The Greens say progress on local tax reform is necessary in order to secure their support for the next Scottish Budget
FOLLOWING their success in securing £170mn extra funding for local council services in a deal to support the latest Scottish Budget, Scottish Green co-convener Patrick Harvie warned that the party will be unable to enter negotiations on next year’s budget if “meaningful progress” isn’t made in the coming months on local tax reform.
Scottish Green proposals for local tax reform include the replacement of the Council Tax with a residential property tax, devolving control of non-domestic business rates, introducing a new local government Fiscal Framework, incorporating the European Charter of Local Self Government into domestic law and instituting a vacant and derelict land levy.
In a letter to First Minister Nicola Sturgeon, Harvie wrote: “The groundwork for reform has been done – the Commission for Local Tax Reform has informed the debate and forged cross-party recognition that the present Council Tax system must end.
“Full replacement of the current system of Council Tax will require time for consultation, legislation and implementation. However, the initial steps must be taken in order for progress to take place over the rest of the parliamentary session.”
Following the publication of his letter, CommonSpace sat down with Harvie to discuss the details of a potential council tax replacement, the case for increasing local government autonomy and the difficulties posed to delivering reform by the UK’s present constitutional relationship.
Firstly, given the urgency with which local tax reform is now being treated by the Scottish Greens, why wasn’t it part of the negotiations between the Scottish Greens and the Scottish Government for the last budget?
“It would be very difficult for an individual budget to proceed like that,” Harvie replies. “The case for local tax reform is very clear, but most of the elements of what that would comprise require primary legislation.
“The one exception to that is council tax rate-capping. We’ve made the case repeatedly that, even when Thatcher did rate-capping to local authorities, she at least had the decency to do it by legislation; she got a majority in parliament to say that’s what should happen. The current Scottish Government approach is to impose a cap on council tax as a matter policy – by putting an arm up the back, to be honest – and saying that if they don’t comply with that limit, they’ll get a more penalising financial settlement.
“Now, it may well be that people will take the view that council tax shouldn’t rise by more than three per cent, but that should be a local decision, not a national decision.
Given that criticisms of the Council Tax – which is based on property valuations that are now both outdated and inaccurate – are long-standing, and that its abolition has been discussed by MSPs for almost as long as the Scottish Parliament has been in existence, Harvie explains why the Scottish Greens have chosen to place greater urgency on the issue:
“Over the course of this year – which, let’s face it, is going to be a busy year on other issues as well – there really does need to be an emphasis on moving forward with this stuff. There was already a consensus in the Commission on Local Tax Reform that council tax needs to end, along with substantial other areas.
“How long are we going to wait? Until council tax valuations are thirty years out of date? Forty years?”
“How long are we going to wait? Until council tax valuations are thirty years out of date? Forty years?” Scottish Green co-convener Patrick Harvie
What response have the Scottish Greens had from the Scottish Government since Harvie wrote to Nicola Sturgeon on the issue of local tax reform? “We haven’t had a formal response yet; I’ll be hoping to get a response from other political parties as well.
“This shouldn’t be done – and can’t be done properly – by scraping through the barest majority. If we got agreement with the SNP, that would get a majority, Greens plus SNP – but that’s not enough. If we’re going to have meaningful reform of the financial relationship between central and local government, that needs a broader parliamentary and political consensus.”
While Council Tax has been a frequent point of debate in parliament in recent years – from the SNP’s controversial Council Tax freeze to barbs over which councils have and have not taken advantage of the ability to increase the tax by up to three per cent – discussion of its abolition has been rather muted outside of the Scottish Greens. Nevertheless, Harvie takes the view that there is more support for a Council Tax replacement across the chamber than it might superficially appear.
