People living in Scotland’s more expensive properties are to pay more council tax from next year, Nicola Sturgeon has announced.
Annual bills for those living in houses in the top council tax bands of E, F, G and H will rise by £105, £207, £335 and £517 respectively under the First Minister’s overhaul of local government taxation.
Her proposals will also see the council tax freeze, which has been in place since 2007, lifted in April next year – a move which will also push up bills.
The end of the freeze will see local authorities given the power to raise council tax levels across all bands by a maximum of 3 per cent, potentially raising £70 million for local services.
Unveiling her plans at Lasswade High School in Midlothian yesterday, the First Minister said the proposals would bring in extra cash of £100m a year, which would be invested in schools.
The 75 per cent of Scottish households living in less expensive properties in council tax bands A, B, C and D will see no change in their council tax rates as a result of the plans, which will be introduced if the SNP is re-elected in May.
Ms Sturgeon said the new system was “fairer” but found herself under attack on two fronts.
The Conservatives claimed Ms Sturgeon’s proposals risked Scotland gaining a reputation as a “high tax country”, while Labour and others claimed the First Minister had missed an opportunity for more radical reform and had reneged on the SNP manifesto pledge to scrap council tax altogether.
The Scottish Government decided against a revaluation of properties, meaning bands will still be based on 1991 property values.
The package included relief for those with lower incomes, who live in more expensive properties. Around 54,000 households in properties from band E to H, who bring in less than £25,000 will be entitled to an exemption through the Council Tax Reduction Scheme.
The Council Tax Reduction Scheme will also extend the relief available for low income households with children. An increase in the child allowance of 25 per cent will benefit 77,000 households, containing almost 140,000 children, by an average of £173 per year.
A key aspect of the reform will be the assignment of income tax receipts to individual councils using a needs based formula. This is designed to allow councils to give an incentive for growth and to benefit from it.
Owners of second homes face being penalised by new laws introduced to enable local authorities to end the council tax discounts currently in place for dwellings that are not a main residence.
A consultation on allowing councils to levy a tax on development and derelict land will be launched in an attempt to increase the supply of homes.
Ms Sturgeon said: “These reforms to council tax bands will mean no change for three out of every four Scottish households, with those in lower banded properties paying no more than they do now.
“Households will also still, on average, pay less than those on equivalent bands in England and less than they would be paying had the council tax freeze not been in place.
“The Commission on Local Tax Reform made clear that the present system could be made fairer. We are choosing to do this in a reasonable and balanced way that will also generate £100 million of additional revenue to invest in schools.”
She added: “I’m asking people in the most expensive houses in the country, those in the top band, will pay a significantly increased portion in council tax and also taking steps to make sure those on the lowest incomes with children will pay less in council tax.”
The £100m per year will be raised by increasing the council tax band “multipliers” for high band properties relative to band D houses. For band E, the multiplier increases from 1.22 to 1.31. For band F it goes up from 1.44 to 1.63 and for band G from 1.67 to 1.96. For band H it increases from 2.00 to 2.45.
Last night Scottish Labour public services spokeswoman Jackie Baillie criticised the plans. “Nicola Sturgeon has broken the promise she was elected on,” she said.
“The SNP promised to abolish council tax back in 2007 and attacked Labour’s proposals to change the way banding worked. Yet that is exactly what the SNP government has announced today. It has taken the SNP a decade to deliver tinkering round the edges rather than real reform.
“In the longer term the SNP’s plan to assign rates of income tax to local authorities seems unfair given the huge difference between the amount of income tax paid between areas, and it will do little to encourage economic development in cities where large sections of the workforce come from neighbouring local authorities.
“Nicola Sturgeon says she wants to invest more in education, yet she is cutting the budget for schools. Faced with a choice between using the powers we have to invest in the future or carrying on with the SNP’s cuts to schools, we will use the powers we have.
“Scottish Labour will set out our fairer plans to reform the system in the coming weeks.”
Scottish Conservative leader Ruth Davidson warned that the changes made to the multiplier were “too steep to be truly fair”.
“When these changes are added to the steep rises in stamp duty brought in by John Swinney as a cash grab, but which has only resulted in slowing the housing market and creating a black hole in Scotland’s finances,” she said.
“The SNP needs to be careful that, as a result, Scotland does not get a reputation as a high tax country. The result will only be to damage the economy and cut the tax revenues which pay for our schools and hospitals.”
The overhaul was also criticised by the Convention on Scottish Local Authorities finance spokesman.
He said: “There is nothing radical in today’s announcement. Unsurprisingly the only opportunity the government did take was to further control and centralise. For a government that has criticised the council tax system since coming into power in 2007 and then went to the trouble of setting up a commission to look at an alternative, it is bizarre that this is the best that they could come up with.”