average tax below the retail price index, which is 4.2%. In Scotland, the big question is what will happen next year when the effects of tighter finances following the government's Comprehensive Spending Review begins to bite, and when new councils, elected by proportional representation for the first time, have to get to grips with decisions on their spending.

The future of the council tax itself will be a key election issue. The Scottish National Party has pledged to freeze bills during the two years it believes it will take to introduce a local income tax.

Finance spokesman John Swinney said: 'Those who will be hardest hit by today's rises will be pensioners and those on low incomes, and that's why we need to scrap Labour's unfair tax and replace it with a fair system based on the ability to pay.'

The Lib Dems also favour a local income tax.

Labour has yet to give its official response to the recent report of the Burt committee on local government finance, which proposed a new local property tax. But it is long odds against the Burt proposals – which produced a panic reaction from First Minster Jack McDonnell – being adopted. The spectre of the annual council tax jousting is likely to continue to haunt Scottish local authorities in the years to come.

Convention of Scottish local authorities council tax levels 06/07 & 07/08
Band D Council tax

Council2006/07 (£)2007/08 (£) % Increase
Aberdeen 1,196 1,231 2.9
Aberdeenshire 1,113 1,141 2.5
Angus 1,072 1,072 0.0
Argyll & Bute 1,156 1,178 1.9
Clackmannanshire 1,127 1,148 1.9
Dumfries & Galloway 1,018 1,049 3.0
Dundee 1,211 yet to declare
East Ayrshire 1,171 1,189 1.5
East Dunbartonshire 1,121 1,142 1.9
East Lothian 1,096 1,118 2.0
East Renfrewshire 1,105 1,126 1.9
Edinburgh 1,152 1,169 1.5
Falkirk 1,045 1,070 2.4
Fife 1,091 1,118 2.5
Glasgow 1,213 1,213 0.0
Highland 1,135 1,163 2.5
Inverclyde 1,206 yet to declare
Midlothian 1,210 1,210 0.0
Moray 1,096 1,135 3.6
North Ayrshire 1,125 1,152 2.4
North Lanarkshire 1,077 1,098 1.9
Orkney 1,007 1,037 3.0
Perth & Kinross 1,136 1,158 1.9
Renfrewshire 1,143 1,165 1.9
Scottish Borders 1,064 1,084 1.9
Shetland 1,017 1,053 3.5
South Ayrshire 1,111 1,154 3.9
South Lanarkshire 1,076 1,101 2.3
Stirling 1,201 1,223 1.8
West Dunbartonshire 1,138 1,163 2.2
West Lothian 1,101 1,128 2.5
Comhairle Nan Eilean Siar 999 1,024 2.5
Scotland 1,129 1,151 1.9

PFfeb2007

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