A short- and long-term plan for local government funding

johnmortonJohn Morton, of Mid Fife & Glenrothes CLP, sets out the stark reality of the Council Tax freeze in Fife and elsewhere, and suggests an immediate plan and a longer-term way forward.


“It would be open to the Council to reject the council tax freeze that the Scottish Government wishes to impose for the 9th year with no alternative in sight. Although the much trumpeted Commission on Local Tax Reform reported before Christmas, it turned out to be yet another fudge and made no clear recommendations for an alternative. Even if a decision on a suitable alternative system of funding local government is taken after the Scottish Parliament elections in May, then it will probably be a number of years before it can be fully implemented. In the meantime councils across Scotland face continued cuts in their grant and increasing pressure on services.

If Fife was to reject the freeze and chose to increase council tax to provide additional funding for local services, then the Scottish Government would impose a penalty by withholding £4.6m in grant to the Council. If it was to choose this option, the Council would have to increase the council tax sufficiently to offset this penalty whilst still bringing in a worthwhile level of additional income, at the same time balancing this against the need to ensure that any increase was affordable, taking into account the effect of allowances and the council tax reduction scheme that are in place to mitigate the impact of the council tax on lower income households.

As can be seen from the table below, a 7.51% increase would bring in over £7m after the penalty had been taken into account and would cost the great majority of households under £2 per week.

Band Proposed
Band £ Value Weighting
745 A Up to 27,000 6/9 801 56 1.08 7.51%
870 B 27,001-35,000 7/9 935 65 1.26 7.51%
994 C 35,001-45,000 8/9 1,068 75 1.44 7.51%
1,118 D 45,001-58,000 9/9 1,202 84 1.62 7.51%
1,366 E 58,001-80,000 11/9 1,469 103 1.97 7.51%
1,615 F 80,001-106,000 13/9 1,736 121 2.33 7.51%
1,863 G 106,001-212,000 15/9 2,003 140 2.69 7.51%
2,236 H Over 212,000 18/9 2,404 168 3.23 7.51%

Increase in Council Tax yield: £11.715m
Less penalty for breaking Council Tax freeze: £-4.600m
Net increase in Council Tax available to offset £7.115m”

The above is an extract from the budget proposals for Fife. Various questions come to mind:

  1. Is the penalty figure (£4,600,000) a fixed amount, or would it vary with the size of increase?
  2. Would it be possible for the Council to introduce additional “bands”, or is that currently “reserved” to Holyrood?
  3. Would it be possible for the Council to alter the weightings attached to bands, or is that currently “reserved” to Holyrood?
  4. Would it be possible for the Council to introduce a differential increase (e.g. 5% for band A, ranging to 10% for band H), or is that also “reserved” to Holyrood?
  5. Could the Council replace the entire system by a charge levied directly proportional to the valuation of the property?

Assuming the answer to questions 2 to 5 is “No, the Council could not do this”, then we have a suggestion for a fairly straightforward, quick to enact and immediately effective piece of legislation to give local authorities power over such matters – certainly as regards 2 and 3.

Longer term, question 5 needs addressed. When Council Tax was introduced, very little private domestic property had a value much in excess of £200,000. That has not been the case for over a decade now, with an increasing proportion of private property being valued at over £500,000. It is obviously unreasonable that those who can afford such property should only be charged the same as if it was worth less than half as much; and while additional “bands” could be used as a temporary stop-gap, the longer term must see a system more closely tied to the actual valuation of property.

In addition, the current system actually raises tax on people, not property, with the occupiers of a property each being responsible for paying the band rate for that property. This is not right: the charge should be levied on whoever – or whatever – actually owns the property. It would then be up to that individual or organisation to levy a suitable contribution from the occupiers to cover the amount. This, for instance, would provide an incentive for people and bodies that own a number of properties to actually rent them out, rather than holding them empty. It would also discourage “holiday home” ownership.

Another consideration is that the Council Tax only covers “domestic” properties, not commercial properties. The latter are still subject to a value-based payment (the Business Rate), but the money thus collected does not go to local authorities, nor do local authorities have any control over how much it is. It would seem sensible to devolve all of this back to local authorities. The amounts thus raised would replace the bulk of local authority funding, which comes from central government, thus rendering local authorities far more self-sufficient, in control of their own finances and, thus, far better positioned to make a suitable “business case” for loans required for major developments and such like.

The role of central government in local authority finance should be restricted to one of balance. That is, central government should be able to claim a certain proportion of the money raised by local authorities, which it would then redistribe back to those local authorities according to need. This “central government precept” should not be a great percentage – maybe 10% to 20% at the most – and should always be fully redistributed back to local authorities. The idea of this precept is that there are certain areas where quite low rates would cover everything, due to the high property valuation, and others where the reverse is true. A fairly straightforward redistribution rule would be one based on actual population, although factors like sparsity of population (involving the need for a higher spend on communications – roads etc. – than the per capita norm) should also feature.

