25 years of Council Tax and still little variation

View of Glasgow

George Black, Visiting Professor, IPPI

George Black
Visiting Professor, International Public Policy Institute
george.black@strath.ac.uk

27 February 2017 

The Council Tax was introduced in Scotland in 1993, replacing the former Community Charge (Poll Tax). Council Tax helps to pay for Council services, is set locally, collected locally, and retained locally. Yet after almost 25 years and despite being set locally to meet local needs, there is very little variation in the levels of Council Tax across Scotland.

Council Tax varies by only 14% across Scotland; and less between similar council areas

Although three Councils have still to set Council Tax levels for 2017/18, the highest level of Council Tax is in Glasgow, which increased its benchmark Band D Council Tax by 3% to £1,249. For the past nine years Aberdeen has had the highest Band D Council Tax, but for 2017/18 froze it at £1,230. Excluding the three Island Councils, the lowest Band D Council Tax is in Dumfries and Galloway. Although it has yet to decide on the level of rise for 2017/18, even if it increased the current level of £1,049 by 3%, the maximum rise allowed, it would still be the lowest in the country, 14% lower than in Glasgow.

However, the range and level of services provided by these two Councils – Glasgow and Dumfries and Galloway - varies significantly. A more meaningful comparison is between Councils of a similar nature, for example Cities or Island Councils, and between neighbouring Councils.

Little variation across city councils, neighbouring and island councils

If we look at the Band D Council tax levels in the four major cities, it ranges from £1,249 in Glasgow to £1,241 in Dundee, £1,230 in Aberdeen, and £1,204 in Edinburgh - only 4% lower than Glasgow. Or, if we look at the three “new“ cities which sit within a wider Council area, it is £1,198 in Inverness, £1,197 in Stirling, and £1,181 in Perth; again only marginal differences.

Looking at some close neighbours, we find that the level is £1,164 in Renfrewshire and £1,160 in East Renfrewshire – a marginal difference. Similarly, it is £1,101 in South Lanarkshire and £1,098 in North Lanarkshire; £1,151 in East Lothian and £1,128 in West Lothian; £1,176 in East Dunbartonshire and £1,163 in West Dunbartonshire, and although both Councils have still to decide on the rise for 2017/18, the current levels are £1,154 in South Ayrshire and £1,152 in North Ayrshire.

And, if we look at the three Island Councils, it is £1,084 in Shetland, £1,068 in Orkney, and £1,055 in the Western Isles, again very small differences.

So, when we look at the level of variation between Councils of a similar nature, and between close neighbours, we find that after 25 years the level of variation in Council Tax levels is actually quite small. Even allowing for the fact that Council Tax was frozen by the Scottish Government for nine years, we may have expected a greater level of variation.

Greater variation in Council Tax across England than in Scotland

Certainly, there is a greater level of variation in England. If we look at the “northern Cities” in 2016/17, it was £1,675 in Liverpool, £1,512 in Newcastle, £1,435 in Manchester, £1,421 in Leeds, and £1,372 in Birmingham – a variation of up to 18% and all significantly higher than cities in Scotland. And, if we look within London, there is a 12% difference between the neighbouring Councils of Southwark and Lewisham. The difference between the highest and lowest rates across England is around 60%.

In Scotland, it would appear that, in deciding on Council Tax levels, most Councils have a close eye on what their neighbours are doing.

Changes ahead? Probably not

Looking ahead to the next few years I don’t see the position changing much. Once we are past the May elections, and taking account of the severe financial pressures Councils face, I would expect most, if not all, Councils to increase Council Tax by the maximum of 3%. Even if the Scottish Government raised the limit of the maximum Council Tax rise to, say 5%, there would be little variation as I would expect Councils to continue to raise Council Tax by the maximum amount permitted, at least until the next Council elections.