Under new Scottish Government rules, local authorities will be able to utilise powers which allow them to up rates to raise revenue for services.
Emma Congreve, a knowledge exchange fellow at the Fraser of Allander Institute at the University of Strathclyde, said it was likely all council areas would increase Council Tax due to increased pressures on budgets.
She also called on the Scottish Government to take responsibility to reform the tax, warning it currently disproportionately affects people at the lower end of the earnings threshold.
Opposition politicians warned Council Tax could rise by as much as 30 per cent in some areas as local authorities battle to plug funding gaps. However, Ms Congreve said she believed rises may only reach around three to five per cent – a figure echoed by COSLA (Convention of Scottish Local Authorities) who pointed out council leaders were aware of pressure on household budgets.
In the draft Scottish Budget earlier this month, Finance Secretary Kate Forbes scrapped a cap on Council Tax rises for the next financial year, meaning people could be asked to pay more from April onwards. It is the first time Scottish councils have been given full control over local tax rates since the SNP came to power in 2007.
Ms Congreve said: “There are difficulties in that the amount that councils raise from Council Tax is large, but it's dwarfed in comparison to the size of the grant they get from the Scottish Government. That's really what matters the most for local spending. And there's a limit to how much Council Tax can raise, additionally with a few percentage increases. And councils that have got a wealthier housing stock – houses in the higher bands - might find it easier to raise more money than those in the areas with lower value housing stock.
“I think it will be a very difficult decision for councils to make, but I think the likelihood is that some will have no choice but to increase rates if they are to be able to provide the public services that they’ve been charged to provide.”
She said councils will be loathe to implement large increases ahead of local council elections.
She said: "I would expect that there would be pressures to use those powers to increase Council Tax, but I think the politics of it may may dampen that a little bit as well, just because Council Tax is so visible.
“I think it's more likely to be in that around the two to three per cent than the 10 to 15 per cent. It's been so long since we've had any substantial increases in rates, so maybe they'll go a bit further than the cap that was in existence before - that was three per cent. But I can't see councils being in that position where they think it's a reasonable thing to ask the electorate to increase it by 10 to 15 per cent, particularly when there's so many other pressures on the cost of living at the moment. It's something that some people will really struggle to pay in some situations.”
She said the tax will disproportionately impact on the lower end of the earnings threshold.
"I think if the Scottish Government is going to allow the freedom for the tax to be increased, then they really should be taking responsibility to reform the tax so those increases are justified and fair. But at the moment, that's just not the case and there's not really a lot that local authorities can do about that.”
“They're under a huge amounts of pressure and I think the pressure’s coming from things like social care over the next few months, over winter, it will be more significant. It's not an understatement to say they're facing some of the biggest issues they'll ever have faced and they've got additional responsibilities coming their way from Scottish Government as well, as we saw in the budget, so that they've got a lot to contend with.
"I think you'll see most areas having a rise of some degree.”
Gail Macgregor, resources spokesperson for COSLA, the umbrella body for local councils, said councils were left with no choice but to utilise the powers to raise Council Tax and warned council leaders were “pretty angry” the decision as to whether to further tax households had been handed to them.
In a recent pre-Budget document, COSLA warned urgent extra funding of more than £1 billion was needed for councils for local authorities to “survive”. It added an increase of £720 million was needed “just to stand still”.
Ms Macgregor said: “To plug that £100 million pound gap we have in our core budget, plus all the additional pressures that are still continuing probably because of Covid as much as anything - trying to recover and move forward and get projects back up and running that have maybe been put on hold for nearly two years – we're going to need that additional funding.”
She added that council leaders would be unlikely to increase taxes by more than three per cent.
She said: "I'm afraid that if we don't see more coming from government, it's going to put a lot of pressure on leaders to have to raise Council Tax. The only thing I would say with that, though, is that leaders are very conscious of the difficulties local households have and I don't think we'll be minded to hammer households.”
Scottish Conservative shadow finance secretary Liz Smith said: “Kate Forbes called this a ‘Budget of choices’ – but it is local councils that now face the impossible choice between failing to deliver essential services, and implementing punishing tax hikes.
“According to COSLA estimates, Council Tax may need to be increased by up to 30 per cent to properly fund local services, while a three per cent rise would be needed just to match previous years’ funding.”
She added: “It seems increasingly likely that local councils will be forced to implement some kind of Council Tax rise next year to fill the black hole that has been left by the SNP’s meagre funding.
“After two incredibly difficult years this is the last thing Scots need."
A Scottish Government spokesperson said: “Thanks to the actions of this government, Council Tax is lower in Scotland than everywhere else – the average Band D charge is £590 lower than in England and £423 lower than in Wales.
“The 2022/23 Budget provides a number of financial flexibilities, including providing councils with complete autonomy on council tax to take local decisions for local populations, as requested by COSLA.
“Council Tax provides a significant source of income to local government whilst also ensuring each Council is accountable to voters for local tax and spending choices. In setting Council Tax rates, we expect councils to take full account of local needs and of the impacts on households budgets of the decisions they make.
“The Council Tax Reduction Scheme ensures nobody should have to pay a council tax liability they cannot afford, with nearly one in five homes benefiting from a Council Tax reduction.”