Are 10% council tax rises on the way in Scotland?

Yahoo

11-02-2025

Scotland's councils are to decide on local tax rates over the coming weeks, with many mulling rises of up to 10%.
Rates have been frozen or capped for much of the last 20 years, but look set to increase as local authorities work to balance the books.
This is the culmination of years of concerns about mounting pressure on local budgets, amid increased demand for services and rows over funding.
Why are Scotland's councils so short of cash, and are big increases in local levies set to become the new normal?
Councils deliver crucial local services from schools to social care. They collect bins and maintain roads, provide housing, oversee planning and development, and run community facilities like libraries and sports centres.
They are also continually short of cash.
Going into this year's budget season, the country's 32 councils warned they faced a projected shortfall between committed spending and expected funding of £392m - and said it could rise to £780m the following year.
Previous years have involved equally dizzying figures. Councils closed a budget gap of £759m in 2023-24, and faced another of £585m in 2024-25.
This is the result of a stack of pressures including inflation, pay deals and pensions, greater demand for services like housing support, the ever-increasing strain of providing care for an aging population, and delivering policy commitments like free school meals.
Funding from the Scottish government makes up the bulk of council finances, so there is usually an annual scrap over whether enough cash is forthcoming from Holyrood.
This year, leaders actually gave Finance Secretary Shona Robison's budget a cautious welcome, calling it a "step in the right direction" which provided some extra funding.
But they insisted it was still a "difficult" settlement in light of longer-term pressures, with each individual council working to fill a gap of millions of pounds.
And that was before they discovered they would have to cover part of the cost of the UK-wide increase in employer's National Insurance Contributions.
Councils need to find £96m to offset their staffing costs - equivalent to a 3% increase in council tax on its own, before you start on any of the other challenges.
Council tax is the biggest fiscal lever councils have to pull upon. And most look ready to pull hard.
Many authorities ran consultations ahead of their budget-setting meetings, seeking views on hikes ranging up into double figures.
Scottish Borders Council has already agreed a draft plan with a 10% rise, with leaders saying the "extremely difficult decision" was needed to safeguard "essential services".
Councils from East Lothian to Fife to Shetland have also mulled increases of up to 10%, while Edinburgh, Midlothian and East Ayrshire are reportedly looking at 8%.
Inverclyde Council actually did implement an 8.2% increase in council tax last year, but after a last-second deal with the government paid the money back to residents through a rebate. That was a one-off though, so residents will still be subject to that rise this year, along with any additional increase for 2025-26.
Some are looking further ahead too. Perth and Kinross Council has proposed a rise of 10% this year, as well as 10% next year and 6% the year after. Leaders say this will provide "stability and predictability" in planning over the longer term.
All of these decisions remain up in the air for now, with individual councils meeting to set their budgets in late February and early March.
For a big chunk of recent history, councils haven't had a free hand over local rates.
The SNP instituted a council tax freeze for nine years after it came to power at Holyrood in 2007, with then-Finance Secretary John Swinney essentially paying councils a lump sum not to raise rates.
When the freeze eventually ended, controls remained. A similar deal was struck to cap rate rises at 3%, and was used most years thereafter.
And last year, then-First Minister Humza Yousaf announced a fresh council tax freeze out of the blue.
Politically, it wrecked his attempts to reset the government's relationship with local authorities, which would far rather be able to make their own decisions.
It also soured ties with the Scottish Greens, contributing to the collapse of the Bute House agreement which ultimately swept Mr Yousaf out of power.
And economically, it underlined the fact that freezes are increasingly expensive, a blunt fiscal tool which benefitted the well-off every bit as much as lower earners.
So this year, councils have a free hand - other than Mr Swinney, now first minister, trying to nudge them a little by suggesting that big rises are not necessary.
Other than 2023-24 - when many councils raised rates by about 5% - this is the first time for almost 20 years when a big increase has really been possible.
Is there an alternative to hiking council tax rates?
There are a range of options available - but few are untapped resources.
The simplest answer is to cut spending on staffing and services. Realistically councils have already been doing this, and will continue to do so hand in hand with tax rises.
The fear is that any fat was trimmed away in previous budget cycles, and that cuts now go to the bone. Things like libraries and community centres are coming under threat - ideas even more unpalatable to councillors than big tax rises.
Most authorities have also dipped heavily into their reserves in recent years, utilising the funds they have squirreled away for a rainy day.
But this pool of cash was drained by 5% last year alone, and 84% of general funds are now committed.
Some money can be raised by increasing charges for services - for everything from rent on council houses to garden waste collections.
Many councils are also seeking to get creative when it comes to revenue streams.
There are new options open to them, thanks to reforms made at Holyrood - things like the tourist tax.
Edinburgh has taken the lead with a 5% levy on accommodation costs, which will be introduced from July 2026. But others like Glasgow, Highland and Stirling are looking at similar measures - and Aberdeen City is pondering a steeper tariff, of 7%.
Another recent addition is the power to double council tax on second homes. Councils including Aberdeenshire, Scottish Borders, Fife and Edinburgh have instituted 200% rates, and others including North Ayrshire have consulted on joining in.
However not all powers have been taken up; Edinburgh dropped plans for a charge on workplace parking last year, with councillors saying it was "hitting working people with a big huge stick" and "not giving them any carrots".
Meanwhile, borrowing by councils went up by £400m last year, chiefly to invest in buildings and infrastructure - and while this is vital, it means almost all of them now face higher levels of debt and annual interest costs.
All but one council increased their debts in 23-24, and combined they have a net debt of £20bn - up 16% on the previous year.
Will things change in future?
Council tax has never been particularly popular.
It is broadly accepted to be a "regressive" tax; it weighs more heavily on poorer households, as a proportion of income, than those on higher incomes.
It's also undeniably out of date, being rooted in property values from 1991.
The SNP's 2007 manifesto promised to replace the "hated" levy with a local income tax.
But talk of change has never led to any real action, even when the SNP had a majority from 2011, or when it partnered up with the strongly pro-reform Greens.
A fresh consultation has just been announced, but given there is only a year until the next Holyrood election nothing is going to actually happen in this term of parliament.
In theory that election should still produce a super-majority in favour of reform. Alongside the SNP and Greens, Scottish Labour and the Lib Dems are both in favour of scrapping the council tax.
But that has been the case for decades. The question is whether it can become enough of a priority for parties to actually do something about it.