Monday, 25 April 2011

Time To Abolish The Council Tax - Not Freeze It

The opinion polls suggest Labour and the SNP are neck and neck in the race for Holyrood 2011. Interestingly both parties now support a freeze in Council Tax bills for the next year. They arrived at this 'freeze' via different routes however.

Like the Scottish Socialist Party the SNP are opposed to the Council Tax in principle, believing, as the majority of Scots do, that it is unfair and hits the less well off disproportionately hard. The Council Tax is indeed a regressive tax that bears no relation to a person's income. Consequently the least well off are hit hardest as the wealthy pay coppers. Since they have not been able to replace it with an income based alternative, the SNP have settled for second be stand 'freezing' the current charges.

Labour on the other hand has no principled objection to the Council Tax. They argue for a freeze on the grounds that they purportedly want to 'help hard working families in this time of austerity'. Most people believe that it has more to do with avoiding being politically outmanoeuvred by the SNP. Either way freezing the Council Tax does nothing to address it's fundamental unfairness. Indeed it may be argued a freeze helps the rich most of all.

As things stand the wealthy in Scotland pay a tiny tiny percentage of their income on this bill. For example,Stephen Hestor (the CEO of RBS) was just awarded a £7.7 million pay package for the coming year. Living in Edinburgh his Council Tax bill will again be frozen at £2,338 or 0.03% of his salary whilst some pensioners are paying 25% of their income on theirs.

The Scottish Socialist Part believes this is utterly unacceptable and this week we will highlight our fully costed proposals for a local income tax to replace the Council Tax. Our plans would mean the burden would be lifted from the shoulders of of pensioners, low paid workers and the poor and at the same time force the wealthy to pay their fair share for a change.

Here's how it works. Each individual in Scotland will pay towards the funding of local services but the more you earn the more you pay. So, for example, if your income is less than £10,000 you are exempt. That's too low to force people to contribute. Thereafter, on incomes over £10,000 and up to £30,000 you pay 4.5%. So if you are on £200,000 your bill is £450 [4.5% of the earnings over £10,000] If you earn more than £30,000 you pay nothing on the first £10,000, 4.5% on the next £20,000 and 10% on the earnings over £30,000. The next incremental step is to 15% on earnings over £50,000 and 20% on earnings over £100,000. This graduated rate (which the SNP opposes) is fairer and ensures that as your income goes up so does your tax obligation.

Economists at Paisley University who scrutinised these figures found that 77% of Scots will be better off compared to now. Furthermore, using the latest Her Majesty's Revenue and Customs figures, they are able to demonstrate that these proposals would bring another £1.5 billion into Holyrood's Treasury.

So, not only would this tax be fairer and redistributive, it would also halt the need for any cuts to public services in Scotland. And that's a freeze we DO need.


  1. This scheme seems fair in many ways.
    Two questions. Is this council tax paid on gross earnings, in addition to income tax? Would there be any reduction for those living in a house with multiple occupants? I'd be going from paying ~£700 to about £1900 under your proposed scheme.
    In fact, how would this work with rented property, or people with more than one property in general?

  2. Si, the scheme is indeed fair. It is designed with a sound principle in mind; that the more you earn the more you pay. The burden is thus lifted from those who cannot afford to pay the lion's share and on to those that can. As you know, the Council Tax, being a tax based on notional property values, takes no account of income and thus ability to pay.

    Yes, the Council Tax is calculated on gross earnings and is payable in addition to income tax. It is a tax that covers the local services that income tax does not currently cover.

    As the tax is attached to the income of individuals it is not affected by questions of property ownership. Every adult would pay according to the income category they fell in to.

    You suggest that you would pay £1,900 a year under our proposals rather than the £700 you currently pay. Obviously I don't know your personal circumstances or where you live but that would seem to suggest that you are living in a Band A property, the lowest level in the country. In Edinburgh Band A covers properties valued at less than £27,000. To pay a Scottish Service Tax of £1,900 you would have to be earning more than £40,000.

    If your calculations are based on your sharing your total bill with someone else in the household please remember that the Scottish Service Tax is calculated on both individual incomes. So, if the other person in the house earned less than £10,000 they would pay nothing. Equally, if they were earning £40,000 a year they would face a Scottish Service Tax bill of £1,900 too - but that would mean that the total household income was in excess od £80,000 a year.

    I hope this answers your questions. I intend to publish a ready reckoner on the tax to enable people to figure out how it would work for them.


  3. Hi Colin, do you not think this scheme would encourage higher earning people to leave Scotland? If this happened we'd end up worse off no?


  4. Council tax any makes up 20% of the total council funding or 4-5% of the total UK government funding. Council tax can make up to 10% of an individuals salary specially those who may be on minimum wage, thus considered a very unfair tax.

    If the council stops funding life style choices of others such as libraries, town halls, museums and funding non-jobs then council tax could easily be abolished with no new replacement tax.

    The money is better in the individuals pocket than governments. Any type of replacement tax, even if its indirect will always result in the cost of level increasing for all of us, irrelevant of class background.

    Purchase a bottle of juice for £1, nearly one third is made up off indirect taxes or even more on the cost of unnecessary red tape/regulations.

    Just imagine how better off all of us would be if government backed off.

  5. Like finding horse meat in your alleged 100% beef burgers, laying off food standards agency workers is not necessarily a good idea either. "Redtape" is usually there for a reason, im all for removal of "redtape" if it has no use and wastes time but within reason.