SPICe Briefing

SPICe COUNCIL TAX ABOLITION AND SERVICE TAX INTRODUCTION (SCOTLAND) BILL STEPHEN HERBERT

briefing 31 August 2005 05/47

This paper outlines the measures proposed in the Bill, provides some background on the council tax and on the debates around the efficiency and equity of the council tax. Discussion of the merits (or otherwise) of a Local Income Tax (LIT) are then briefly considered alongside a discussion of some of the practical issues in implementing a LIT. The Scottish Service Tax, as proposed in the Bill, is then considered in more detail with particular regard to the debates which have surrounded this model of generating funding for Scottish local authorities. Lastly the paper considers the Scottish Executive’s position on the Bill and the issue of local government finance more generally is detailed before the likely approach of the Local Government and Transport Committee, as lead committee on the Bill at Stage One, is outlined.

Scottish Parliament Information Centre (SPICe) Briefings are compiled for the benefit of the Members of the Parliament and their personal staff. Authors are available to discuss the contents of these papers with MSPs and their staff who should contact Stephen Herbert on extension 85373 or email [email protected]. Members of the public or external organisations may comment on this briefing by emailing us at [email protected]. However, researchers are unable to enter into personal discussion in relation to SPICe Briefing Papers. Every effort is made to ensure that the information contained in SPICe briefings is correct at the time of publication. Readers should be aware however that briefings are not necessarily updated or otherwise amended to reflect subsequent changes.

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CONTENTS KEY POINTS ................................................................................................................................................................3 INTRODUCTION ..........................................................................................................................................................4 CONTENT OF THE BILL..................................................................................................................................................4

COUNCIL TAX .............................................................................................................................................................5 COUNCIL TAX LEVELS

..................................................................................................................................................6

DEBATES ON COUNCIL TAX ...........................................................................................................................................8

Critiques of Council Tax .......................................................................................................................................9 Advantages of Council Tax ................................................................................................................................12 LOCAL INCOME TAX................................................................................................................................................13 SCOTTISH SERVICE TAX.........................................................................................................................................17 Is the SST a Local Tax?.....................................................................................................................................18 Council Tax Benefit ............................................................................................................................................19 The Impact on Local Authority Staff...................................................................................................................20 Fiscal Flight ........................................................................................................................................................20 Water Rates .......................................................................................................................................................21 SCOTTISH EXECUTIVE ............................................................................................................................................21 NEXT STEPS..............................................................................................................................................................22 APPENDIX ONE – COUNCIL TAX BY BAND AND LOCAL AUTHORITY, 2005-06...............................................23 SOURCES ..................................................................................................................................................................24

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KEY POINTS •

The Bill proposes replacing the council tax with a form of income tax which would apply uniform rates of taxation across all Scottish local authority areas. The primary objective of the Bill is to effect a significant redistribution of income in favour of low income citizens and families

•

The Bill proposes to replace the council tax with a Scottish Service Tax (SST). The SST would involve the application of income tax from 0% to 20% depending upon the income of the individual. Income tax rates would apply uniformly across Scotland with the funds collected being distributed between local authorities in line with ‘meeting the expense of each local authority in discharging its functions or exercising its powers’

•

Between 1997-98 and 2005-06 the real terms increase in average Scottish Band D council tax levels was 12.36%. In England, over the same time period, the real terms increase in average Band D council tax levels was 41.9% in England and 49.33% in Wales

•

Council tax tends to be criticised for a number of reasons including the regressivity of tax, the impact of the tax on those on low or fixed incomes, the ‘gearing’ effect, lack of buoyancy, non-payment of the tax and the cost of collecting council tax

•

In contrast, advocates of the council tax highlight a range of benefits arising from council tax such as that its basic principles are easy to understand, it is easy to collect and that the yield is easy to predict

•

Local Income Tax as a source of revenue generation has been a longstanding proposal in debates regarding local government finance. Recently the Office of the Deputy Prime Minister undertook a detailed review of local government funding in England and Wales including detailed scrutiny of local income tax

•

The Scottish Service Tax has been debated on five previous occasions in the Scottish Parliament and as a consequence a number of lines of debate have emerged specific to the SST. These include whether the SST is a local tax, the impact on council tax benefit, fiscal flight and the impact on local authority staff

•

The Scottish Executive has established an Independent Review into Local Government Finance. The Review team is expected to report to Scottish Ministers during the summer of 2006. Accordingly the Scottish Executive is opposed to this Bill and does not wish to draw any conclusions with regard to local government finance until the Review has reported

•

The Local Government and Transport Committee will begin Stage 1 scrutiny of the Bill on 8 September 2005. The Committee has issued a call for written evidence the deadline for submissions for which is 30 September 2005

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INTRODUCTION The Council Tax Abolition and Service Tax Introduction (Scotland) Bill was introduced to Parliament on 11 November 2004 as a Member’s Bill by Tommy Sheridan MSP. The Bill aims to replace the council tax with a form of ‘local’ income tax termed the Scottish Service Tax. The Policy Memorandum to the Bill states that the primary objective of the Bill is to: “effect a significant redistribution of income in favour of low income citizens and families across Scotland thus reducing poverty through the replacement of the current council tax with a personal income based alternative applied in a progressive fashion to various levels of income” (p 1)

CONTENT OF THE BILL The Scottish Service Tax (SST) would apply to any individual who is domiciled in Scotland or who resides in Scotland for 91 days or more in a financial year. The Bill allows for Scottish Ministers to create new categories of individuals who would not be eligible for the SST via Statutory Instrument (Section 2 of the Bill). The income which would be subject to the SST would be income which would be considered liable for income tax (Section 3). Section 4 of the Bill proposes the following tax bands for the SST: • • • • •

Band A – Below £10,000 – 0% Band B - £10,000 to £29,999.99 – 4.5% Band C - £30,000 to £49,999.99 – 15% Band D - £50,000 to £89,999.99 – 18% Band E - £90,000 and over – 20%

The Bill provides for Scottish Ministers to amend the tax bands proposed or create additional bands, with the exception of Band A which the Bill would not allow to be reduced below £10,000 per annum. Section 5 of the Bill places a duty on local authorities to ensure that the SST is imposed and collected from each qualifying individual in their local authority area with all the revenue collected to be remitted to Scottish Ministers. Section 5 of the Bill also proposes that Scottish Ministers would be required via Statutory Instrument to make provision for a range of issues including the following: • • • • •

How information about a qualifying individual’s income would be obtained The means via which the SST would be paid The means by which the SST would be collected The method of enforcement for collecting the SST Any penalties which may be imposed for failure to pay the SST

Section 6 would require that Scottish Ministers distribute all the revenue received via the SST amongst Scottish local authorities. In determining the distribution of funds between local authorities it is proposed that the purpose of this process would be: “to contribute towards meeting the expense of each local authority in discharging its functions or exercising its powers” (Section 6 (2)) providing research and information services to the Scottish Parliament 4

In addition Section 6(3) of the Bill states that: “Scottish Ministers are to divide the total revenue amongst local authorities as they consider appropriate having regard to relative levels of poverty and deprivation in each local authority area and the likely financial needs of each local authority after consultation with – (a) the Convention of Scottish Local Authorities; (b) the Scottish Trades Union Congress; and (c) such other persons as the Scottish Ministers consider appropriate”. Section 8 of the Bill proposes that any outstanding debts, and any ongoing legal action in connection with debts, resulting from the community charge (‘poll tax’) or council tax before 1 April 2004, be cancelled. The Financial Memorandum comments on this section as follows: “The proposed moratorium on Community Charge debt, and on Council Tax debt up to April 2004, would result in a one-off loss of potential future income against which must be set the cost of collection of the debt. At March 2003 there was £550 million of Council Tax debt outstanding across Scottish Local Authorities. In any given year around 10% of tax collected comes from previous years, however, the amount collectable diminishes dramatically in future years. Across Scotland, around 5% in any given year is likely never to be collected. We estimate the lost revenue resulting from the debt moratorium to be between £100 million and £150 million” (p 5) Given that outstanding debt is cited as being £550 million in the Financial Memorandum it is not evident why the projected lost revenue stands between £100m to £150m and not £550m. The Bill proposes that the SST would come into effect on 1 April 2006 or another day which Scottish Ministers may determine via Statutory Instrument (Section 9). Section 10(3) requires that all the Statutory Instruments proposed in the Bill would be required to be approved via the affirmative procedure of the Parliament.

