Fairer Council Tax: consultation

Council Tax and Local Government Funding

Revenue from Council Tax is retained in full by councils and is not part of the Scottish Government's funding allocation to local government. Council Tax is expected to contribute around £2.9 billion towards the funding of local public services in 2023-24. This is an increase on previous years. Council Tax income has corresponded to around 19% of general funding to local government over the past few years.

Each local authority's Council Tax income will vary, depending on the tax rate set, the number of properties in total and the number of properties in each valuation band. Across Scotland, just under three-quarters of all chargeable dwellings are in Bands A to D, but this varies across local authorities. For example, Na h-Eileanan Siar has the largest proportion of dwellings in Bands A to D at 89%, whereas East Renfrewshire has the lowest proportion in Bands A to D at 43%.

This variation across local authorities in the proportion of properties in each valuation band is partially compensated for in the distribution of the General Revenue Grant (GRG). The GRG is the main source of funding for local authorities, and is paid by the Scottish Government. It has made up around 65% of the general funding for local government in the past few years. Amongst other variables, the formula used to calculate how the GRG compensates for the differing proportions of properties in each valuation band, in relation to the assumed^[1] level of Council Tax used in the calculations, was adjusted in 2017^[2] to reflect the changes in Bands E, F, G and H. This adjustment to the GRG means that any changes to the way the assumed Council Tax is calculated for properties in the valuation bands will not disproportionately benefit, or disadvantage, any council.