Fairer Council Tax: consultation analysis

Executive summary

Council Tax has been devolved to the Scottish Parliament since 1999 and is administered by individual councils. All households pay Council Tax (unless exempt), and revenue from Council Tax supports a wide range of vital services that communities rely on, including funding for schools, social care, roads, transport and environment/waste services. While the importance of Council Tax and the services and support that it helps fund are widely accepted, the structure and functioning of the present Council Tax system have received criticism from some stakeholders. Although the most financially vulnerable people in Scotland are protected through the Council Tax Reduction Scheme, under the current system the effective Council Tax rate is higher for lower value properties (when expressed as a percentage of the estimated property value), as recognised in the Comission on Local Tax Reform’s 2015 report.^[1]

In Scotland, each council determines the tax for Band D properties, and the charges for other property bands (A to C, E to H) are fixed in proportion to the Band D charge. These proportions, also known as multipliers, are set in law and the same for all Scottish council areas. In 2017, the Scottish Government changed the multipliers for Bands E to H, increasing the Council Tax for around 25% of properties. For example, under the 2017 change, the multiplier for Band E was increased from 11/9 (1.22 times the Band D tax rate) to 473/360 (1.31 times the Band D tax rate), an increase of 7.5%.^[2]

The Scottish Government and Convention of Scottish Local Authorities (COSLA) held a public consultation between 12 July and 20 September 2023 on proposed changes to the Council Tax system in Scotland. The consultation document proposed to address perceived imbalance in the system by repeating the 2017 change of increasing the Council Tax Band E to H multipliers. The proposals that were consulted on would increase Council Tax by 7.5%, 12.5%, 17.5%, and 22.5% for Bands E through H, respectively. The consultation included nine questions and sought views and opinions on:

• Whether households in properties in the highest Council Tax bands (Bands E to H) should make a greater contribution, and
• The relationship between the valuation band a property is in, and the tax rate set by the council for the local authority area.

The consultation received 15,628 responses via the Scottish Government’s online Citizen Space portal, e-mail and post, with 15,537 from individuals and 87 from organisations (four respondents did not mention their respondent type). Alma Economics was commissioned to provide independent analysis of the responses to the consultation and produce a comprehensive summary of individuals’ and organisations’ views. Responses were analysed using a mix of quantitative analysis (where summary statistics were calculated for closed-format questions) and qualitative analysis (where thematic analysis of free-text responses was carried out through an integrated manual and automated approach). A more detailed explanation of the research team’s methodology can be found in the following sections of the report: Approach to analysis of closed-format questions, Approach to analysis of open-format questions and Annex B: Technical appproach to qualitative analysis.

Key findings

The consultation received 15,628 total responses, 1,324 respondents who selected Bands A-D and 13,409 respondents who selected Bands E-H. The remaining respondents selected multiple bands, said they didn’t know/didn’t pay council tax or did not answer the question (more detail on how respondents were asked about their council tax band is included on page 9). Note that respondents were required to answer all closed format questions to the consultation, which meant that respondents who rejected the proposal were still asked what increase would be appropriate (in the event of a decision being taken to increase the multipliers).

The quantitative analysis of the responses to closed-format questions showed that:

• 4% of all respondents supported the proposed Council Tax increase. This included 22% of respondents in Bands A-D and 2% of respondents in Bands E-H.
• 3% of all respondents supported the levels of increase proposed in the consultation document. This included 16% of respondents in Bands A-D and 2% of respondents in Bands E-H.
• 1% of all respondents (6% of respondents in Bands A-D and less than 1% of respondents in Bands E-H) thought any increases should be higher. 88% of all respondents (80% of respondents in Bands A-D and 89% of respondents in Bands E-H) thought any increases should be lower. 11% of all respondents answered “Don’t know”.
• In the event of a decision being taken to implement increases in Council Tax multipliers, 2% of respondents supported full implementation from 2024-25 (11% of respondents in bands A-D and less than 1% of respondents in bands E-H). 3% of respondents supported a phased-approach to any increase over two years (10% of respondents in bands A-D and 2% of respondents in Bands E-H). 31% of respondents supported a phased-approach over three years (29% of respondents in Bands A-D and 32% of respondents in Bands E-H).
• In the event of a decision being taken to implement increases in Council Tax multipliers, 50% of all respondents (56% of respondents in bands A-D and 50% of respondents in Bands E-H) supported expanding the Council Tax Reduction scheme to protect those on lower incomes.

The qualitative analysis of open-format responses revealed a set of common themes that respondents mentioned in their answers across different consultation questions, including the following:

Unfairness of the proposed increase

Many respondents thought that property values were not correlated with income and that the proposed increase did not consider whether impacted individuals could afford to pay. These respondents often called for broader review of the Council Tax system or suggested changes to the system, including switching to a local income tax, revaluing properties, or setting the amount of Council Tax paid based on services used or current income (instead of property values). Other respondents disagreed that the current Council Tax system was unfair or benefited residents in higher band properties.

Respondents mentioned that the proposed increase could negatively impact a number of specific groups, including the elderly and pensioners (who were on fixed incomes and potentially living in properties they had inherited or bought many years earlier), low-income households, middle-income households (who might not be eligible for any additional support) and families (who would have less disposable income to support their children).

Impacts on household spending and housing stability

Respondents often mentioned they would find it difficult to afford the Council Tax increase due to the broader cost of living crisis (with higher inflation rates, higher mortgage payments and increased expenses on utilities/groceries). Respondents suggested that this might require households to spend less money on necessities such as food or heating or potentially require them to downsize to a smaller property in a different community. This situation could potentially be exacerbated for those living in island communities, which respondents mentioned faced lower wages, higher living costs and lower availability of affordable housing (due to the popularity of second or holiday homes). As a result, respondents suggested that any proposed increase be phased in over a longer period of time to help households adjust gradually to the decrease in disposable income. In addition, respondents thought that downsizing caused by any proposed increase would have an impact on housing markets, with weaker demand for Bands E-H properties and stronger demand for Bands A-D properties (potentially making it more difficult to find affordable housing).

Impacts on mental health and wellbeing

Respondents commented on the potential stress and anxiety caused by the proposed Council Tax increase, for those who were unsure whether they could afford to pay higher rates. They felt that mental health could potentially be impacted for those who were forced to move to a less expensive property in another community (where they would be separated from friends, family and their existing support networks), uncertain access to support services (if they could no longer afford necessities), general anxiety about the future (for themselves and their families) and resentment towards the Scottish Government (which respondents felt was penalising them despite their hard work).

Impacts on provision of council services

While some respondents thought that the proposed Council Tax increase would lead to greater revenue for councils and improved provision of services, others thought that this would be outweighed by an increase in demand for council services as households faced a decrease in disposable income (potentially placing them in challenging financial circumstances). Respondents also expressed a general lack of trust that councils would use the additional Council Tax revenues for service improvements given challenges with delivery of existing services.