COUNCIL TAX The council tax was introduced in Scotland on 1 April 1993, in replacement of the community charge (‘poll tax’), as a means of local revenue collection for local authorities. The legislation relating to council tax is contained within the Local Government Finance Act 1992 and subsequent Regulations. Council tax levels are set by individual local authorities and account for approximately 20% of local authority revenue expenditure. The actual amount of council tax levied on individual properties is determined by their placement within eight valuation bands (see Table One below) according to the estimated market value of the property as at 1 April 1991. The property banding process in Scotland is the responsibility of the Assessor, an officer appointed by and employed by local authorities, but who remains an independent professional valuer. There are a range of exemptions from the council tax for specific types of property such as dwellings occupied solely by full time students, properties solely occupied by mentally impaired people, and armed forces accommodation. As previously stated the valuation of properties is based on the value of the property in 1991. There has been no revaluation of domestic properties undertaken since 1991. Table One details the Council Tax Valuation Bands for domestic properties in Scotland. The council tax bill for Band D properties forms the baseline for other bands. Accordingly the bill for a dwelling in Band A will be two thirds of the size of the bill for a property in Band D and one third of that for a property in Band H. providing research and information services to the Scottish Parliament 5

Table One – Council Tax Valuation Bands in Scotland (as of 1 April 1991) Council Tax Band Range of Values Up to £27,000 Band A Over £27,000 and up to £35,000 Band B Over £35,000 and up to £45,000 Band C Over £45,000 and up to £58,000 Band D Over £58,000 and up to £80,000 Band E Over £80,000 and up to £106,000 Band F Over £106,000 and up to £212,000 Band G Over £212,000 Band H Source: Scottish Executive 2003 In addition to exemptions from council tax for specific types of properties there are also a range of discounts available from council tax, for example, single person households receive a 25% deduction in their council tax bill. Furthermore, people on low income may be eligible for council tax benefit in order to assist in paying all or some of their council tax. Accordingly, council tax benefit, which is a reserved issue, changes the nature of council tax from a property tax into a property tax which also takes account of the income of individuals/households or, as the Local Government Information Unit (2005) comments: “Council Tax Benefit changes the very nature of the council tax system, transforming it into a hybrid tax – a combination of a property-based tax for most households and income-based tax for the rest” (p 4) Further information on eligibility for Council Tax Benefit can be accessed from the Department for Work and Pensions (DWP) web-site at: http://www.dwp.gov.uk/lifeevent/benefits/council_tax_benefit.asp#what The 2005/06 council tax charges by band and local authority are detailed in Appendix One. Appendix One details that the Scottish average council tax charges by band are as follows: Band A - £729 p.a. Band B - £851 p.a. Band C - £973 p.a. Band D - £1,094 p.a. Band E - £1,337 p.a. Band F - £1,580 p.a. Band G - £1,823 p.a. Band H - £2,188 p.a.

COUNCIL TAX LEVELS Increases in council tax levels have become an increasingly prominent item of public discourse and political debate in recent years both in Scotland and Britain more generally. Table Two details the level of change in council tax levels between 1997/98 to 2005/06. The table indicates that: •

Between 1997/98 to 2005/06 average Band D council tax levels rose, in actual terms, from £783 p.a. to £1,094 p.a. or by £311. This represents an average annual increase of £38.88. providing research and information services to the Scottish Parliament 6

• • • •

In real terms between 1997/98 to 2005/06 average Band D council tax levels rose from £783 p.a. to £907 p.a. or by £124. This represents an average annual increase of £15.50. Between 1999/2000 to 2005/06 average Band D council tax levels rose from £849 p.a. to £1,094 p.a. or by £245. This represents an average annual increase of £40.83. Between 1999/00 to 2005/06 average Band D council tax levels rose, in real terms, by £101. This represents an average annual increase of £16.83. In real terms between 1997/98 to 2005/06 average Band D council tax levels cumulatively rose by 12.36% and by 6.84% between 1999/00 and 2005/06.

TABLE TWO – AVERAGE SCOTTISH BAND D COUNCIL TAX LEVELS, 1997-98 TO 2005-06 Year 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 £ p.a. Actual 783 827 849 886 929 971 1,009 1,053 1,094 Terms £ p.a. Real 783 803 806 831 848 853 857 873 907 Terms % Increase Real Terms 2.58 2.94 6.12 8.24 8.88 9.40 11.51 12.36 (Cumulative) Source: Berry (2004); COSLA (2005), Real terms figures from GDP Deflators on HM Treasury website.

Figure One details the level of percentage change in average Band D council tax levels, in actual and real terms, in Scotland, England and Wales. Figure One details that the level of average Band D council tax increases in Scotland have been considerably lower in Scotland than the rate of increase in England and Wales. The key trends evident in Figure One are: • • •

Average Scottish Band D council tax levels increased by 39.72% in actual terms and 12.36% in real terms between 1997/98 and 2005/06 Average English Band D council tax levels increased by 76.45% in actual terms and 41.90% in real terms between 1997/98 and 2005/06 Average Welsh Band D council tax levels increased by 85.69% in actual terms and 49.33% in real terms between 1997/98 and 2005/06

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Figure One - Band D Council Tax in GB 1997-98 to 2005-06, % Cumulative Increase, Actual and Real Terms 90 80 70 60

%

50 40 30 20 10 0 1997/98

1998/99

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

Year Actual Terms Scotland Real Terms Scotland

Actual Terms England Real Terms England

Actual Terms Wales Real Terms Wales

Further data on council tax levels can be accessed at: http://www.scottish.parliament.uk/business/research/pdf_res_notes/rn01-35.pdf (Berry 2001)