As well as the value of property, the potential value of property should feature. That is, for instance, a field of, say, 2.5 hectares has no great value as it stands – yes, a reasonable sum for agricultural or leisure purposes, but that’s it. However, if the said field happens to be in a zone classified as “residential” or “commercial” (rather than “leisure” or “agricultural”), its potential value is considerably higher. It may be appropriate for such fields to be subject to a rate at least partly dependent upon their potential value, rather than their actual present value. This would encourage commercial organisations to actually develop such fields as they may possess, rather than allowing them to lie empty. Obviously, if there’s no real prospect of a “residential” or “commercial” development, the owner should be able to ask the Council to reclassify the field as “leisure” or “agricultural”, which, of course, would automatically cause any residential or commercial planning permission for it to lapse.

As regards the immediate problem facing Fife, a council tax increase of 22% should cover the shortfall, without having to make any significant cuts. But why should the burden of maintaining services thus fall so disproportionately upon “domestic” users rather than “business” users? Not only that, but a similar increase would be needed, according to current Scottish Government plans, for the next 3 years. Frankly, what is currently being planned makes the entire notion of local democracy meaningless. If things don’t change significantly during the course of this year, it might be seriously worth considering the resignation of every Labour councillor in Scotland, with no Labour candidate standing in any on the ensuing by-elections. It really is that bad, that pointless, unless there’s a change in outlook at Holyrood.

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18 thoughts on “A short- and long-term plan for local government funding

  1. John one of the primary reasons why the head office of the Labour Party UK lost the general elction was that they were not trusted on running the economy and were incompetent, so this bright spark idea by the branch office Scottish Labour section of increasing council tax on the poor folks of Scotland is on par with your head offices line of thinking. I don’t suppose you are bothered by the branch office Scottish Labour being viewed as a spent force in Scotland it is because of ideas like this one that the branch office Scottish Labour section face total wipeout and being beaten into 3rd place by the Tories at the Scottish elections and thereafter extinction.

  2. fabulous brainwave……..

    So the average house price in Scotland is £167,000;

    with the proposed re-banding to reflect actual house prices and assuming a Gaussian distribution curve, this means over 70% of Scottish households will fall into the new band G or higher….

    meaning a house valued at £160,000 and currently in the old band E paying around £1366 a year would jump to £2003 a year…..

    a whopping £640 increase …or £12.31 per week extra….a near 47% rise!….
    in one fell swoop!

    Looks like another well thought out plan from our local friendly UK Labour Branch Office….

    Sure looks like a vote winner to me…..i really hope you put this in the manifesto, along with the APD money tree…

    This should ensure enough cash to pay for all the extras

    1. But nothing here suggests that course of action. You just made it up.

      Try harder.

      1. Duncan,

        in the section in italics it details a table, in that table there is the information for council tax band E.
        Band E currently pays £1366 per year, as the bands do not reflect current market prices it is true that a property valued at £167,000 (average price) is set at band E. I know this as I have up until recently owned such a property and that was the band in which it was placed.

        With the proposed changes within the fife council section this would increase to £ 1469.

        Further in the article there is the statement

        “the longer term must see a system more closely tied to the actual valuation of property.”

        in doing this, a £167,000 property would be placed in band G and pay £2003 per year.

        taking both proposed changes the council tax would increase from £1366 to £2003, a 47% increase. Now, you obviously think this is a great idea and a real vote winner as the article was published by you.

        For me however it raises several possibbilities.

        1) This is another policy wheeze that has been ill thought out and not costed properly (APD?)
        2) It is proposed in the hope that readers either cannot count or read the article carefully, thinking through the possible outcomes or both.
        3) Labour-run councils are so incabable of managing finance that they think raising the council tax for almost 70% of properties around the median price by 47%, is not only affordable but acceptible and as long as it is couched in terms of SNPBAD it’ll be a real vote winner.

        This of course doesn’t rule out all three being true

        1. So you think “a system more closely tied to the actual valuation of property” means one in which the existing bands stay exactly the same and today’s valuations are applied to the 1990 assessment levels? That’s just idiotic. No-one is suggesting that, not in this piece and not anywhere else I’ve seen. Your interpretation is designed simply to give you an opportunity to throw mud. It’s pathetic.

          Oh, and a reminder once again:
          – posts on this site in the Opinion section are the opinions of the individual authors
          – party policy is published by the party – articles here don’t define party policy
          – my publishing something does not indicate my agreement with it (see George Galloway)

          1. “So you think “a system more closely tied to the actual valuation of property” means one in which the existing bands stay exactly the same and today’s valuations are applied to the 1990 assessment levels? That’s just idiotic. ”

            Information regarding whether or not the bands stay exactly the same or not is not contained in the article……..shifting the goalpoasts by introducing an “undefined new system” to get out of the implications indicates that the article and the idea is flawed, half-baked and does Labour no service.

            You may also notice that using terms such as “That’s just idiotic” are indicative of poor argument, Try to stay on topic

          2. It wasn’t in the article so you made it up and then criticised not only the person who didn’t write it, but the person who published the article that didn’t contain it, and the party with which they are both associated. All getting it in the neck for something neither stated nor implied.


