By Alasdair Galloway
So, yet again a freeze on Council Tax. Almost an SNP staple. It is likely to offer some good headlines, but how good an idea is it really?
First of all, unless the Scottish Government provide the necessary funding to make good the Council Tax loss caused by the freeze, no matter its benefit (eg not paying more Council Tax) is lost because in some regards the can has only been kicked a bit further down the road, as local government is likely to end up even more badly financed. Therefore, set against those good headlines you have to consider the bad headlines because another community asset has been lost or availability diminished, Council charges go up or services lost as Councils “struggle with the freeze imposed by this SNP government”.
No doubt Councils – especially those controlled by Labour and/or Tory – will exaggerate this, which will be responded to with claims of poor management and so on. We’ve heard it all before, and the problem is that there is something to be said for both sides. While the community will pay less tax than they might have done (though keep in mind the Economist’s encouragement not to forget that there is no such thing as a free lunch), the Councils, at least in real terms, have less resource than they had the year before. Given the difficult finances of local government something has to give. So, those will be the terms of the debate. So much, so boring.
However, one thing that is seldom commented on is, given that Council Tax bears no direct relation to ability to pay, it is, to some extent regressive, or at best not very progressive. If this is so, how progressive is a freeze? The consequence of the freeze is to save us the annual Council Tax increase (whatever that might have been), which is usually expressed as a percentage of the Council Tax band your dwelling is in. As a percentage increase the benefit is therefore greater the more Council Tax you pay. Therefore the benefit is greatest for the “big hooses” at the edge of town – those who cet par are probably best able to pay.
It is something of an irony moreover that when the SNP came to power in 2007 one of their promises was to replace the Council Tax with a local income tax which could have been more progressive. Unfortunately they were deterred from doing so by Westminster (at a time when Gordon Brown had just become PM) informing them, as John Hutton, the Work and Pensions Secretary, said “Let us be clear, if there is no council tax in Scotland there will be no council tax benefit. It is a UK benefit to help people with the cost of council tax.”
Easy peasy! But a black hole of a £381 million on local authority spending in Scotland, the idea was dropped, and Council Tax was frozen, ironically as it was “unfair”. Since then the struggle has mainly been around maintaining the freeze (and negotiating with COSLA to get local government to work with it). There is little sign of serious debate about a fairer system.
To be fair to the SNP part of the reason for this must be their suspicion that there will be little support from Westminster, or even just a repeat of 2007. Is cooperation more or less likely now than in 2007? In any case, how much interest has there been in a fairer system since the 2010 election?
All that said, it’s clear that today’s announcement is packaged as a social benefit to much of the electorate, and, let’s face it, no one’s going to send it back. Therefore, it can be added to the list of widely available, non-means tested benefits implemented in Scotland by the SNP since 2007 – prescription charges, bus passes, university fees etc. However, what is missing, I think, is a joined up philosophy justifying these benefits as something more than just “fair” but about their connection to the “better, fairer Scotland” people were promised in 2014, in particular what it means, why this is important and how it would work (including implications for tax).
What I have in mind is something that
- Offers a philosophical justification for benefits, and particularly non-means tested benefit paid to everyone as a matter of entitlement. In regard to avoiding means testing don’t underestimate the influence of Naomi Eisenstadt, Nicola Sturgeon’s one-time adviser on poverty. For instance, an important justification of non-means-tested benefits is that everyone gets them. There is no need to make a claim, which some won’t do for a variety of reasons (eg fear of the process, shame at claiming benefit).
And that is Eisenstadt’s point – if everyone gets the benefit (progressively taxed back) then where is the shame in receiving it? But it’s not only more effective in this sense, but it’s also more efficient – less bureaucracy as the only aim is to get the benefit out to everyone entitled regardless of income. Also more efficient in helping the state fulfil its social aims.
