Scottish Labour proposals for Local Government finance

I've blogged extensively over recent years on the topic of Local Government funding in Scotland being broken - for example, see here and also here.

So - was very good to hear that Scottish Labour has today pledged to scrap the Council Tax system and replace it with a fairer system based on property value - all of which could see 80% of households better off.

Announcing the primary policy in Edinburgh, party leader Kezia Dugdale has also proposed additional, optional-powers for Local Councils, around a tourist tax and a tax on vacant, economically inactive land.

The main points of what's been announced are:

• The unfair council tax will be scrapped and replaced with a fairer system based on property value.

• Under the plans nearly 2 million households - 80% - would pay less than they do today.

• In addition to the fair property tax Scottish Labour will devolve radical powers over tax to local government to give them the extra ability to raise revenue for local services.

• These tax powers include a Tourist tax and a Land Value Tax on vacant, economically inactive land. It would be for local councils to decide whether or not to use these powers.

• Scottish Labour would also devolve the surplus from the Crown Estate to local government.

• Under Scottish Labour’s replacement for the council tax, households would pay a percentage of what their property is worth, with a maximum charge of £3,000 in year one.

• Scottish Labour will make good on the broken promises to scrap the council tax. This replacement plan will fix the funding of local services for good. It’s a fair plan which means millions will pay less and those who can afford to will pay a little more.

• The Scottish Government recently commissioned a report into replacing council tax and then ignored its main findings.

• Scottish Labour have taken that report, and its research, and voters can now choose a fairer alternative to council tax.

• For properties of £180,000 or less the tax would be levied at a rate of £450 + 0.35% of the property value.

• For properties above £180,000 the portion above £180,000 would attract a rate of 0.9% of property value.

• The maximum charge under this scheme would be capped at £3,000 in year one, with a 3 percent cap on increases year on year.

I'll re-produce some further detail below on how this new, fairer system would work ...

... but for me, Party politics aside, this is a hugely refreshing set of proposals that would see some serious fiscal flexibility restored to Local Councils - giving them more control over their own destiny. Section d. below is very welcome indeed.

If implemented, these proposals would see the most significant devolution of financial powers to Local Councils since the Scottish Parliament was established in 1999 ... and not before time.


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a. The majority households will thus pay less

Nearly 2 million households - 1,972,956 will be better off with 80.8% paying less than they do today.

Scottish Labour's calculations are based on the modelled evidence, provided to the Commission on Local Taxation reform, which all four member parties were provided with in order to aid their work on the commission, and any proposed reforms.

Based on the data used by the Commission, provided in its report, nearly 2 million households will pay less under Scottish Labour’s fairer property tax.

Detailed analysis from the Commission on Local Tax Reform with Heriot-Watt University found that the failure to address the current system leaves 57% of properties in the wrong band: 28% households should pay less, and 29% should pay more.

Scottish Labour’s system will reflect our changed housing market. It will realign the taxation paid towards local services with house prices, give a tax cut to millions, and will ensure that the richest pay their fair share for local services.


b. What happens each year?

Annual increases linked to local house prices would be capped at a maximum of 3%.

Local authorities would be responsible for setting the increases.

House prices vary between regions of Scotland and annual updating of value would be done on a local basis to maintain fairness.

Adjustments will be made to the percentage of property value rate to ensure this 3% cap is not exceeded. That means that if local house prices increase by more than 3% the cap won’t.


c. Discounts, rebates and exemptions

All discounts rebates and exemptions would continue to apply, protecting those households who benefit from them.

Recognising that there are some circumstances where householders, particularly elderly householders, are asset rich and income poor we will establish a new system of protections to apply in those cases.

Because the liabilities will reduce for the cheapest homes, we can spend less to correct the flaws of an unfair system.


d. Empowering local government with new tax powers

Devolution should not stop at the Scottish Parliament that is why Scottish Labour will empower local government with new tax powers to raise additional revenue for local services and pursue economic development. This will broaden the tax base for local authorities.

Taken together, these new tax powers are worth over £150 million to local government in Scotland.

It would be for local councils to decide whether or not to use these powers.

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