“Labour’s budget submission came at the 11th hour and written on the back of a fag packet.” Scottish Green co-convener Patrick Harvie
“I think, within both Labour and the SNP, there are a range of attitudes to how long the council tax can be allowed to continue,” says Harvie. “There are folk within the SNP and Labour who are keen to make progress on local tax reform, and there are those who are willing to downgrade it as an issue. There are folk in Labour who have talked about a land value tax, for example. They [Labour] put forward in their budget submission this year some elements of local tax reform, so there’s a willingness to talk about it.”
However, despite his sympathy is some elements of their submission, Harvie is unsurprised that Scottish Labour did not make much headway during the budget process: “Labour’s budget submission came at the 11th hour and written on the back of a fag packet, so you can understand why the government gave it short shrift. But there’s some substance in there, and if they’re willing to engage in a longer-term debate on a timescale that will make some of these things viable, then we want to reach out across party lines.”
Since the Scottish Greens have said that they see their support for the next Scottish Budget as being contingent upon meaningful progress on local tax reform, what kind of timeframe do they have in mind?
“Given that there are some short-term measures that could be taken that are not contingent on complete replacement of Council Tax, we think it’s reasonable that we see a bill on Council Tax replacement at some point during this parliamentary session, before the next Holyrood election,” says Harvie.
“It might be that it can be passed in that time; it might be we could get to a consensus on what issues should be involved. We know it’s not going to done in a single step, but until you’ve taken the first step, you’re still stuck at square one.”
Harvie explains that Green policy proposals on local tax reform are part of a wider philosophy on local government, rooted as much in principle as practicality: “The principle that local government is a fundamental part of our constitutional framework – that it has a right to make local decisions without being overly controlled by the centre – is, I hope, one that most people in Scotland agree with.
“I’d like to see local government that is more local and more able to govern. I don’t think we have local government in this country at the moment; I think we have big local service delivery agencies, whose financial situation is almost entirely dictated by the centre. That’s not the arrangement that works well for people. And even if it, at some measure, manages to achieve efficiency, it does it very often by imposing one big solution on a policy area. Different communities have different economic and social circumstances and imposing one big solution on them all very often leaves everyone very unhappy that they’re not in control of their local policies.
“Property wealth is a greater source of economic inequality in our society than income inequality.” Scottish Green co-convener Patrick Harvie
Harvie acknowledges that some might be wary of the potential consequences of increasing the power of local authorities, yet remains adamant that such fear cannot justify the present system: “If you decentralise and allow communities to make to their own choices, some of them might make choices that you don’t like. The point is: that is their right.
“Some communities might choose to elect Tory councils that want to get involved in tax competition and cutting their public services. I will argue that Greens will campaign hard in those areas against those policies. But the flipside of that is that there is also a point about innovation; policy innovation happens faster when people can put ideas into practice at the local level.”
Many prior touted replacements for the Council Tax were some variation on a local income tax: from the Scottish Socialist Party’s ‘Service Tax’, which failed to gain sufficient support when put before parliament in 2005, to the SNP’s abandoned 3p local income tax, to the policy favoured by RISE in the last Holyrood election. The Greens, by contrast, favour of a progressive residential property tax.
Asked to explain the virtues of this replacement in comparison with other, income-based efforts, Harvie argues that “if you narrow the tax base onto income, and don’t have a property element to that, then there are certainly people are more able to shift their wealth from income into property. Property wealth is a greater source of economic inequality in our society than income inequality, [because of] the huge hoarding of asset wealth by a tiny proportion of people. If we’re going to address inequality, both in income and in property, we need a tax base that includes property taxes as well as income taxes.
“There’s umpteen different ways you can implement this – we’re not going to get into the detailed implementation questions until we’ve reached the principle agreement that I thought the Commission on Local Tax Reform had agreed: council tax has to go.”
