Scotland’s first minister Humza Yousaf’s decision to freeze council tax has triggered a backlash from local authorities across the country, which warn of being forced to make sharp cuts to public services.
The announcement at the recent Scottish National Party annual conference came just months after the leader sought to raise council tax by as much as 23 per cent.
The policy reversal has since led to accusations from councillors and analysts that Yousaf is trying to buy middle-class votes, creating a political headache for the leader.
The U-turn “completely undermines the powers of local government, which are very few and far in between”, Cammy Day, Edinburgh council leader, told the Financial Times.
“It was just a party political stunt because the SNP are struggling in the polls and by making a bold announcement to freeze council tax, they think that will buy votes for the 2024 general election,” said Day, a Labour councillor who became Edinburgh council leader with backing of the Liberal Democrats and the Conservatives.
Yousaf’s party has been rocked by internal divisions and an escalating police investigation into its finances since the resignation of its former leader, Nicola Sturgeon, this year. A poll by Scottish Election Study, an independent research body, this week gave Labour a 6-point lead over the SNP for the next Westminster election.
However, Yousaf has defended the plan, saying it “will bring much needed financial relief to those households who are struggling in the face of rising prices”. He has promised the freeze will be fully funded by the government.
Yousaf’s U-turn is threatening to fracture the SNP’s relationship with the leftwing Scottish Greens, whose support provides the SNP a pro-independence majority in Holyrood.
The Greens have said freezing council tax “will entrench economic inequalities, deprive local authorities of essential revenue”.
There has been speculation that the decision was a panicked reaction to fears of losing votes to Labour, which has taken more centrist policy positions and beat the SNP in the recent Rutherglen by-election.
However, this week Scottish Labour leader Anas Sarwar said he supported the freeze, although he criticised the way it was introduced, highlighting how the issue is also tricky for opposition parties. They were almost unanimous in rejecting SNP plans in July to increase council tax in the four highest bands by 7.5 to 22.5 per cent.
But the move has angered Cosla, Scotland’s local authorities’ lobby group, whose president is an SNP councillor. It said the move undermined councils’ right to make their own tax decisions and would worsen funding pressures when demand for services such as social care is increasing.
“We deplore the way the announcement was made and its substance,” said the organisation, which represents Scotland’s 32 local authorities, meaning that its membership is drawn from across all the country’s major parties.
Reforming council tax has long been a contentious issue for the SNP, which committed to replacing it when it first came to power in 2007.
However, attempts at changing the system that the party has said is unfair and regressive have stalled, leading to perceptions that the SNP’s claim of bold policymaking has not been matched by action.
Sturgeon failed to act even when the party was at the height of its popularity. In 2016, the former first minister said she was not willing to implement reforms that would lead to “very significant and dramatic changes”.
Council tax accounts for a significant amount of the income of local authorities at 16-20 per cent, according to Cosla, who argues the policy change will leave a big hole in local authority budgets.
Economists at the Fraser of Allander Institute, a think-tank, said the freeze will collectively cost councils £148mn next year, assuming council tax would have increased 5 per cent as it did last year. Calculated at 8 per cent, and factoring the increases that were proposed in the July consultation, that figure would rise to roughly £417mn.
According to Day, Edinburgh had expected its council tax to rise about 3 per cent next year, with some other authorities anticipating increases between 8 and 10 per cent.
Holyrood is currently facing a funding gap that could constrain its ability to compensate councils for revenue loss resulting from the council tax freeze. In May, the Scottish government said its spending commitments could exceed funding projections by £1bn in 2024-25.
Scotland’s current funding gap now stands at about £600mn, said João Sousa, FAI deputy director.
Policy experts at the Institute for Public Policy Research think-tank, said people in poverty will see virtually none of the savings that would accrue to taxpayers from the freeze.
A 2015 Scottish government commission on local tax reform found that houses in the highest tax band paid three times as much as those in the lowest ones, despite on average being worth about 15 times more.
Dave Hawkey, a senior research fellow at the Institute for Public Policy Research Scotland, called the policy a “terrible idea”.
“[The Scottish government] could be using the same amount of money to have a much more significant impact on those on those families who are genuinely struggling,” he said.
“The announcement was remarkable for the wrong reasons,” said Jon Molyneux, co-leader of the Greens group at Glasgow’s city council, who also warned of possible cuts to services such as refuse removal, public libraries and museums.
“It feels like a mis-step for the sake of a few headlines and a knee-jerk reaction to a bad by-election defeat.”