Thursday, 12 May 2011

Council Tax freeze and local democracy

Much was made in the Scottish election of the various promises to freeze Council Tax and specifically the SNP's five year pledge, seen as a major vote winner.

It's not difficult to understand why this was popular.  Ask anyone if they want taxes to rise and the answer is usually no, but give them a range of options on how else to raise the required revenue and I suspect a Council Tax freeze would not seem so attractive. The problem is the options were not spelled out by the SNP (or Labour) and I think that was deliberate, for reasons I'll go on to in a minute.

Firstly look at the figures. It's estimated that the current saving for a Band D householder is around £1.20 per week. Those with bigger houses save more and those with smaller houses or on housing benefits a lot less. That's not the way I like to see tax changes to apply.

Compare this to other changes to household budgets. A teacher or other public service employee on around £30,000 a year and with inflation running at around 5% will lose over £40 a week following a 2-year pay freeze. Yet I wonder how many voted SNP for £1.20 a week saving?

The total cost of the freeze over the 8 year period from 2008/9 to 2016/17 is expected to be £3 Billion - hundreds of millions of pounds each year which have to be found from somewhere, and by all accounts not from those with big houses.

The real problem I have with the Council Tax freeze though is the erosion of local democracy. Currently about 80% of councils' income comes from Government funding, with the remainder from Council Tax. So if our councillors wanted to increase the council budget by 1% they would need to raise Council Tax by 5%. Is it worth it?

And this is where I think the MSPs in parties which aspire to Government want us to be. Not just to make it a no-brainer that councillors will not bump up the tax, causing embarrassment to their own party hierarchy, but also to keep a firm Holyrood hand on council budgets.

Whilst the last SNP administration in Holyrood reduced ring-fencing to around 4% of the central government grant, which was a step away from centralisation, the tendancy has been continually to foist more and more statutory responsibilities, like care of the elderly, on to councils, leaving them little lee-way in how they manage their budgets.

Local councillors are becoming more and more administrators of budgets handed down from Holyrood, and thereby becoming less and less accountable to their electorate for how that money is spent.

So should we change the system? My own party's preference is for Land Value Tax, which has a major advantage of discouraging land banking and speculation, but what of the Local Income Tax? I suspect the SNP has looked down that hole and stepped back, so is keen to retain Council Tax whilst keeping local councillors on a short leash, and the Council Tax freeze helps them do just that.