DEBATES ON COUNCIL TAX Whilst debate around the efficiency and equity of the council tax has been prominent in recent years, debates regarding the appropriate structure and balance of local government funding (vis-à-vis central government funding) are as old as local government itself. Some commentators consider debates on local government finance as being a function of the constitutional structure of the United Kingdom. For instance Sanderson (1995) comments on this issue as follows: “At the root of this problem is the constitutional status of local government. Britain has an evolutionary, unwritten constitution which does not incorporate any formally entrenched safeguards which renders local government – as a statutory creation of a sovereign parliament – essentially at the mercy of an omnicompetent government. …. In essence, the problems of local government finance can be seen as reflecting this informal, evolutionary approach to the distribution of political authority within the state” (p 5) In Scotland debates regarding local government finance have also been prominent postdevolution. The Commission on Local Government and the Scottish Parliament (‘the McIntosh Commission’) (1999) made the following comments, despite the issue not being part of the Commission’s remit, in relation to local government finance: “Our recommendations on the democratic renewal of councils, which follow in the later chapters of this report, will themselves take some time to come to fruition; and we consider it appropriate that an early and practical examination of the finance of local government should proceed in parallel with that process. … Accordingly we recommend providing research and information services to the Scottish Parliament 8

that an independent inquiry into local government finance should be instituted immediately” (paras 56 and 57). During the previous parliamentary session (1999-2003), the then Local Government Committee undertook an Inquiry into Local Government Finance. The Scottish Executive have appointed an Independent Local Government Finance Review Committee, the role of which is discussed later in this paper. Critiques of Council Tax The Bill cites as its primary objective “a significant redistribution of income in favour of low income citizens and families” (p 1). One of the main criticisms of the council tax has been its perceived negative impact on low income households and pensioners. The Office of the Deputy Prime Minister (ODPM) Balance of Funding Review report conducted into local government funding in England and Wales recognised that concerns existed with regard to this issue and summarised these as follows: “Although those in higher band properties pay more, those in lower band properties spend a higher proportion of their income on council tax than those in higher bands. It therefore bears more heavily on those on low incomes especially if they live in higher band properties. The structure of council tax means that it is also regressive to property value – while the ratio between property values in the top and bottom bands is at least eight to one, the ratio between the amounts of tax payable is only three to one” (ODPM 2004, p 27-28) In relation to council tax benefit the Balance of Funding review report made the following comments: “Council Tax Benefit exists to tackle the difficulties faced by those on low incomes. However, low levels of take-up reduce its impact, and mean that, at current levels, the overall effect of the council tax is still regressive to income. Full take-up would reduce regressivity significantly, but not remove it. Take-up is particularly low amongst pensioners who are owner-occupiers” (ODPM 2004, p 28) The consultation document of the Local Government Finance Review Committee (2005) makes the following comments in relation to council tax benefit uptake in Scotland: “At present, 24% of all households and over 40% of pensioner households receive partial or full relief via Council Tax Benefit” (p 13) The Family Resources Survey (2003-04) found that 24% of households in Scotland were in receipt of council tax benefit compared to 19% for the UK as a whole indicating that uptake of the benefit is greater in Scotland than for the UK (Department of Work and Pensions 2004, Table 3.10). The payment of council tax by pensioners, particularly those on low or fixed incomes, tends to be a particularly prominent issue. A Help the Aged report on the issue reached the following conclusions: “After food, council tax and water rates is usually the second biggest item of expenditure in any pensioner household. The majority of pensioner households are forced to make providing research and information services to the Scottish Parliament 9

cuts to their budget every year following increases in council tax and water rates. These cuts are often made in heating, leisure, clothing and travel. …. Council tax benefit provides a great deal of relief for those who successfully claim it, however, 22% of older people in the survey did not know whether they were entitled to council tax benefit. Up to 40% of eligible pensioners are known not to claim the benefit. … This survey has found that lengthy complicated claim forms and lack of awareness of the benefit are key factors affecting underclaiming” (Help the Aged 2004, p 3-4) In addition to critiques of council tax for its regressivity and associated impacts on low income, fixed income and pensioner households a range of other criticisms are also made of council tax and these are briefly summarised below. Accountability At present council tax, the principal source of locally raised revenue for local authorities, accounts for 20% of local authority expenditure. Accordingly in order for a local authority to undertake a 1% rise in expenditure which is not covered by Government grants, requires a 5% increase in council tax. This effect, termed ‘gearing’, is considered as sending misleading signals to local taxpayers and electors about a local authorities’ spending decisions. However the effect is not a consequence of the council tax but rather of the balance of funding between central and local government. Accordingly remedying this effect would require a larger proportion of local authority revenue to be generated locally regardless of the mechanism used. However council tax is also a highly visible tax, with local taxpayers acutely aware when council tax bills rise to any significant extent. Despite the difficulties this may cause for local authorities aiming to generate additional revenue it can also be argued that this does make local authorities accountable to their taxpayers. Travers (2004) comments on the visibility of council tax in the following terms: “Opposition to rising council taxes, which has intensified in recent years, is to a significant extent a reaction against the painful visibility of the local property tax. Like the community charge and domestic rates before it, local government has found itself raising the sole truly transparent, visible, accountable tax….. The difficulties facing local government, with its sole, regressive, non-buoyant, geared and highly visible tax, are regularly rehearsed. There can be little doubt that the transparent and painful impact of council tax – like domestic rates before it – acts as a powerful discipline on councils” (p 23) Buoyancy Council tax is not a particularly buoyant source of revenue as the revenues generated from council tax do not rise or fall in line with the performance of the economy. Accordingly the lack of buoyancy of council tax can be perceived as limiting the ability of local authorities to respond in a flexible manner to local issues and to benefit from an improvement in the performance of the economy. Council Tax Benefit As has been noted above, a proportion of households are either unaware of their eligibility or are unwilling to claim council tax benefit. However the existence of this benefit for low income households can be viewed as creating a further complication for low income households as: providing research and information services to the Scottish Parliament 10

“it implies extremely high marginal tax rates – a disincentive – for those contemplating moving into work – the poverty trap” (Sawkins and Dickie 2002, p 5) Non-Payment As the Policy Memorandum to the Bill notes (p 5), the collection of council tax has proved problematic. Collection rates have been improving in recent years - in 2004-05 the collection rate was 92.7% for the year. Since 1993-94, of the total amount of council tax billed in Scotland, 94.9% had been collected by 31 March 2005 (Scottish Executive 2005). However collection rates in Scotland still lag behind collection rates in England and Wales. For example the council tax collection rate for 2004-05 in England was 96.6% (ODPM 2005, p 1). Sawkins and Dickie (2002) state: “One of the key criteria for judging the success or otherwise of a tax is whether those liable to pay, actually do pay. Since the inception of council tax non-payment has been particularly troublesome for Scottish local authorities” (p 8) However the difference in collection rates between Scotland and the rest of Britain suggests that non-payment is not a inherent characteristic of the council tax but rather a symptom of different factors being at work in Scotland compared to the rest of the UK. The Scottish Executive undertook research into the issue of the variation in council tax collection rates which identified four factors that were considered as explaining the variation. These were: 1. “The legacy of the poll tax: the earlier introduction of poll tax in Scotland caused much greater and longer lasting political reaction; 2. Local government in Scotland was severely affected by the reorganisation on 1 April 1996. The abolition of the Regional Councils meant that major local taxation functions were transferred from 9 Regions to 29 mainland unitary authorities involving both aggregation and disaggregation of the function. The re-organisation in England and Wales was simpler, only one out of 105 new councils took on an aggregation of local tax and benefit responsibilities; 3. Differences in legislation and procedures: Scotland has different legislation in key areas (local government and debt recovery) and a different legal system. This naturally means many processes and procedures also differ, with differing impacts on council tax collection rates. In some cases, the Scottish approach is, or is seen as, equally effective as the English; 4. The joint billing of council tax with water and sewerage charges also emerged as a key difference, and potentially a major reason for the lower collection rates in Scotland”. Source: Scottish Executive 2000, Ch 1, paras 6.1 to 6.4) Administration Costs The Policy Memorandum to the Bill notes the high costs associated with administering the council tax with collection costs amounting to 5% of revenue raised (p 5). These costs are perceived by critics of council tax as being a consequence of council tax being: “complex and expensive to administer, with a whole separate recording system required of local authorities, with a need to take account of people movement, single person discounts, empty and second homes” (Clarke 2003, p 11) providing research and information services to the Scottish Parliament 11