Eisenstadt’s aim was to shift the curve, “what actions could the Scottish Government (and others) take to significantly reduce the numbers of people living in poverty in Scotland?” Not means testing benefits was a recommended route, though with the proviso that for the poorest and most needy, to put in additional resources. For instance that all schools should be properly resourced, but schools in deprived areas would be more than properly resourced to address the additional needs of such communities.
- But in particular there is a need to put flesh on the bones of what we mean when we talk about a “better, fairer Scotland”. Oh I know such as Colin Fox and Tommy Sheridan will bang on about how it doesn’t go far enough (maybe even Patrick Harvie). Could it ever? At the same time Ross will …..well behave as we have expected Douglas Ross to behave. Liz Smith will put on that long face of hers, getting words like “scroungers” and “highest taxed in the UK” into every sentence.
- But any reference to the UK would be redundant, for if any of this is to be implemented Scotland will no longer be part of the UK which emphasises that this document is about Scotland as an independent nation, able to do what it wants, or at least what it can afford. So what might that be?
If the above is about why or what for, the second part concerns “what”. What would/ could be done to realise as close as possible the “better, fairer Scotland we talk about”.
- We all know about atrocities like the two child cap on benefits, the bedroom tax and so on. But really we should get beyond “we will put right the wrongs of Westminster” for three reasons
- It puts too much power into Westminster’s hands, even once we are independent. Change should be driven by what needs to change, not by what was wrong at Westminster (though there will be overlap).
- There might be so many more things that we could do and should consider
- It was recommended by Sir James Mirlees during his time as a member of Alex Salmond’s Committee of Economic Experts that any new system of tax in an independent Scotland should be written on a clean sheet of A4 and not adapted from the UK system. Perhaps the same should apply to welfare as well?
- Any such document should be generated by a wide range of opinion. It could for instance be a product of the oft-promised National Convention. As above it will face opposition, but it should set out the practical meaning of what kind of country an independent Scotland would be like, what it would be like to live here and so on, rather than soft words, mom and apple pie and worst of all vagueness.
- What about opposition? Gordon McIntyre-Kemp made the point in a recent Believe in Scotland Newsletter that the biggest obstacle to a well-being economy would be those who win under the current system. Aye, if only Gordon, but its worse than that isn’t it, for those who aspire to doing well under the current economic system will likewise be opposed. Think Annie Wells with a few brain cells! Political ideology isn’t only influenced by one’s current social position, what one is. It is also influenced by what one aspires to be.
Much the same applies to paying for welfare benefits, so the point has to be made strongly that the benefits will be universal, even if they are being taxed back. Thus if you pay higher tax celebrate how well you are doing and that you live in a country with adequately funding for their social services. This is a critical idea – too much time has been spent on ideas for which the funding has never been adequate. A benefit should be paid for properly, services funded to not only be readily available – not with 6 month waits and delays – but be delivered to be high quality so provided by staff at least as highly trained as they need to be and paid properly. The perception of transparency and honesty even, might not go wrong with general public.
Much of this is consistent with the Scandinavian view of social welfare and – so it goes – high taxation. Denmark’s tax-to-GDP ratio was at 46.9 percent, Norway’s at 42.2 percent, and Sweden’s at 42.6 percent. This compares to a ratio of 24.5 percent in the United States, the much higher Scandinavian level being required for the higher level of social spending.
It would be naïve to expect to be overwhelmed by the electorate’s support to pay more tax, but debate about what it would mean is necessary. How fair? What services? What responsibility does the individual elector have? How much of a family’s wealth should be protected so that it can be passed on to the “next generation”? None of this will be easy. The debate will be long and hard. But if the struggle for independence, independence itself and the promises made for independence are to be taken seriously. However the council tax freeze isn’t a promising start.
Talking-up Scotland 
‘However, what is missing, I think, is a joined up philosophy justifying these benefits as something more than just “fair” but about their connection to the “better, fairer Scotland” people were promised in 2014, in particular what it means, why this is important and how it would work (including implications for tax).’
Like this?