“The Scottish Parliament and Scottish Government will always be in a weak position trying to mitigate those kind of unintended consequences if our only argument is: ‘But it’s fair.’ That’s not going to cut it with the UK Government.” Scottish Green co-convener Patrick Harvie
The major roadblock for the SNP when it attempted to replace Council Tax with a local income tax was the UK Government’s threat to withhold almost £381mn in Council Tax Benefit if plans for abolition went ahead. Then-Work and Pensions Secretary John Hutton stated in 2007: “If there is no council tax in Scotland there will be no council tax benefit. It is a UK benefit to help people with the cost of council tax.”
The SNP argued that the money was earmarked for the poorest in society, and that it should continue to be paid even under a different system of taxation, but this argument found little purchase at the time, and eventually led to the derailing of the SNP’s local income tax plans. Asked if he saw any danger of a similar scenario if Council Tax abolition became a likely possibility again, Harvie did not rule it out, saying that the UK’s constitutional makeup made such dangers unavoidable and instead arguing that they must be worked around.
“The Scottish Parliament and Scottish Government will always be in a weak position trying to mitigate those kind of unintended consequences if our only argument is: ‘But it’s fair,’” says Harvie. “That’s not going to cut it with the UK Government. Now obviously, I would like to be in a position where Scotland never has to go and make those requests to the UK Government, but for the foreseeable future, that’s where we are, and so we need to make decisions that are relevant.”
“There comes a point where you have to recognise that the unfairness of the system in the past is not what we should be enforcing.” Scottish Green co-convener Patrick Harvie
Other than the outdated and unprogressive nature of the system, a common criticism of Council Tax by both its political opponents and ordinary Scots is the use by local authorities of debt collection agencies empowered as Sheriff Officers. Asked what view the Scottish Greens took of these agencies and the arguably aggressive tactics they employ to collect unpaid Council Tax, Harvie responds that there is a need to prevent tax avoidance, but not at the expense of fairness.
“Fundamentally, we want a fair system of taxation, and when you have a fair system – where it’s people who can afford to pay are expected to pay – then obviously there needs to be a backstop of enforcement for someone who can afford to pay but refuses to. That’s not an acceptable situation,” Harvie says.
“We’ve certainly argued against the continued pursuing of people whose debts are historic – some of them go back as far as the Poll Tax. There comes a point where you have to recognise that the unfairness of the system in the past is not what we should be enforcing. What we should be enforcing is a fair approach to taxation, where the burden falls on those whose shoulders are broad enough. The situation will continue to be deeply imperfect both in terms of how much tax those who cannot pay are being expected to pay, but also how these services are being cut from those who absolutely need those services.”
“The idea of taxation as a fee for services still persists, and we need to challenge that.” Scottish Green co-convener Patrick Harvie
Elaborating on the wider philosophical shift he would like to see in Scotland on how local government is perceived, Harvie says: “You can compare Scotland to some of those lovely Nordic countries, where far more people are involved in local decision-making; it creates a sense of ownership and connection and relevance. The centralisation we have instead creates a sense of disconnect, otherness, mistrust – some of which is justified. When you’re sitting in a remote office, trying to make decisions for a territory the size of Belgium, that’s not local government.
“It’s also partly a hangover of right-wing Thatcherite economic policy which tries to turn the taxation relationship into a transaction. I don’t live in a hotel; I live in a society. I don’t pay my hotel bill and exchange my services in exchange for a fee. I live in a society where I pay more tax than my neighbour because my income is high, or less than my neighbour because my income is low. I receive services which make us better off as a society when we receive them collectively.
“I want to live in a society, not a hotel, and I suspect most people want to live in a society, but we still have this attitude to taxation and particularly local tax: ‘I paid my council tax – what am I getting for that?’ That’s a screwed-up way of approaching taxation.
“I don’t have kids, for example – I don’t expect that I’ll ever have kids, and I’m not particularly fussed about that – but I absolutely depend on a well-educated population around me, so I should be contributing to the costs of running schools.
“The idea of taxation as a fee for services still persists, and we need to challenge that.”
Picture courtesy of F Y F E
Look at how important CommonSpace has become, and how vital it is for the future #SupportAReporter