No (Effective) Representation Without Taxation – How Greens Will Shake Up Council Funding

SGP Tax Plans

Allan Faulds

Following on from David Allison’s piece yesterday about how important local empowerment is, as a matter of democratic principle rather than cynical policy, it seemed a good time for to follow up by getting a little  bit more technical on some of what we need to put that principle into practice – namely, an enormous shift in the level of responsibility our local councils have over their own revenues and expenditure.

Talking about revenues  can seem, it has to be said, rather dry and uninspiring, but at all levels of government the question of funding is absolutely central. You can have the best policies in the world, but if you don’t have the money to deliver them, they are worthless. That’s why the powers to raise revenue are so important for the Scottish Parliament, and the same rationale applies to local governments too.

If you don’t control your own revenues, you’re at the mercy of whichever higher layer of government funds you, limiting your ability to make your own policy – and more importantly, you limit the ability of people to effect change in their own communities. Across the EU, local governments control on average around 52% of their revenues. In Scotland it’s half that, at only 26%. That’s a significant part of the reason why councils are so weak, which leads directly to lack of trust in them, and why Greens are so keen to shake up local government funding.

Where Things Stand Now


The chart above breaks down where Scottish councils currently get their money from, according to the Commission on Local Tax Reform. In 2013-14, they estimated that Scottish councils spent between them £16.481bn, made up of;

  • General Revenue Grant – £7.225bn (43.8%), from the Scottish Government.
  • Non Domestic Rates (aka “Business Rates”) – £2.435bn (14.8%), collected locally but distributed nationally by the Scottish Government.
  • Customer and Client Receipts – £2.327bn (14.1%), charges from their own local services.
  • Council Tax – £1.981bn (12%), collected locally.
  • “Other Income” – £2.513bn (15.2%), a collection of other revenues, such as funds from the UK Government to cover housing benefit.

The 26.1% controlled by local councils at present are the Council Tax and Customer and Client Receipts. For the purposes of local revenues, it’s important to draw a distinction between a “tax” and a “charge”. Whilst a charge tends to be a specific fee for accessing a particular service, a tax is a usually variable amount levied on a specific source, such as on property or income, or an additional surcharge on a monetary transaction.

As a rule, taxes are fairer than charges, as the people most reliant on council provided services are also those least likely to have the money to pay for them. Most political parties in Scotland agree with the Commission’s recommendation that local services continue to be primarily funded through general taxation. At present, more than half of the revenues councils control comes from charges (54% to 46%, in relative terms). Combined with the paltry amount council tax contributes overall and the inherent flaws with that tax, it is extremely hard to raise local revenues in a fair way. So what would Greens do differently?

Residential Property Tax

Our flagship local tax policy this election is the “Residential Property Tax” – a proportional tax to replace the banded council tax, levied as a % of the property value above £10k. The rate for this tax would be entirely within the control of local government. A rate of 0.7%, applied across Scotland, would raise as much revenue as the council tax does at present. However, the recommendation is for a 1% rate. That would mean a house valued at £110k would pay £1k in RPT each year. At 1% nationally, RPT would raise £490mn more than council tax does.

Site Value Rating

The other big change proposed for local taxation is to abolish Non-Domestic Rates and replace them with a Site Value Rating. Whereas NDRs are currently levied as a % of the overall value of a business property, as SVR is a form of land value tax, it would be levied only on the value of the land that property occupies. Although an LVT remains a long-term goal for all local taxation in Scotland, it’s most easily applicable to businesses right now.

At the moment, although NDRs are collected locally, they are pooled nationally and redistributed by the Scottish Government, with no local control over rates. Greens would give local councils the responsibility for setting the rate on half the value of each business property. So, if we had a business property with a value of £30k, the Scottish Government and the local council would each set a rate to be levied on £15k of that value.

The initial assumption is that this SVR based tax will raise as much as NDRs do at present – however, half of that money will now be the responsibility of local councils, and they’ll be able to vary the rates and thus the revenues if necessary.

Vacant Land Levy

The final major plank of local tax reform is for a vacant land levy. This tax would be available to local councils with the intention of bringing derelict and vacant land into productive use, whilst getting some use to the community out of land that remains unused. It’s estimated that this tax would raise an additional £250mn of revenues for local councils.

Overall Effect

SGP Tax Plans

Putting all of these changes together, the new local government funding structure in Scotland would see councils managing (roughly – adding to 2013-14 revenue values the 2016 estimates for 2020-21 extra revenues isn’t perfect) £17.221bn, made up of;

  • General Revenue Grant – £7.225bn (42%), from the Scottish Government.
  • Residential Property Tax – £2.471bn (14.3%), collected locally.
  • Customer and Client Receipts – £2.327bn (13.5%), charges from their own local services.
  • National half of Site Value Rating – £1.2175bn (7.1%), collected locally but distributed nationally by the Scottish Government.
  • Local half of Site Value Rating – £1.2175bn (7.1%), collected locally.
  • Vacant Land Levy – £0.25bn (1.5%), collected locally.
  • “Other Income” – £2.513bn (14.6%), a collection of other revenues, such as funds from the UK Government to cover housing benefit.

With the RPT, half of SVR, Vacant Land Levy and Customer and Client Receipts all coming under local government control, councils would be managing 36.4% of their revenues. Crucially, the balance of those powers shifts from charges to taxes with 22.9% of that (or 63% to 37% in relative terms) now coming from taxation, making it easier to raise additional revenues in a fair manner.

This represents a significant increase in local control compared to the current dysfunctional setup, as well as a big step towards the ultimate goal of 50%. This doesn’t just empower local councils, but it ensures that when local people cast their vote, they can do so knowing it’s far more likely to make a difference. With greater control at their disposal, it’d be up to those seeking to run our councils to rise to the challenge and provide bolder plans for local government.

Further Reading:

Andy Wightman’s report on local tax

Current Revenues Chart Source; Just Change (Volume 1) – A New Approach to Local Taxation, from the Commission on Local Tax Reform

Scottish Green Party “Fair Funding for Public Services” Briefing


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