Jimmy Reid Foundation: ‘Universal Benefits probably Scottish Parliament’s greatest achievement’ https://newsnet.scot/archive/jimmy-reid-foundation-universal-benefits-probably-scottish-parliaments-greatest-achievement/
In full – https://reidfoundation.scot/portfolio-2/the-case-for-universalism-an-assessment-of-the-evidence-on-the-effectiveness-and-efficiency-of-the-universal-welfare-state/
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The Reid paper, offers a justification for universalism rather than selective benefits. As I hope I made clear this would be my view as well, so big tick!
What is missing is any justification for the benefits that are offered, or could/ should be offered, or perhaps really should not be offered. This needs debated – how far should the support of the state extend? What form should that support take? Financial (just give them the money) or services (being able to access services organized by the state) – self directed care is an example of the former (and having some experience of this, I can tell you its not always easy to access even if you do qualify on grounds of health). How much support? Claimants and pressure groups are routinely critical of the state for “letting them down”, but how much would be enough? Is it ever?
The other thing is there is a need for a wider debate about how much support should the state provide. Higher social spend means higher tax, as I noted, so cue Ross and Smith forecasting doom. But the link is there – if we are to develop the more supportive society that the Scandis enjoy then we need to pay more tax, and the problem is the current dominant paradigm is that higher tax is the kiss of death. Of course income tax is toxic because you are reminded of it whenever you are paid, so Finance Ministers increasingly have turned to “stealth taxes” where the tax payer doesnt even know they are paying more tax (though companies are transparent about the tax paid for such as airline tickes, insurance etc – sort of, “it wisnae us”).
So, we cannot ignore the development of the economy for ultimately it is this that is going to pay for this social support – though at the same time it may be the cause/ source of the need for such support through practices such as paying badly, zero hours contracts etc. A report which recommends a whole plethora of benefits (and generous too) faces the question “how does the state pay for this?” for which the response “it must” really isnt good enough. It was this that to some extent gifted us Thatcher.
What is needed is a comprehensive societal plan that explores
1. what benefits will be provided? How? (I would assume, universalism would be default)
2. how paid for – so a plan for development of the economy, with 1 explicitly written in.
In other words, not just what social support would be provided, and how it would be paid for.
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Tell readers you are Alasdair?
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I didn’t see the recent council tx freeze as some long held ideological stance, towards a fairer, better Scotland. I see it as a political decision, for the immediate effect, wrong footing the opponents (which it has) and, as in past freezes and funding made good, to some extent works against, the shenanigans of SNP opposition at council level.
S.G has made up the council short fall in the past, I can only think that this “surprise” freeze announcement was made possible due to early indicators from the forth coming economic report.
We, as a group, had debate and discussion around a land tax system. Land tax plus income tax system, looked a worthwhile option for national debate.
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Completely agree with that. I dont know if you watched Debate Night last night, but the freeze was the first thing up, and Neil Gray got roasted for it. Richard Murphy pointed out very eloquently that the freeze was regressive rather than progressive. So, in reality, yes a political decision to distract from the other problems faced by the SNP. Nonetheless it is how it is being presented – this was Gray’s primary defence (and to some extent supported by Labour’s Pam Duncan-Glancy). But if you are interested at all in equality, what you are interested in is an alternative to Council Tax, but the primary question there is that there might not be one as part of the UK, unless a Scottish Government is prepared to make up the loss of Council Tax benefit from its own resources
I have a lot of time for the idea of taxing land – hard one to avoid! But it still comes up against the “Council tax benefit” problem. A land tax (whatever form) is likely to be applied to the dwellings of folk on Universal Credit. If London follows previous practice it will refuse to make good the loss of benefit as there is no Council Tax and the Land Tax is not allowed for in UC (it could be I suppose, but that it almost certainly will not tells its own story) so the claimant loses a sum from their benefit. BUT whether the tax is paid directly by the occupant or it’s levied on the landlord, the occupant is going to pay as the landlord will adjust the rent to suit their additional costs. I dont see how that can be avoided, so the biggest losers are those least able to deal with it. Only when we are independent – or there is a BIG change in attitude in London- can this be dealt with. Broad shoulders of the UK right enough!
