Local taxation sensible option for council budgets


Ben Thomson in The Scotsman

Scotland’s local authorities have this week raised the prospect of new taxes being levied by them to support their budgets after many years of the council tax freeze. Whilst new taxes are never welcome, I’d suggest there is something to welcome here.

Over 90 per cent of all public sector revenue in the UK is raised by Westminster, but the majority of money is spent at a devolved or local level. Currently, Westminster hands over a budget to devolved administrations, who then fund local governments. This creates a dependency on central government, reduced political accountability and removes an incentive to spend budgets efficiently.

The Devo Plus Group has long highlighted the need for the Scottish Parliament to be responsible for raising more of its own revenue. However, we do that in the context of wanting further devolution of tax raising to local authorities.

Accountability is the key to successful decisions being taken by all levels of government. Holyrood needs to be more accountable for raising the money it spends, but that principle applies equally to councils. Meaningful accountability would ensure that each level of government had revenue powers more closely matched to spending ones.

With the current council tax freeze, local authorities in Scotland are only truly responsible for raising just over a tenth of their total revenue. So when they run short of money, they inevitably complain to those who feed them financially.

It would be a significant boost for accountability if councils had to raise the majority of what they spent, and had to justify to local voters when local taxes had to rise (or could fall) to pay for local spending.

If that meant a new sales tax to fund local government in Edinburgh, or indeed local income taxes, that would be a good thing, providing taxes raised by Holyrood and Westminster reduced at the same time. No one likes new taxes, but being taxed closer to home will mean better decisions taken at Holyrood and in council chambers.

Cosla’s statement this week reflects that localism in taxation is an idea whose time has come.