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Taxing times

Taxing times

How Scotland pays for its public services is a thorny issue. On one hand, with an aging population and increasing numbers of people needing help from local authorities, these services are more essential than ever. However, as councils continue to feel the bite from squeezed budgets, paying for them becomes an increasingly complicated problem.

In Scotland, council tax has been frozen since 2007. In a statement to the Scottish Parliament in December, Finance Secretary John Swinney told MSPs: “Recent local government finance settlements have been set following detailed discussion and agreement with COSLA, against a backdrop of the continued financial constraint that the United Kingdom Government has applied in Scotland. In these difficult times, the Scottish Government has remained fully committed to that partnership and has protected local government as much as possible, to shield our local communities from the worst of the cuts.

“As part of the settlement, local authorities will continue to freeze the council tax. That is continuing to help families during tough economic times. The partnership working between the Scottish Government and local government remains a hallmark of our approach to public service reform. The Scottish Government has supported the partnership with fair financial settlements in the face of real budgetary pressures as a result of funding settlements from Westminster.

“As part of the partnership that we have operated since 2007, we have maintained the funding formula that was agreed jointly with COSLA for determining the settlement for individual local authorities. That needs-based formula takes into account issues such as population levels, deprivation and sparsity among the individual local authorities. I have again applied that formula to the settlement that I am setting out today for 2014-15.”

Labour’s local government spokeswoman Sarah Boyack attacked the SNP for continuing to freeze council tax. She said: “Since 2008 almost 35,000 jobs have been lost within councils as the SNP continue to grasp power back from local authorities. This has an impact not only on service delivery but also across communities who rely on public sector jobs.”

Last year, Labour leader Johann Lamont said the current council tax freeze was not working. Her words came after Professor Arthur Midwinter, an academic advising Labour on how to reduce public spending, branded the council tax freeze a “major problem” for councils and said it was an “inefficient use of public money”. The academic told the Scotland on Sunday newspaper by failing to ring-fence some anti-poverty funds, the Scottish Government had allowed money to be swallowed up elsewhere as councils tried to patch over cuts. Lamont called for a discussion on how to fund local authorities in Scotland, saying the council tax was “discredited”.

A recent poll undertaken by MORI on behalf of the Commission on Strengthening Local Democracy, found two out of three Scots would be willing to pay more in council tax if they could be guaranteed the money raised was to be spent on local services such as schools and care for older people. More than seven in 10 people also felt that one size does not fit all in terms of service delivery and local services should be delivered in ways that meet the needs of local people in their area. Less than half of people thought councils have enough money to deliver the services they think their community needs.

The Commission on Strengthening Local Democracy was set up by the Convention of Scottish Local Authorities (COSLA) to look at possible ways of improving councils and local services after the independence referendum.

COSLA president and commission chairman councillor David O’Neill said: “This commission is all about starting a debate. When it was launched we said that we would listen to communities and that their views would be at the heart of all our work. This work undertaken by MORI is about getting to the heart of what the people of Scotland think matters, not the things that politicians tell them that matter. It is one part of our bigger commitment to ask some new questions about why doing things locally matters, and what stronger local democracy in Scotland might look like.

“For example, we’ve also seen hundreds of people from all walks of life, and from across Europe, come forward with ideas as part of our call for evidence. That is fantastic and shows that the issues the commission wants to hear about chime with what people in Scotland care about and want to talk about. Scotland has never tried anything like this before. We are breaking new ground by offering a mature and evidence based debate about the kind of democracy we want, regardless of the outcome of the referendum in September.

“As a collective, we want to deliver real change and we want to influence change elsewhere. It is only once we have finished collecting evidence that we will be able to draw any conclusions as a commission. But it is hugely encouraging that both our call for evidence and our polling work are already showing that right across the country there is a growing appetite for a serious discussion about why local services and local accountability matter and how we strengthen them in Scotland’s future.”

Discussing the poll, Liberal Democrat MSP Alison McInnes said the results of the survey articulate what many Lib Dems have been saying for years, that “local decisions should be taken by those in the community for the benefits of the community”.

She added: “Local democracy needs to be strengthened, not undermined by successive SNP policies and their centralisation agenda. The merging of local forces to create Police Scotland has shown just how damaging such power grabs can be to local interests and priorities.”

Looking more generally at the council tax, the Institute for Fiscal Studies think tank said in a recent report that the system of property taxation in Scotland was “ripe for reform”. The report added: “But while Scotland’s intended replacement for stamp duty land tax is an improvement, the failure of successive Scottish governments to date to undertake even the most obviously desirable reform to council tax – a revaluation to base it on up-to-date property values – does not bode well for making politically difficult improvements under independence.”

Two weeks ago, MSPs approved over £10.6bn of funding measures to deliver local services across Scotland. The Scottish Government confirmed it would also remove council tax from students progressing from an HNC or HND to a degree-level course and take steps to ensure payday lenders no longer benefit from business rates relief. The measures were outlined during a parliamentary debate about the Scottish Government’s funding for local government for 2014/15, which also confirmed funding for the continuation of the council tax freeze and the expansion of the Small Business Bonus scheme.

The approved funding for 2014/15 is being maintained at 2013/14 levels with extra money for new services. Swinney said: “Business rates are a key issue for the business community, which is why I have provided additional certainty by legislating for the Small Business Bonus scheme for the lifetime of the parliament. This underlines the government’s commitment to maintain Scotland’s position as the best place to do business with a business rates relief package worth over £590 million in 2014-15.”

However, despite this, it doesn’t look like any real changes will be made to the way councils are funded any time soon. As the independence referendum creeps closer, Swinney added: “With control of the main levers of power we could do so much more. We have already put forward our proposals for Scotland’s Future and demonstrated how the powers of independence can be used to build a wealthier and fairer Scotland.”

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