Advantages of Council Tax In response to critiques of council tax a set of counter arguments exist in favour of the tax. The principal arguments made in defence of council tax are summarised below: Property Tax At present council tax is the only form of taxation which is levied on residential property. Proponents of council tax therefore contend that removing one of the major sources of income from the taxation regime would be to neglect a significant source of income. For example, during the previous session of Parliament, Professor Stephen Smith made the following comments to the then Local Government Committee on the issue: “There are advantages in the UK fiscal system of having some taxation on housing, which is otherwise pretty much untaxed. We are a small country that has a lot of pressure on space and in which there are housing problems in many areas. Encouraging over-consumption of housing by leaving it as one of the few wholly untaxed items of consumption is probably not desirable. There are arguments about the neutrality of tax treatment of different things on which people could spend their money. There are arguments for keeping some kind of taxation on housing. That is why I would keep the council tax in place” (Local Government Committee 2002, para 33) Council Tax contains a number of advantageous features The council tax is viewed by proponents as having a number of features which make it a useful form of taxation for local authorities to levy. The aforementioned Balance of Funding Review in England and Wales summarised these as follows: • • • • •

“it is the only tax on residential property values (and property taxes are widely used in other countries) it is an existing tax under the control of local government the basic principles are easy to understand it is easy to collect – in England in 2003-04 96.5% of council tax for that year was collected in-year; ultimate collection rates are even higher the yield is easy to predict” (Source: ODPM 2004, p 27)

Problems are not inherent to council tax Proponents of council tax highlight that many of the problems associated with council tax are not an inherent feature of the tax. For example, the gearing effect is not a function of the tax but rather of the skewed balance of central-local funding. The increasingly poor relationship between property prices and council tax bands is a result of the lack of regular property revaluations. Moreover through the creation of more council tax bands at the top and bottom of the scale the council tax would achieve more equitable outcomes. The previous Local Government Committee took this view and accordingly recommended that: “the revaluation [of domestic properties] should be accompanied by a review of the banding arrangements. New bands should be added at both the upper and lower ends of the existing valuation range; and the Council Tax should be made more progressive by changing the relationship between the tax bands” (Local Government Committee 2002, para 49) providing research and information services to the Scottish Parliament 12

Changing the system of local finance is problematic Proponents of the council tax emphasise that as a system of local taxation council tax is already working reasonably well and that reform of the council tax would present a more palatable form of change than the abolition of the council tax. Whilst recognising that issues regarding the equity of the tax exist proponents caution that the argument to replace council tax with a local income tax: “rests almost wholly on arguments about fairness. However, no tax is fully progressive in practice” (Midwinter 2003, p 29) Moreover proponents of the status quo contend that the experience of the community charge should act as a warning of the potential dangers of significant change in the structure of local taxation. Accordingly the benefits of the council tax, allied to reform of the operation of the tax, can be viewed as offering a less perilous means of reforming local government finance. For example Midwinter (2003) comments in this vein as follows: “The council tax provides a stable yield, at low administrative cost. There is a need for a robust and rigorous review, which recognises that we operate in a complicated fiscal landscape in which options for reform are very limited. The challenge of providing a ‘fairer’ system, which permits local accountability at reasonable cost, is not an easy one” (Midwinter 2003, p 29)

LOCAL INCOME TAX The proposal to introduce a local income tax (LIT) is a long standing proposal in terms of UK local government finance. For example the Layfield Report on Local Government Finance in 1976 made the following comments with regard to local income tax: “there is a strongly held view amongst us that the only way to sustain a vital local democracy is to enlarge the share of local taxation in total local revenue and thereby make councillors more directly accountable to local electorates for their expenditure and taxation decisions. On balance, we consider that the administrative cost involved in introducing a local income tax for this purpose would be justified. After many decades of uncertainty in the realm of local government finance the time has come for a choice on the issue of responsibility” (Jones and Stewart 2002, p 9). Whether a local income tax should be the main source of local finance to local government or in addition to council tax remains a source of debate. The Balance of Funding Review in England and Wales (ODPM 2004) found that consultees were “divided between the merits of a reformed council tax and LIT as the main local revenue source” (p 42). The previous Local Government Committee reached the following conclusion with regard to LIT: “For the longer term, the Committee recommends that the Executive should examine the feasibility of introducing a Local Income Tax in Scotland – and reducing either councils’ dependence on government grants or the amount raised by the Council Tax” (Local Government Committee 2002, para 81) Regardless of the exact form of LIT proposed, advocates of LIT emphasise that the tax would be progressive in application, deliver a substantial yield to local authorities, enhance the local accountability of local authorities to local citizens and be relatively straightforward to deliver. In 1976 the Layfield Committee set out the main advantages and disadvantages of a LIT as being that it would: providing research and information services to the Scottish Parliament 13

• • • •

“raise substantial sums of money enhance the accountability of local authorities by bearing on the inhabitants of the area concerned bear on individuals according to their income; and be a feasible proposition if operated by the Inland Revenue, making use of the PAYE [Pay As You Earn] system for Schedule E incomes and provided the present national scheme was simplified. But it would:-

• • • • • •

add considerably to the present burden of income tax collection and assessment, both for the Inland Revenue and for industry and commerce generally; impose a public and private cost for its operation of about £100 million a year because of a total manpower cost equivalent to around 25,000 people; change the circumstances in which income tax is used as a tool of central economic management; require special measures to make it clearly perceptible within the individual taxpayer’s total local and national income tax; require at least five years before it could be introduced; and depend on a number of important simplifications being made within the national tax system” (Hale and Travers 1998, p 19)

It is important to note that the Layfield Committee report was written in 1976 and therefore the remarks made in relation to the burden of income tax collection and assessment, and the cost of operation of a local income tax have changed significantly due to advances in information technology (see discussion of ODPM review for a more recent account). The Policy Memorandum to the Bill makes the following comments in relation to Layfield: “Unlike local income tax schemes the set-up costs and problems of fiscal flight (as identified by the Layfield Committee of 1976) are insignificant as the necessary coding exercise to identify tax payers domiciled in Scotland has already been carried out by [the] Inland Revenue, and avoidance of Scottish Service Tax would involve leaving Scotland rather than shifting between local authority areas to seek lower local income tax rates” (p 2-3) The Balance of Funding review in England and Wales considered in significant detail the theoretical background to the LIT as well as the practicalities of implementing a LIT. The review report considered that the introduction of a LIT as a replacement for the council tax would have no significant impact on the overall balance of funding. Although this outcome would be subject to “the effect of future buoyancy in revenues increasing the relative size of the tax take within the total envelope of local authority income” (ODPM, p 49). With regard to local accountability the report found that a variable LIT (i e where a local authority set their own income tax rates) should result in an increase in local accountability to taxpayers if the LIT was introduced as a supplement to council tax. As the Bill proposes uniform taxation rates across all Scottish local authorities the measures proposed do not enhance local accountability in this sense. Reflecting earlier studies the report considered that LIT would provide a more ‘buoyant’ and more progressive income source for local authorities than the council tax. However the report was more circumspect with regard to the predictability and collectability of a LIT as the following quotes indicate:

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“The yield from a LIT would be less predictable than that from council tax. Even relatively small variations between a local authority’s prediction of LIT receipts and actual revenue raised could have significant implications for its finances, particularly over a run of years, but this could be in part be mitigated by distributing revenues to authorities on the basis of estimates and carrying surpluses and deficits on the yield within the national LIT collection fund” (ODPM 2004, p 50) “Although the costs of collection would undoubtedly be considerable, given the number of different factors involved, it is impossible to estimate these reliably at this stage. It would be simpler and cheaper for the IR [Inland Revenue] to collect the tax rather than local authorities themselves. … Broadly speaking, a LIT would be harder to enforce and collect than a property-based tax such as council tax” (ODPM 2004, p 51) The Chartered Institute for Public Finance and Accountancy (CIPFA) undertook research on behalf of the Balance of Funding Review on the issue of Local Income Tax, albeit a model of LIT which would supplement and not replace council tax. The papers which CIPFA produced for the Review were: • •

CIPFA (2004) ‘Reviewing the Case for a Local Income Tax’ which can be accessed at: http://www.local.odpm.gov.uk/finance/balance/boflit.pdf CIPFA (2004a) ‘Reviewing the Case for a Local Income Tax – Supplementary Report’ which can be accessed at: http://www.local.odpm.gov.uk/finance/balance/bof25.pdf

The reports provided a detailed analysis of the practicalities of implementing a LIT in the UK. The Financial Memorandum to the Bill draws extensively on the calculations made by CIPFA for the Balance of Funding Review and applies them to Scotland. Bearing in mind that the conclusions which were made in the CIPFA report applied to the United Kingdom some of the headline conclusions reached were as follows: Administration and costs – CIPFA concluded that, whilst local authorities collecting the LIT would offer the possibility of improved local accountability, given the complexity of the exercise and the experience of the Inland Revenue (IR), a more realistic option was to have the IR collecting the LIT. In considering the cost of implementing a LIT to replace the council tax for the UK as a whole CIPFA considered that: “net savings would be possible – perhaps of the order of £140–280 million. (The costs in England only would equate to about four-fifths of these figures). CIPFA said that, at this stage of analysis, these and other costings should be treated only as broad estimates” (ODPM 2004, p 44) Start-Up Costs and Timing – CIPFA estimated that in broad terms the introduction of a local income tax system based on PAYE and self-assessment would cost around £330m. This cost would arise principally from the development and implementation of a database with details of taxpayers by local authority area and associated IT costs. In the situation where the council tax was abolished at the same time CIPFA estimated “that staff severance and restructuring costs might cost something like £70 million on top” (ODPM 2004, p 45) of the costs for introducing a LIT. In terms of the timescale for implementation CIPFA suggested that a minimum of four years would be required including provision for passing the legislation through Westminster. The White Paper ‘Scotland’s Parliament’ recommended that income tax was a suitable tax power for the Scottish Parliament as “it is broadly based and easy to administer. Income tax is providing research and information services to the Scottish Parliament 15

relatively simple and easy to understand and has none of the difficulties associated with the other major tax bases” (Scottish Office 1997, para 7.12). The cost of using the tax power were estimated in the White Paper to be as follows: “The direct costs to the Government of establishing the mechanisms for tax variation in Scotland is estimated at around £10m. Running costs for the Government of collecting the tax are expected to be around £8m per annum, but may vary depending upon whether or not the Scottish Parliament chooses to vary the rate of tax” (Scottish Office 1997, para 7.18) The costings in the White Paper were based upon varying the rate of income tax by 3p in the pound which is a simpler model to operate than the SST which contains a number of tax bands depending on income and therefore the costs of implementation could be expected to increase in line with the greater complexity of the proposed scheme. Nevertheless the cost estimates in the White Paper provide a rough indication of the likely scale of the cost involved. The Implications for Business – The Balance of Funding review considered that the introduction of a LIT through PAYE would place additional burdens on employers although this would vary depending on the form of LIT proposed whilst a LIT would have varying effects on firms depending upon the size of the business, geographical spread of employees etc. CIPFA estimated that the additional cost to business would be in the region of £110m per annum. The White Paper made the following comments in relation to the costs to business of implementing the 3p tax varying power for the Scottish Parliament: “Collection through PAYE will also generate additional costs for employers. Their setting up costs are estimated to be around £50m (which could be phased) and running costs at around £6-£15m. Costs will vary from employer to employer. For illustrative purposes, an employer with 5 Scottish resident employees, (most cases in practice) would typically face setting-up costs in the range £50-£100. A larger firm, with 200 Scottish resident employees operating PAYE could expect set up costs in the range of £700-£1,400, around £5 per employee. Once the legislation enacting the tax-varying power is in place, the Government will publish a formal compliance cost assessment, following consultation with employers” (Scottish Office 1997, para 7.19) The Impact of a LIT upon individuals – CIPFA considered that the introduction of a LIT across the UK as a whole would result in 30.7m taxpayers contributing to the LIT which would represent 5.7m more taxpayers than currently pay the council tax. Whilst the impact of the LIT would depend on the precise form of the model introduced CIPFA estimated that a rate of 4 pence in the pound on all rates of income tax would equate to the amount of revenue generated by the council tax. With regard to the impact of a LIT upon different income groups and household types the Balance of Funding report made the following comments: “According to CIPFA’s analysis, if LIT were to replace council tax, the effective tax rate for individuals on average incomes might rise from 15.5% to 17.9% and from 26% to 30% for individuals with incomes three times the national average. The analysis suggested that lower income groups, particularly pensioners, single parent families and households with at least one other person dependent on a single earner would tend to gain most from a switch from council tax to LIT, and the single employed and households with two or more earners would be least likely to benefit.

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In the case of a LIT which replaced council tax in particular, the effect of the LIT on many lower income individuals would also be affected by the interplay with other benefits. CIPFA estimated that, without protection, the very poorest could be worse off with a LIT than with council tax. We were not able to investigate the complex issues involved here, but they are clearly another example of a crucial area which would need further detailed examination” (ODPM 2004, p 47) No comparable assessment has been undertaken to assess the impact of the introduction of a LIT solely in Scotland. However Sawkins and Dickie (2002) made the following remarks with regard to the applicability of a LIT to Scotland alone: “An alternative such as local income tax may be well understood, progressive and straightforward to administer, but suffers from the fact that it is based on a rather narrow tax base. Any further addition to this tax base is likely to risk it crumbling away as liable citizens pursue ever more elaborate avoidance strategies. The problems are compounded by the devolution settlement which raises the possibility of relocation as an effective and relatively cheap avoidance strategy” (p 12) Whilst the Bill does not propose different rates between local authority areas the introduction of the SST in Scotland alone would result in the LIT applying only in Scotland and not the rest of the UK resulting in a ‘cliff edge’ scenario between Scotland and the rest of the UK. Alternatively if the LIT was introduced in the other parts of the UK then differing rates of LIT would apply in the different nations of the UK. The Balance of Funding report recognised this problem, which it termed ‘cliff edges’, where taxpayers on either side of a ‘national’ boundary were subject to varying fiscal regimes. The report commented that: “These [‘cliff edges’] might be created both across local authority boundaries, where neighbouring authorities set significantly different rates of LIT, and, if a LIT were not to be introduced across the UK as a whole, across national boundaries” (ODPM 2004, p 49) However Danson, Whittam and Cooper (2005) contend that the issue of loss of individuals through tax avoidance is not a significant issue in the following terms: “The much respected Kay and King (1991) who have written one of the definitive texts on ‘The British Tax System’ comment: ‘The most important tax on factors of production is the income tax on individuals. If labour income is taxed too heavily in country A, you can often reduce the burden by working in country B instead. Again, this is an issue which generates more anecdote than evidence of serious effect” (p 12)