  3. “We will freeze council tax till 2017″…… Is what Scottish Labour’s manifesto stated.
    Now we have 22% rises for now, and for the next three years.
    Unbelievable?…..Well no, this is the same Labour Party that raised council tax by 65% in just a few years, last time round.

    In England there are deeper cuts in local government financing, but we don’t get this perpetual whining. Wonder why? Is it because BBC Scotland give Labour a platform?

  4. Labour have nothing to lose.
    The way the votes are going it should be full on to retain the hardcore vote.
    That means ditching everything bar Glasgow Provan and Glasgow Pollok.
    Forget Bishopbriggs and concentrate on Barmulloch
    Btw, if you don’t understand that then tough.
    This is “man the lifeboats” time.

    1. Yeah but it’s supposed to be women and children first…….

      Not Labour MPs, MSPs, coucillors then devil take the hindmost

  5. Would it be beyond Scottish Labour to live within its means? I.e. only spend the money that is coming in? Mr Morton can whine all he wants about SNP cuts but the fact of the matter is that we are living in Tory austerity, and most likely will until 2020, cuts are a fact of life. And let’s not forget that it is the Tory Government that gives sweetie money to the Scottish Government; we had our chance to change that and we declined. Time to live in the present and accept the situation as it is: cuts will happen, deal with them and don’t whine like bitches about how bad things are.

    Labour Councilors resigning and refusing to stand again? Sounds like a fucking good idea, why don’t you all piss of now and never come back? Sod your pathetic plans to re adjust the council tax banding, just get lost and stay lost. Labour hasn’t changed it’s ways, it’s still full of idiots who think they have the right to stick their hand in my pocket to fund whatever they want. Labour keep going on about improving council services but they are never named so this gives Labour the get out clause later of justifying rises to combat ‘SNP’ cuts (as Labour in Wales are already doing and blaming the Tories) while all the time pissing on local services just to make political points. Resign you pathetic wastes of space, resign and never come back.

    (Sorry about the ranting and swearing Duncan but I’m a Fifer and I’m livid at this piece of shit. Twenty two percent for me is about £140 on my council tax, and I’m not getting £140 more in my wages, one person’s opinion or not. All my life Labour just increase taxes and then increase taxes again and I’m sick of it, and sick of Labour always proposing to raise taxes to solve any problems. Until the SNP stopped the rises I saw my council tax go up but my services reduced: Fife Labour regularly increased the council tax yet stopped the weekly bin collections and started charging for uplifting white goods, we in Fife have virtually no council offices we can go into because they’ve all been closed or handed over to ‘Management Committees’, the local libraries have been handed over to a trust and recent closures of libraries were announced, wildlife ares and public parks such as Lochore Meadows – given away by Mr Rowley! – have also been handed over to trusts, and Councillors talk about massive cuts but still advertise council jobs for £40-50K per year and above. I’m just sick of Labour and it’s time Labour started living in the real world with the rest of us.)

    1. In a previous life Mr Rowley was a council gardener so the fact that he offloaded the public park Lochore Meadows to a trust was an absolute disgrace Mr Rowley is what is commonly known in political circles as a pseudo left wing careerist and as long as the good folks of Fife who voted for him are kept in the dark and unaware as to what he is up to then he will continue use his position to sup up the corn and fill his boots with the good folks of Fife’s resources. I hope good folks like yourself will let others know what Mr Rowley is about and take measures to give him the grand order of the boot at the earliest opportunity.

    2. great points, I was with you all the way …up to

      “it’s time Labour started living in the real world with the rest of us.)”

      think that bit might be a bridge too far

    3. You should see the one about Falkirk Council’s new £21 million HQ plan. Subsequently (apparently) dropped but hardly a sign of acute political awareness.

  6. The stark reality of the council tax freeze is the fact that’s its helping alleviate a further imposed financial burden on already hard pressed tax payers in Scotland being forced to endure wage freezes and minimum below inflation wage rises.

    And all the spin lies and bullshit coming from Labour cant hide that very basic fundamental fact.

  7. “It wasn’t in the article so you made it up and then criticised not only the person who didn’t write it, but the person who published the article that didn’t contain it, and the party with which they are both associated. All getting it in the neck for something neither stated nor implied.


    yet again the reply button disappears conveniently but no at other times…

    I use the data and the comments contained within the article, to build the future impact of the changes mentioned there……nothing was brought in from the outside. You however brought up a vague allusion towards an ill-defined system where current bands will be changed.

    The comments critiqued the article, the Party deserves the critique as this site, it’s editor and the articles author are affiliated with it.

    The only personal critique is your immediate grab for using the word “idiotic” in place of a reasoned, rational, coherent response to the points made….

    Which you still have not done in any meaningful way….

    Feel free to try

  8. I think that local government should have the power to raise money in a number of different ways. Previous discussion on local government finance has assumed that only one system of tax collection could be used. National governments like to have a range of money raising powers.

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