Scotland's council tax: Higher rates may be needed but ministers should worry about the damage to the economy – Scotsman comment

Scotland’s councils are in the grip of a funding crisis that is undermining their ability to deliver vital public services

For years, Scotland’s local authorities, which deliver vital services like education, social care and road maintenance, have been shortchanged by the Scottish Government. So, when looking for someone to blame over news that council tax bills could rise by up to 22.5 per cent, the finger can hardly be pointed at some of our most diligent and under-appreciated politicians: local councillors.

When the SNP imposed a long-term ban on council tax increases, it was essentially a tax cut that many welcomed. However, it was accompanied by years of severe underfunding. These two pressures created an unsustainable situation that was always bound to reach a crisis point. And the Covid pandemic made the situation even worse.

In May, the Accounts Commission warned councils were facing “increasingly difficult choices about spending priorities and service provision” and “have had to make significant savings to balance their budgets”. “Some communities are facing crisis, with persistently high levels of poverty and increasing financial hardship putting additional pressure on services, at a time when councils have less capacity to support them,” it added.

However, with Scotland’s higher earners already paying more in income tax than those on the same salaries in England, significant increases in council tax will have an effect on the job market. For example, the council tax bill for a band H property in Midlothian for this year is currently £3,711. If this goes up by 22.5 per cent – as suggested by leaked proposals set to be put out to public consultation by Cosla – the cost would rise to £4,546. The people of Rutland currently pay the highest council tax in England with an annual bill of £4,843 for band H homes. So the gap between English and Scottish bills may close substantially.

Higher taxes will inevitably make people thinking of moving to Scotland to take up a new job think twice. If too many are put off, that could harm long-term investment decisions, with potentially serious effects for the whole economy. Higher council tax may be needed to pay for vital local services today. The Scottish Government must consider the total impact of such decisions on Scotland’s economy tomorrow.