Housing tax now inevitable across Scotland, experts warn

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Under the Scottish Government’s new rules, local authorities will be able to use powers that will allow them to increase tariffs to increase revenues from services.

Emma Congreve, a knowledge exchange scholar at the Fraser of Allander Institute at the University of Strathclyde, said all areas of the council are likely to increase housing tax due to increased pressures on budgets.

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She also called on the Scottish government to take responsibility for reforming the tax, warning that it currently disproportionately affects people at the lower end of the income threshold.

Finance Secretary Kate Forbes presented the Scottish budget to the Scottish Parliament on December 9.

Opposition politicians have warned that the housing tax could rise as much as 30 percent in some areas as local authorities struggle to close funding gaps. However, Ms Congreve said she believed the increases might only be around three to five percent – a figure echoed by the Convention of Scottish Local Authorities (COSLA) which stressed that council leaders were aware of the pressure on household budgets.

In the Scottish Budget Draft earlier this month, Finance Secretary Kate Forbes removed the cap on house tax increases for the next fiscal year, meaning people could be asked to pay more from April. This is the first time Scottish councils have been given full control over local tax rates since the SNP came to power in 2007.

Ms Congreve said: ‘There are challenges as the amount the councils collect in council tax is large, but it is eclipsed compared to the size of the grant they receive from the Scottish government. This is really what matters most to local spending. And there is a limit to how much council tax can increase, in addition to a few percentage increases. And councils that have a richer housing stock – houses in the upper bands – might find it easier to raise more money than those in areas with lower-value housing stock.

“I think it will be a very difficult decision for boards to make, but I think it is likely that some will have no choice but to increase tariffs if they want to be able to provide the utilities that they were responsible for providing. . “

She said councils would be reluctant to implement large increases ahead of local council elections.

She said: “I would expect there would be pressure to use these powers to raise the council tax, but I think the policy in this area could also tone it down a bit, just because the housing tax is so visible.

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“I think it’s more likely to be around the two to three percent than the 10 to 15 percent. It’s been so long since we’ve had a substantial rate hike, so maybe they’ll go a little further than the cap that was there before – which was three percent. But I don’t see the councils being in this position where they think it’s reasonable to ask the electorate to increase it from 10 to 15 percent, especially when there is so much other pressure on the government. cost of living right now. This is something that some people will really struggle to afford in certain situations.

She said the tax would have a disproportionate impact on the lower end of the income threshold.

“I think if the Scottish government allows the tax increase, it should really take responsibility for reforming the tax so that those increases are justified and fair. But at the moment, that is simply not the case and there is not much that local authorities can do about it.

“They are under tremendous pressure and I think the pressure will come from things like social care in the next few months, during the winter it will be more important. It is no understatement to say that they face some of the biggest problems they will ever have and also have additional responsibilities that fall on them from the Scottish Government as we have seen in the budget, so they have a lot to contend with.

“I think you will see most areas have an increase to some degree.”

Gail Macgregor, spokesperson for resources for COSLA, the umbrella body for local councils, said councils had no choice but to use powers to raise housing tax and warned that council leaders were “quite angry” over the decision to tax households more. was given to them.

In a recent pre-budget document, COSLA warned that urgent additional funding of over £ 1 billion was needed for local government councils to ‘survive’. He added that an increase of £ 720million was needed “just to stand still”.

Ms Macgregor said: ‘To close that £ 100million gap that we have in our base budget, as well as all the additional pressures that probably continue because of Covid as much as anything else – trying to recover and to go ahead and revive the projects and running that may have been on hold for almost two years – we’re going to need that extra funding.

She added that council leaders are unlikely to raise taxes by more than three percent.

She said: “I’m afraid if we don’t see more coming from the government, it will put a lot of pressure on the leaders to raise the council tax. The only thing I would say about this, though, is that the leaders are very aware of the difficulties faced by the local households and I don’t think that we will mind hammering the households.

Scottish Conservative shadow finance secretary Liz Smith said: “Kate Forbes called it a ‘choice budget’ – but now it is local councils that are faced with the impossible choice between not providing essential services and implementing implementing punitive tax increases.

“According to COSLA estimates, the council tax may need to be increased up to 30 percent to properly fund local services, while a 3 percent increase would be needed just to match funding from previous years. “

She added: “It seems increasingly likely that local councils will be forced to implement some sort of housing tax increase next year to fill the black hole left by meager funding for the SNP.

“After two incredibly difficult years, this is the last thing the Scots need.”

A Scottish government spokesperson said: ‘Thanks to the actions of this government, council tax is lower in Scotland than anywhere else – average Group D charges are £ 590 lower than in England and from £ 423 to those in Wales.

“The 2022/23 budget provides for a number of financial flexibilities, in particular by offering municipalities complete autonomy in terms of housing tax to make local decisions for local populations, as requested by COSLA.

“Communal tax is an important source of revenue for local government while ensuring that each council is accountable to voters for local tax and spending choices. By setting the rates of the housing tax, we expect municipalities to take full account of local needs and the impacts on household budgets of the decisions they make.

“The Council Tax Reduction Scheme ensures that no one should have to pay a housing tax they cannot afford, with nearly one in five households benefiting from a housing tax reduction.”

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