A fairer council tax

The Royal Society of Edinburgh (RSE), Scotland’s National Academy, in conjunction with the Young Academy of Scotland (YAS), welcomed the opportunity to respond to the Scottish Government and Convention of Scottish Local Authorities consultation on a Fairer Council Tax. Our consultation response and this expanded advice paper draw on our varied expertise, including on the economy, fiscal policy and the public sector. A working group, which included Fellows and members of the RSE Economy and Enterprise Committee, was formed to contribute to both the consultation response and this advice paper.

RSE advice paper, a fairer council tax 2023 (306KB, PDF)

The unsatisfactory nature of the Scottish Government’s electronic consultation submission system and of the questions asked in it led the RSE to also publish this advice paper, which incorporates material from its response and includes further details that were not submitted. The consultation paper is weak in terms of data and analysis; the questions asked are in some cases badly formulated, for example, Question 3; and the automated system is not user-friendly for inputting responses, which leads to unattractively formatted documents for citizens and external bodies who wish to view what has been submitted.

The RSE has published advice papers on the Scottish tax system, the most relevant of which are cited here. It supports policies which would make the tax system more progressive but has cautioned against policies which pay inadequate attention to efficiency considerations and to the potential behavioural effects of taxation.

The RSE believes that Council Tax cannot be made ‘fairer’ while still using out-of-date valuations from 1 April 1991 and, for that reason, opposes the proposed increases of the multipliers relative to Band D for properties in Bands E, F, G and H. This Advice Paper makes suggestions as to how the local government finance system, of which Council Tax is part, can be improved.
The title of the Consultation Paper is ‘Consultation on a Fairer Council Tax’. The RSE does support measures which would make Council Tax fairer, but believes it is impossible to do so without a property revaluation. The use of 1991 valuations breaches the principle of horizontal equity as properties which would have the same 2023 valuation are in different bands. The Institute for Fiscal Studies has concluded that 50% of properties in England are now in the wrong Council Tax band.[1] Restrictions on data access have prevented the extension of their analysis to Scotland and the RSE urges the Scottish Government to address the obstacles to a comparable analysis for Scotland.
The RSE notes that, in considering any Council Tax changes, account needs to be taken of the impact on households and councils and the wider effect on the economy rather than solely looking at the impact on households according to their Council Tax band. Moreover, when making changes to one particular tax vehicle, attention should be paid to the effect on the overall tax system, only part of which the Scottish Government controls.
What is required in local authority taxation in Scotland is a consensus between the major parties on how the deficiencies should be addressed. The present situation reflects badly on devolved government, particularly when it seems that policy change in Scotland is impossible without parallel change in England. It might be tempting to suggest the appointment of a committee to investigate local taxation, but the existing problems are well understood and the report of any such committee would most likely be discarded.
Instead, it is for the Scottish Government and the Scottish Parliament to agree on a path forward which deals with short-term issues without prejudicing longer-term reform. Civil society organisations will have important contributions to make. The RSE is actively seeking further engagement with the Scottish Government, MSPs, and public bodies, and is willing to help facilitate further discussions regarding tax policy.

[1] Adam, S., Hodge, L., Phillips, D and Xu, X. (2020) Revaluation and Reform: Bringing Council Tax in England into the 21st Century, Report 168, Institute for Fiscal Studies, London.

RSE advice paper, a fairer council tax 2023 (306KB, PDF)