Meeting of the Parliament 26 February 2015
It is “linked”, but I said that it
“does not in a substantive sense adhere”
to the fourth principle. There is a linkage, but it could be greater.
The 1992 act hardwired in a lack of progressivity. Band H properties have greater liability than band D properties, but their value is at least four times that of band D properties while their liability is just twice that of band D properties. Therefore, it is clear that there is a limit to how close the link is. The values are based on the situation in 1991 and no account has been taken of subsequent changes in relative prices, so areas that have not benefited from house price increases have not seen their council tax bills become lower than those that had a bit of a boom.
The council tax valuation bands mean that there is no differentiation among properties that are in the same band. As with the late and unlamented stamp duty, there is a slabbing effect that penalises properties whose value brings them just into a higher band and no more by charging them the same as properties that are near the top of the band.
Even looking at the banding should raise concern. Some 74 per cent—almost three quarters—of properties are in bands A, B, C and D, and only one in 200 is in band H. It is all based on the assumption—which has been the subject of many debates in Parliament over many years—that the best way of assessing an individual’s ability to pay is by looking at the value of their home.
Since 2008, we have been addressing the worst failings of that flawed system by delivering funding to local government that has enabled all councils to freeze the council tax. With the continuing agreement of all councils in Scotland, that freeze is about to run for the eighth consecutive year. The cumulative saving over the 2008-09 to 2014-15 period for band D households amounts to more than £900 per household. We estimate that that will rise to about £1,200 by 2015-16.
Before the introduction of the freeze, the average council tax per dwelling increased by more than 50 per cent between 1997-98 and 2007-08. That was not just far beyond inflation; it was financially crippling for certain types of household—for example, pensioner households—that were dependent on a modest fixed income, but still earned a little too much to qualify for council tax benefit. For many, there was real fear in awaiting the annual council tax letter dropping through the letterbox onto the doormat. Now, that at least is no longer the case.
In addition, with our local government partners, we stepped in when the United Kingdom Government abolished council tax benefit to ensure that vital reliefs could continue. The council tax reduction scheme, which Gavin Brown kindly introduced to the debate, affords people targeted relief from council tax liability. At its peak, it applied to more than 550,000 people in Scotland. That corresponded to £360 million of support in that year and covered 22 per cent of all households.
We have to contrast that with the approach that is taken in England, where localisation of council tax relief has meant that more than 300 different schemes are being operated, some of which mean that the UK Government’s budget cuts are falling on those who are least able to pay—even more so than the council tax unamended.