Call for evidence on the Council Tax (Substitution of Proportion) (Scotland) Order 2016

Council Tax is the system of local taxation that is used to part-fund local authorities. It was introduced in 1993 to replace the Community Charge (known as the “poll tax”) and has remained unchanged since its introduction.

The Scottish Government and COSLA established the Commission on Local Tax Reform, which reported in December 2015. In March 2016, the Scottish Government published its proposals for reform of the Council Tax.

What changes does the Scottish Government propose to make?

The main area of reform proposed by the Scottish Government is to increase the ratios of the upper bands (E-H) relative to Band D. This will mean that bills for Band E will increase by 7.5%, Band F by 12.5%, Band G by 17.5% and Band H by 22.5%. No additional bands have been added and the ratios for Bands A-D will remain unchanged. The Government has also confirmed that it does not plan to hold a revaluation, so Council Tax will remain based on values of property in 1991. The impact of the proposed changes on bills varies between local authorities – for example those in Band H properties in Aberdeen City will see bills rise by £554, but those in Band H in Eilean Siar will see bills rise by £461.

Another aspect of the Government’s proposed reform is to end the Council Tax freeze, although the Government states that any future rises will be capped at 3% per year. It is not clear how this will be enforced.

What might it mean for local authorities?

The distribution of households in higher bands also varies considerably between local authorities. This means that some local authorities will take in much more additional income than others – Edinburgh will receive around £15.6m additional income, but the three island authorities will all receive less than £0.2m. The Government states that the additional income from changing Bands E-H “will be invested in schools across Scotland,” according to eligibility for free school meals, but there does not appear to be a mechanism for ring-fencing money received from the Council Tax, as it is collected by councils.

Council tax reduction scheme – consideration by the Social Security Committee

In addition to amending Bands E-H, the other major area of reform to Council Tax is the introduction of a targeted relief for “around 54,000 households in properties in Bands E-H on net incomes below the Scottish median for their household type, up to a maximum of £25,000”. However, how this reform will operate in practice, how much it will cost to implement the policy and the extent to which local authorities were consulted prior to its announcement are areas that the Committee will wish to explore.

In addition, the Government states that it will “increase the child premium by 25%, from £66.90 to £83.63 per week.” This will cost £18 million per annum, and benefit 77,000 households with an average gain of £173 per annum.

This targeted relief is included in an separate SSI which will be considered by the Social Security Committee. Any comments you provide on this SSI will be shared with the Social Security Committee. 

The Committee process

The Government intends to implement Council Tax reform through Secondary Legislation in the attached Scottish Statutory Instrument (SSI). The Local Government and Communities Committee has been designated as the lead Committee to consider this SSI.

The SSI is subject to the affirmative procedure, which means that the Committee has 40 days to report on whether or not to recommend that the SSI be approved by the Scottish Parliament. It cannot recommend that the SSI be changed.

In reaching a view, the Committee will take evidence on the SSI from the Scottish Government and will then debate and vote on a motion on whether to recommend to Parliament that the SSI be approved. The Delegated Powers and Law Reform Committee will also consider the SSI and may report under a number of grounds, including its competence and drafting.

After both Committees report, the Parliament will debate and vote on whether the SSI should be agreed. If the Parliament agrees the instrument, the Scottish Government will have the authority to implement the changes proposed.

We want to hear your views on the changes being proposed to Council tax and have provided some questions below on which we seek your comments.

1. Overall, do you support the principles of the Government's plans to reform Council Tax?
2. To what extent will the Government's proposed reforms make the system of Council Tax fairer?
3. To what extent will the changes be straightforward for local authorities to implement?
4. Do you support the Government's planned changes to Council Tax reductions?
5. Please add any other comments on any aspect of the proposed reforms.

How to submit evidence

To allow the Committee to take account of any views received, submissions should be sent to the address below, no later than Wednesday 28 September 2016.

They should be submitted electronically (preferably in plain text Word format and without graphical borders or headers) to:

[email protected]

Written submissions will be made public on the Committee’s webpage. If you do not wish your response to be made public, please contact the clerks to discuss (you may wish to refer to the Parliament’s policy on handling information received in response to calls for evidence).

The Committee welcomes written evidence in English, Gaelic or any other language.

If you have any further questions regarding the Committee’s work on this inquiry, please contact the Committee clerking team at the above e-mail address or call 0131 348 6037.

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