SCOTTISH SERVICE TAX As noted above the primary policy objective of the Bill is to effect a significant redistribution of income towards low income citizens and families. The Policy Memorandum to the Bill expands on the principal objective of the Bill as follows: “The Bill would effect a significant redistribution of income across Scotland from those on an above average income to those on below average incomes. The biggest beneficiaries will be pensioners and workers on low pay, while the biggest losers will be those on personal incomes above £40,000 a year, less than 10% of the taxpaying population and less than 5% of the overall population of Scotland” (p 1-2)

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Beyond debates regarding the utility of modifying the council tax, augmenting the council tax with a LIT, or of replacing the council tax with a LIT there are also a series of debates which are specific to the Scottish Service Tax (SST). The SST has been debated in the Scottish Parliament on five occasions as follows: • • • • •

30 March 2000 http://www.scottish.parliament.uk/business/officialReports/meetingsParliament/or00/or051201.htm 8 February 2001 http://www.scottish.parliament.uk/business/officialReports/meetingsParliament/or01/or101001.htm 24 January 2002 http://www.scottish.parliament.uk/business/officialReports/meetingsParliament/or02/sor0124-01.htm 30 January 2003 http://www.scottish.parliament.uk/business/officialReports/meetingsParliament/or03/sor0130-01.htm 11 March 2004 http://www.scottish.parliament.uk/business/officialReports/meetingsParliament/or04/sor0311-01.htm

There are also two previous SPICe papers on the Scottish Service Tax from the previous Parliamentary session. These are: • •

SPICe Research Note (2000) ‘A Scottish Service Tax’ SPICe Briefing (2002) ‘A Scottish Service Tax (Updated)’

In addition the SST was also considered by the previous Local Government Committee during its Inquiry into Local Government Finance. The Committee’s report reached the following conclusion on the SST: “Having examined in detail the proposals for a Scottish Service Tax, the Committee sees no merit in this option because the proposal as outlined in Professor Danson’s written evidence to the Committee would replace Scotland’s only tax with a new, national tax; leave councils in Scotland wholly dependent on central government for their funding; and would, in the Committee’s view, destroy local accountability for councils’ spending decisions” (Local Government Committee 2002, para 82) The Policy Memorandum contends that the return of Non-Domestic Rate Income (NDRI) to local authority control, which was recommended by the previous Local Government Committee’s Inquiry, would address this issue. However the Bill does not contain any proposals to return NDRI to local authority control. As the Committee’s remarks indicate there are a number of issues specific to the SST which have been subject to debate in the Parliament in recent years. These issues are considered below. Is the SST a Local Tax? The Bill proposes that revenues accrued from the SST would be pooled nationally and then redistributed to local authorities once an assessment has been made of the financial needs of individual local authorities whilst also having regard to the relative levels of poverty and deprivation in each local authority area (Section 6 of the Bill). In this sense the process of collecting and distributing the monies is analogous to that used with Non-Domestic Rate Income (NDRI – ‘business rates’). Whether the actual monies would be collected by local authorities or providing research and information services to the Scottish Parliament 18

the Inland Revenue is left to the discretion of Scottish Ministers, via Statutory Instrument, however the Financial Memorandum to the Bill (p 2-4) estimates the cost of either approach based on the estimates made by CIPFA to the Balance of Funding Review in England and Wales (as outlined above). This collection of revenues at national level led the previous Local Government Committee to critique the SST in the manner quoted above. The Policy Memorandum to the Bill recognises that the loss of local control is an issue in the following manner: “Although beyond the remit of the Bill, the member in charge supports the return of the right for local authorities to set and retain their business rates in full to compensate for the loss of financial autonomy over council tax setting and retention” (p 2) As noted above, the Bill does not contain any proposals to return Non-Domestic Rate Income to local authority control. Council Tax Benefit As has been discussed above Council Tax Benefit is provided to low income households as a means of providing assistance in paying the Council Tax. Local authorities deduct a sum from the council tax bill of a household dependent upon the characteristics of the household. To compensate for this shortfall in income the Department for Work and Pensions (DWP) provides financial support to local authorities to meet this shortfall via ‘Council Tax rebate grants’. In 2003-04 Scottish local authorities received £307.733m in Council Tax rebate grants (Scottish Executive, 2005a, Table 2A). Were the SST to be introduced then Scottish local authorities would no longer require Council Tax rebate grants to be provided by DWP. The position of the DWP or the Treasury in relation to this issue is not known, however these funds could either be added to the block grant of the Scottish Executive or the funds could be retained by the Treasury. In effect the situation with council tax benefit, were the SST to be introduced, could be analogous to that which pertained to attendance allowance following the introduction of free personal care for the elderly by the Scottish Executive in 2002. In other words, council tax rebate grant funds which pertained to Scotland could be retained by the Treasury. The Policy Memorandum to the Bill contains the following comments on this issue: “One previously mentioned risk factor is the removal of Council Tax rebate amounting to £285 million. Whilst no clear case has been shown why Scotland should lose that money by dint of changing the tax system, it is a risk” (Scottish Parliament 2004a, p 6) A paper by Danson, Whittam and Cooper (2005) makes the following comments on this issue: “What would happen to the Council Tax Benefit saved by the move to an SST with an exemption threshold of £10,000? This would return to the Treasury. The implication of seeking to help the poorest in the community by exempting them from paying any local taxation is that Westminster would gain from the reduction in benefit being claimed. It seems unfair that Scotland would lose about £285m to the Treasury. Local authorities in England discovered a similar problem with their plans to exempt pensioners from the high increases in Council Tax in 2003” (p 12) Danson, Whittam and Cooper (2005) contend that the SST would generate a surplus in revenue even accounting for the loss of council tax rebate grant funds and comment on this issue as follows: providing research and information services to the Scottish Parliament 19

