Fairer Council Tax: consultation analysis

Analysis - Question 8: Please tell us how you think changes to Council Tax rates for properties in Bands E, F, G and H might affect Island Communities.

Qualitative analysis

There were 11,292 responses to this question. Many respondents to this question did not comment specifically on island communities and instead discussed their general sentiments towards the proposed Council Tax increase or the impact the increase would have across Scotland (these responses cover themes also discussed in responses to question 1).^[15] Very few respondents commented on how impacts might differ across island communities.

Higher cost of living and lower wages in island communities

The most common theme (raised by both respondents in non-island and island communities) was that the proposed tax increase could have a greater impact on island communities due to the higher cost of living and lower wages. Respondents pointed out that many residents of island communities worked multiple jobs or had seasonal/agricultural employment and believed they were already struggling to make ends meet under the current Council Tax system.

“Scottish Island Communities often face higher costs of living and limited access to essential goods and services due to their remote locations. The proposed Council Tax rate increases would add an additional financial burden on homeowners in Bands E, F, G, and H, exacerbating the existing challenges of affordability. These changes may place undue pressure on island residents, particularly those on lower incomes or fixed budgets, potentially leading to increased financial hardship and limited disposable income for daily necessities.” (Individual, South Lanarkshire, Band F)

Other respondents pointed out the high cost of shipping goods from the rest of Scotland. These respondents argued that the proposed increase could potentially limit access to essential goods and raise the overall cost of living in island areas.

“Island communities, by their often-isolated nature, will have many more problems with funding local services than more densely-populated areas. Incomes might be more likely to be either fixed or slower growing due to substantial costs that employers encounter for raw materials, transport of these from the mainland and fuel costs. Depopulation due in part to the above issues would exacerbate the problem. By increasing council tax bands at the levels suggested, there is a distinct possibility that the effect on island residents will be much more severe than mainland dwellers.” (Individual, Stirling, Band G)

As a result of higher costs of living and lower wages, respondents felt that residents of island communities could potentially be even less able than people living in other areas to afford the proposed Council Tax increase. Some respondents thought that this could contribute to residents moving away from island communities and overall depopulation.

“It's already more expensive in almost every way in the islands and wages rarely meet industry averages. Energy costs, travel and food are all significantly higher in the Highlands and Islands and accommodation is often not energy efficient or affordable or even available. It will add to a rural skills drain as people move away from the region.” (Individual, Highland, Band F)

Impact on the housing market on island communities

Respondents disagreed about how housing markets in island communities would be impacted by the proposed increases, and how this might impact local residents. Some respondents believed that property prices (especially for new builds) were already inflated due to the growing share of second or holiday homes owned by non-residents. As a result, these residents believed that the proposed increase could exacerbate existing affordability problems for local people (including young people) in the local housing market. They thought that the share of homes owned by non-residents might increase (as they would be the only people able to afford the higher levels of Council Tax).

“It will make any young islander with aspirations to own their own home even further out of reach to home ownership. Communities in the islands are disappearing due to second home owners, Airbnb properties and lack of job opportunities which is directly linked to poor housing availability. More local authority housing stock is clearly required. If people from [outside] the local community can afford to buy 2nd and 3rd homes for holiday lets or as a distant and absent owner, they will likely be able to afford the increase suggested or they will charge more rental to cover the costs.” (Individual, Renfrewshire, Band E)

“The biggest challenge for island and many coastal communities is that prices are being disproportionately set by furnished holiday let businesses (which are supported by generous tax breaks) and people re-locating from area[s] with much higher values.” (Individual, Stirling, Band G)

In contrast, a smaller set of respondents thought that owners of second or holiday homes could choose to sell their properties when faced with the tax increase, leading to an overall drop in property values. This might make more homes available at prices that local households could afford. Some respondents thought that a decrease in property prices could negatively impact the local economy (in particular the tourism sector), while other respondents thought a decrease in property prices could increase the attractiveness of island communities for new residents.

“[The increase is] likely to seriously negatively impact my area as many of the homes are second homes, rentals or holiday rentals. I see this increase will effectively force many to sell and flood the market creating a huge drop in property value. While it may mean more families can afford to get on the ladder it will ultimately mean there will be fewer jobs for these families and the net impact will be de-population of the rural areas.” (Individual, Argyll and Bute, Band E)

“Within Argyll and Bute there are a high degree of second home owners with properties that fall within bands E, F, G and H. This might encourage them to bring their second homes into use when not occupied, or indeed to put them up for sale. This would be of great benefit to the residents of Argyll and Bute who are seeking such accommodation which is at a shortage, and perhaps encourage/enable more families to move into the area.” (Individual, Argyll and Bute, Band D)

Other respondents commented on the potential impact of any Council Tax increase on affordability of housing for employees (many of whom were seasonal) for local businesses.

“[…] The rise in council tax will impact on the cost of renting and it is already difficult to recruit the seasonal workers and hospitality at the moment. It will be even more difficult if the cost of accommodation rises.” (Individual, East Ayrshire, Band F)

“My understanding is that it can be challenging to attract professional workers to work in some of Scotland's islands - teachers, headteachers, GPs, dentists, etc. Charging more to live in certain buildings may not help this problem.” (Individual, no local authority or band provided)

Impact on the tourism industry

Some respondents discussed the impact that the proposed increase could have on the tourism industry in island communities. Many of these respondents believed that the increase could hurt the tourism industry, and these respondents mentioned two specific negative impacts. First, some respondents thought that the overall decrease in disposable income (that they believed could result from increases in Council Tax) could reduce the number of people visiting island communities on their holidays.

“People from the mainland won't be able to afford breaks/holidays anywhere least of all the islands, therefore businesses and communities relying on tourism will cease to exist.” (Individual, South Lanarkshire, Band F)

Second, other respondents thought that people looking to start businesses in the tourism sector in island communities might be less incentivised to do so because of the proposed increase in Council Tax, as this increase could potentially have a negative impact on the sustainability of the business.

“This area relies on tourism and I think new prospective buyers of larger houses with a view to opening as a B&B for instance would think twice if the Council Tax increases too much.” (Individual, Highland, Band G)

Proposed increase would not impact some island communities

Less than 1% of respondents thought that the proposed increase in Council Tax would have minimal impact, either because they believed councils governing island communities did not depend on Council Tax as a major source of revenue or there were not a sufficient number of properties in Bands E-H to make a difference in revenue.

“I think it will have a marginal beneficial impact in my area (Shetland) contributing a small amount of additional resources to the local authority, which doesn't have any great reliance on Council Tax as a source of income. It may have a slightly greater impact more generally in Scotland.” (Individual, Shetland Islands, Band C)

Themes raised by councils

Only two councils responded to this question. One council referenced the higher costs of living on island communities (which meant that an increase in Council Tax could have disproportionate impacts on island residents), and also expressed concern that the limited range of property available suggested that property values did not necessarily correlate with ability to pay.

“[…] the costs of living in available accommodation […] may not necessarily reflect individual need. This can mean that some households are living in larger houses with higher Council Tax Bands without hav[ing] the financial means to afford these higher charges. These households may not be eligible for Council Tax Reduction or Disabled Band Reduction.” (Council)

The other council mentioned the broader point that councils should receive a fair and equitable share of overall funding (in other words, councils with more properties in Bands E-H should share potential increases in Council Tax revenue with councils with fewer properties in Bands E-H) and this should apply equally to all councils, including island authorities.