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Andy Wightman, who I have great respect for in many areas, sees the freeze as a moral outrage – apparently we must allow councils a totally free rein when it comes to raising their own funds. This is nonsense, and smacks of the argument against ring fencing. Where a government policy requires council action, the only way for government policy to be implemented is to provide ring-fenced funding. I agree this is a tricky area, and the balance of the argument may be hard to find, but ranting about ring-fencing is not the answer – especially when there are councils politically opposed to government policy.
Having said all that, I do wonder if there are better ways to provide relief, especially in a more progressive way. Whatever amount has been (or will be) conjured up as mitigation for the freeze could be spent instead on a non-universal benefit payment, or payments. Given that council tax increases will then to some extent negate those benefits, it’s hard to estimate the overall effect but it seems likely to have a more progressive outcome. There are strong arguments for universality, but this seems to be a case for targeted benefits – could it be done quickly?
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There was an interesting debate about this in 2007 when the SNP were proposing a local income tax. The only party offering support were the Lib Dems who also wanted to implement a local income tax. But the Lib Dems wanted the Councils to set, collect and keep their own tax procedes.
I live in West Dunbartonshire, and if you look at any league table of poverty it is vying with Glasgow, Inverclyde and often Dundee for the worst affected Council areas. However on each side of us is East Dunbartonshire (including Bearsden and Milngavie) and Argyll and Bute (Helensburgh) – both usually among the wealthier council areas in Scotland. Thus for the same pc expenditure West Dunbartonshire would have to levy a much higher rate for their tax base is that much lower, despite facing much greater social needs (not just poverty per se, but health issues, housng etc) requiring more not less expenditure. In the two adjacent council areas (both at one time part of the county of Dunbartonshire) these are less of an issue and the tax base is that much greater.
The difference was that the SNP proposed to have the proceeds all paid centrally, and the govt would realloate according to some formula of needs. Thus, for instance East Dunbartonshire would get its tax raised minus, while West Dunbartonshire would get its tax plus.
Given the proposal was abandoned, this debate never reached a conclusion, but the issue never disappeared. One solution might be to allow Councils to set their own tax rates, but based on an assessment of needs for the central government to pay in a subsidy to address the greater poverty faced.
Whatever is used to address this will create resentment – is Glasgow getting enough more than Dundee to face their greater degree of poverty? Why should the parsimonious burghers of Edinburgh subsidise weegies?
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Andy Wightman, who I have great respect for in many areas, sees the freeze as a moral outrage – apparently we must allow councils a totally free rein when it comes to raising their own funds. This is nonsense, and smacks of the argument against ring fencing. Where a government policy requires council action, the only way for government policy to be implemented is to provide ring-fenced funding. I agree this is a tricky area, and the balance of the argument may be hard to find, but ranting about ring-fencing is not the answer – especially when there are councils politically opposed to government policy.
Having said all that, I do wonder if there are better ways to provide relief, especially in a more progressive way. Whatever amount has been (or will be) conjured up as mitigation for the freeze could be spent instead on a non-universal benefit payment, or payments. Given that council tax increases will then to some extent negate those benefits, it’s hard to estimate the overall effect but it seems likely to have a more progressive outcome. There are strong arguments for universality, but this seems to be a case for targeted benefits – could it be done as quickly?
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I like the idea of starting out with a blank piece of paper and open mind.
Golfnut
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That should read blank pieces of paper because we have a lot to fix and that needs to start with what kind of government, National and local, do we want and need. Until we make our politicians and media, let’s not forget them, accountable not just at the ballot box, nothing will change. Yes we’ll have all of Scotland’s resources and the fiscal levers not currently available to us but if we have the same level of partisanship and self interest so embedded in our current political system, nothing will change. Yes we have good people but they are fewer than we think and independence itself will not get rid of the dross and timeservers and unless we start there nothing will change.
Golfnut
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