“The most recent analysis uses the very latest Inland Revenue figures for 2002-2003, released towards the end of March 2005. …. In that year, SST would have raised £2.022bn, generating a surplus of £269m over the £1.753bn revenues of Council Tax (£1.459bn) and CTB (£294m) available to local authorities in 2002-2003” (p 8) The Impact on Local Authority Staff Currently some local authority employees are engaged in roles relating to council tax. The Policy Memorandum to the Bill suggests that the measures proposed in the Bill will result in the generation of new local job and services partly as a consequence of the surplus in revenue which it is contended the SST will generate (as outlined above). For instance the Policy Memorandum comments: “This Bill both redistributes income across Scotland and generates millions more for local jobs and services. …. This Bill means more jobs and services across local authorities, not less. Obviously those currently deployed in council tax collection would have to be redeployed and / or retained. No worker should be made redundant as a result of the bill. Returning the power to set and fully retain business rates to local authorities and the adoption of income maximisation schemes targeting unclaimed Housing Benefit, among other things, would certainly provide productive work for current council tax collection workers” (p 17-18) Local authorities are currently responsible for the collection of Non-Domestic Rate Income (NDRI) and for the administration of housing benefit and it is not clear how much additional employment, if any, local authorities would be able to create within these areas of administration. It is also important to note that the issue of how to deal with the staff issues arising from the implementation of the SST would lie within the discretion of each individual local authority. Once again it is also important to note that the Bill does not contain proposals to return NDRI to local authority control. The Financial Memorandum (p 2) to the Bill indicates that the costs of redeploying and retraining local authority staff would be between £0 and £20m depending on the approach taken to tax collection by local authorities. Fiscal Flight Fiscal flight refers to a scenario where individuals leave a particular geographical area in order to reside in an alternative area where taxation rates are lower. As discussed above, the ODPM Balance of Funding Review highlighted the issue of ‘cliff edges’ as a potential problem with local income tax whilst Sawkins and Dickie (2002) considered that devolution heightened the potential of individuals and households relocating in order to avoid the Scottish fiscal regime. As the Scottish Service Tax does not propose differential income tax rates between local authority areas but rather the same rates would apply across Scotland then the issue of ‘fiscal flight’ between local authority areas does not arise. Indeed Danson, Whittam and Cooper (2005) suggest that one reason for not proposing that local authorities have the autonomy to vary income tax rates is to avoid fiscal flight. They comment: “Why are there not local tax rates for each local area? Simplicity, fairness and to avoid ‘fiscal flight’. As the cities and other areas with high levels of poverty and deprivation need more resources, they would be under pressure to raise local income tax rates. Residents who were mobile and those on higher incomes especially would then be likely to leave the area exacerbating the problem of low revenues. Also, those who live in the providing research and information services to the Scottish Parliament 20

commuting suburbs around the cities tend to benefit from their facilities but, as with the Council Tax, do not pay for them. For both these reasons, it is better to have a tax which covers a wider region” (p 11) Nevertheless as the Balance of Funding Review report highlighted there would remain the issue of differential tax rates between Scotland and the rest of the UK and for local authorities on the border with England. Water Rates At present council tax is billed jointly with water charges. The Bill does not establish how the system for charging water rates will be dealt with should the SST be implemented.

SCOTTISH EXECUTIVE The Partnership Agreement in 2003 contained a commitment that “following consultation with COSLA, we will establish an independent review into local government finance” (Scottish Labour Party and Scottish Liberal Democrats 2003, p 46). The composition of the group which is conducting the review was announced by the Minister for Finance and Public Services in June 2004. The review team consists of: • • • •

Sir Peter Burt (Chair) Professor John Baillie Peter Daniels, and Janet Lowe

The remit of the review is: “to review the different forms of local taxation, including reform of the Council Tax, against criteria set by the Executive, to identify the pros and cons of implementing any changes to the local taxation system in Scotland, including the practicalities and the implications for the rest of the local government finance system and any wider economic impact, and to make recommendations” (Scottish Executive 2004, p 1) The Local Government Finance Review Committee has recently undertaken a public consultation and is currently undertaking a range of evidence gathering activity. The Committee plan to report to Scottish Ministers during the Summer of 2006. Information on work the Committee has undertaken to date can be accessed at: http://www.localgovernmentfinancereview.org/default.aspx In December 2004 the then Deputy Minister for Finance and Parliamentary Business, Tavish Scott MSP, provided the Local Government and Transport Committee with an ‘Executive Memorandum on the Bill’. The memorandum summarised the Scottish Executive’s position on the Council Tax Abolition and Service Tax Introduction (Scotland) Bill in the following terms: • •

“We are committed to the Independent Review of Local Government Finance which will specifically review local taxation It would be wrong to draw any conclusions until the Independent Review has had time to properly consider the way forward and make recommendations to Ministers. The Executive is therefore opposed to this Bill” (Scottish Executive 2004a, p 5)

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NEXT STEPS The Local Government and Transport Committee will begin Stage One scrutiny of the Bill on 8 September 2005. The Committee plans to take evidence over four committee sessions covering a wide range of issues including the socio-economic implications of the Bill, the impact of the Bill on local authorities and issues regarding implication if the Bill were passed. In addition the Committee will also take evidence from the Scottish Executive and the member in charge of the Bill, Tommy Sheridan MSP. The Local Government and Transport Committee have issued a call for written evidence. The deadline for receiving submissions is 30 September 2005. Further details can be accessed at: http://www.scottish.parliament.uk/business/committees/lg/inquiries/ctax/lg-ctax-call.htm

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APPENDIX ONE – COUNCIL TAX BY BAND AND LOCAL AUTHORITY, 200506 Table 1.1 – Council Tax by Band and Local Authority, 2005-06, £ Actual Terms Local Authority BAND A BAND B BAND C BAND D BAND E BAND F Aberdeen City Aberdeenshire Angus Argyll & Bute Clackmannanshire Dumfries & Galloway Dundee City East Ayrshire East Dunbartonshire East Lothian East Renfrewshire Edinburgh, City of Eilean Siar Falkirk Fife Glasgow City Highland Inverclyde Midlothian Moray North Ayrshire North Lanarkshire Orkney Islands Perth & Kinross Renfrewshire Scottish Borders Shetland Islands South Ayrshire South Lanarkshire Stirling West Dunbartonshire West Lothian

BAND G

BAND H

774.72 710.00 691.33 744.67 716.00

903.84 828.33 806.56 868.78 835.33

1,032.96 946.67 921.78 992.89 954.67

1,162.08 1,065.00 1,037.00 1,117.00 1,074.00

1,420.32 1,301.67 1,267.44 1,365.22 1,312.67

1,678.56 1,538.33 1,497.89 1,613.44 1,551.33

1,936.80 1,775.00 1,728.33 1,861.67 1,790.00

2,324.16 2,130.00 2,074.00 2,234.00 2,148.00

658.67 786.67 744.18

768.44 917.78 868.21

878.22 1,048.89 992.24

988.00 1,180.00 1,116.27

1,207.56 1,442.22 1,364.33

1,427.11 1,704.44 1,612.39

1,646.67 1,966.67 1,860.45

1,976.00 2,360.00 2,232.54

718.99 712.62 702.00 750.67 637.33 666.09 700.00 808.67 724.00 784.00 784.00 696.67 716.67 694.00 648.67 725.33 727.30 679.33 654.00 708.54 693.33 766.00

838.83 831.39 819.00 875.78 743.56 777.11 816.67 943.44 844.67 914.67 914.67 812.78 836.11 809.67 756.78 846.22 848.52 792.56 763.00 826.63 808.89 893.67

958.66 950.16 936.00 1,000.89 849.78 888.12 933.33 1,078.22 965.33 1,045.33 1,045.33 928.89 955.56 925.33 864.89 967.11 969.73 905.78 872.00 944.72 924.44 1,021.33

1,078.49 1,068.93 1,053.00 1,126.00 956.00 999.14 1,050.00 1,213.00 1,086.00 1,176.00 1,176.00 1,045.00 1,075.00 1,041.00 973.00 1,088.00 1,090.95 1,019.00 981.00 1,062.81 1,040.00 1,149.00

1,318.15 1,306.47 1,287.00 1,376.22 1,168.44 1,221.17 1,283.33 1,482.56 1,327.33 1,437.33 1,437.33 1,277.22 1,313.89 1,272.33 1,189.22 1,329.78 1,333.38 1,245.44 1,199.00 1,298.99 1,271.11 1,404.33

1,557.82 1,544.01 1,521.00 1,626.44 1,380.89 1,443.20 1,516.67 1,752.11 1,568.67 1,698.67 1,698.67 1,509.44 1,552.78 1,503.67 1,405.44 1,571.56 1,575.82 1,471.89 1,417.00 1,535.17 1,502.22 1,659.67

1,797.48 1,781.55 1,755.00 1,876.67 1,593.33 1,665.23 1,750.00 2,021.67 1,810.00 1,960.00 1,960.00 1,741.67 1,791.67 1,735.00 1,621.67 1,813.33 1,818.25 1,698.33 1,635.00 1,771.35 1,733.33 1,915.00

2,156.98 2,137.86 2,106.00 2,252.00 1,912.00 1,998.28 2,100.00 2,426.00 2,172.00 2,352.00 2,352.00 2,090.00 2,150.00 2,082.00 1,946.00 2,176.00 2,181.90 2,038.00 1,962.00 2,125.62 2,080.00 2,298.00

742.00 716.00

865.67 835.33

989.33 954.67

1,113.00 1,074.00

1,360.33 1,312.67

1,607.67 1,551.33

1,855.00 1,790.00

2,226.00 2,148.00

Scotland Average 729 851 973 1,094 1,337 1,580 1,823 2,188 Source: Scottish Executive website: Local Government Finance Statistics - Council Tax Data and Publications. http://www.scotland.gov.uk/Topics/Statistics/16945/CouncilTax

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SOURCES Berry, K. (2001) Council Tax Levels. Research Note 01/35. Edinburgh: Scottish Parliament Information Centre. Available at: http://www.scottish.parliament.uk/business/research/pdf_res_notes/rn01-35.pdf Berry, K. (2004) Council Tax Statistics. SPICe Briefing 04/17. Edinburgh: Scottish Parliament Information Centre. Available at: http://www.scottish.parliament.uk/business/research/briefings04/sb04-17.pdf CIPFA (2004) Reviewing the case for a Local Income Tax London: Office of the Deputy Prime Minister. Available at: http://www.local.odpm.gov.uk/finance/balance/boflit.pdf CIPFA (2004a) Reviewing the case for a Local Income Tax: Supplementary Report London: Office of the Deputy Prime Minister. Available at: http://www.local.odpm.gov.uk/finance/balance/bof25.pdf Clarke, C. (2003) Local Income Tax Takes Off. Municipal Journal, August 2003, p 11. Commission on Local Government and the Scottish Parliament. (1999) The Report of the Commission on Local Government and the Scottish Parliament. Edinburgh: Stationery Office. COSLA (2005) Council Tax Increases By Under Four Per Cent Edinburgh: COSLA. Available at: http://www.cosla.gov.uk/news_story.asp?leftId=100018D6A-10766761&rightId=100018D6A10771676&hybrid=false&storycode=100018D6A-15164616 Council Tax Abolition and Service Tax Introduction (Scotland) Bill [as introduced] Session 2 (2004). SP Bill 31. Edinburgh: Scottish Parliament. Available at: http://www.scottish.parliament.uk/business/bills/pdfs/b31s2-introd.pdf Council Tax Abolition and Service Tax Introduction (Scotland) Bill: Financial Memorandum Session 1 (2004). SP Bill 31-FM. Edinburgh: Scottish Parliament. Available at: http://www.scottish.parliament.uk/business/bills/pdfs/b31s2-introd-fm.pdf Council Tax Abolition and Service Tax Introduction (Scotland) Bill: Policy Memorandum Session 2 (2004). SP Bill 31-PM. Edinburgh: Scottish Parliament. Available at: http://www.scottish.parliament.uk/business/bills/pdfs/b31s2-introd-pm.pdf Danson, M., Whittam, G. and Cooper, C. (2005) The Case for a Scottish Service Tax: Update. [Unpublished manuscript], Department for Work and Pensions. (2004) Family Resources Survey: Income and State Support Receipt. London: Department for Work and Pensions. Available at: http://www.dwp.gov.uk/asd/frs/2003_04/tables/income_and_state_support_receipt(tables).asp Hale, R. and Travers, T. (1998) Sources of Revenue for Local Authorities: A Briefing Paper. London: Local Government Management Board. Help the Aged. (2005) Council Tax: A Path To Poverty? Edinburgh: Help the Aged. providing research and information services to the Scottish Parliament 24

Jones, G. and Stewart, J. (2002) Central-Local Relations Since the Layfield Report..Local Government Studies, Vol 28, No 3 p 7-28. Local Government Information Unit (2005) Making it fair: Council Tax Benefit and working households. London: Local Government Information Unit Local Government Committee. (2002) 6th Report, 2002, Report on Inquiry Into Local Government Finance. SP Paper 551. Edinburgh: Scottish Parliament. Available at: http://www.scottish.parliament.uk/business/committees/historic/x-lg/reports-02/lgr02-06-vol0101.htm Local Government Finance Review Committee. (2005) Local Taxation in Scotland: a Consultation by the Local Government Finance Review Committee. Available at: http://www.localgovernmentfinancereview.org/public-consultation/consultationdocument/document_index.aspx Midwinter, A. (2003) Not Proven.,Holyrood Magazine, 15 December 2003 p 29. Office of the Deputy Prime Minister. (2004) Balance of Funding Review: Report. London: Office of the Deputy Prime Minister. Available at: http://www.local.odpm.gov.uk/finance/balance/report.pdf Office of the Deputy Prime Minister. (2005) Council Tax and National Non-Domestic Rates Collection Rates 2004/05. Statistical Release. London: Office of the Deputy Prime Minister. Available at: http://www.local.odpm.gov.uk/finance/ctax/data/cp045release.pdf Sanderson, I (1995) Current Issues in Local Government Finance. London: Commission for Local Democracy. Sawkins, J. and Dickie, V. (2002) Council Tax in Scotland: The Economic Case for Reform. Stirling: Scotecon. Scottish Executive. (2000) It Pays to Pay: improving council tax collection in Scotland. Edinburgh: Scottish Executive. Available at: http://www.scotland.gov.uk/library2/doc10/ctco-00.asp Scottish Executive. (2003) Council Tax in Scotland: Valuation and Banding. Edinburgh: Scottish Executive. Available at: http://www.scottishexecutive.gov.uk/library3/localgov/ctvb-00.asp Scottish Executive. (2004) Local Government Finance Review Team Named. News Release 30/06/2004. Edinburgh: Scottish Executive. Available at: http://www.scotland.gov.uk/News/Releases/2004/06/5749 Scottish Executive. (2004a) Council Tax Abolition and Service Tax Introduction (Scotland) Bill: Memorandum by the Scottish Executive to the Local Government and Transport Committee of the Scottish Parliament. Edinburgh: Scottish Executive. Scottish Executive. (2005) Council Tax Collection Statistics 2005. Available at: http://www.scotland.gov.uk/Publications/2005/06/1792413/24144 Scottish Executive. (2005a) Scottish Local Government Financial Statistics 2003-04. Edinburgh: Scottish Executive. Available at: http://www.scotland.gov.uk/stats/bulletins/00404-00.asp providing research and information services to the Scottish Parliament 25

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