Official Report 678KB pdf
The next agenda item is evidence taking on the council tax freeze from Tom Arthur, the Minister for Community Wealth and Public Finance. Mr Arthur is joined by Ellen Leaver, deputy director of the Scottish Government’s local government and analytical services division. I welcome our witnesses to the meeting.
We had hoped to hear from COSLA representatives on this topic but, unfortunately, they were unable to attend. We hope to hear from COSLA at a future meeting.
We will move straight to questions. We had a COSLA representative online earlier, for the session on the visitor levy, and it was good to hear from Councillor Gail Macgregor that there had been good communication between COSLA and the Scottish Government in that process. She sounded positive about it.
It is interesting, though, that local government was not made aware of the decision to freeze council tax prior to its being announced. I would be interested in hearing your thoughts on how that has impacted the relationship between local government and central Government.
I am grateful for the opportunity to answer questions on this issue.
We very much recognise the views that have been expressed by local government since the First Minister’s announcement on the council tax freeze. In fact, since then, the First Minister and the Deputy First Minister have met and had engagement with COSLA.
The Verity house agreement, which underpins our new deal with local government, is broad and wide ranging. The fiscal element is just one part of that agreement; council tax is just one part of the fiscal element; and the council tax freeze is just one part of our considerations around council tax. The committee will be aware of the work that has been undertaken through the joint working group on sources of local government funding and council tax reform.
We are committed to engaging constructively with local government colleagues in COSLA to ensure that we are able to successfully implement a council tax freeze. I think that there is a shared understanding that that would be of benefit to households who are struggling right across Scotland.
Thank you for that response.
You mentioned the Verity house agreement and the fact that the fiscal arrangement is only a part of it and that council tax is only a part of the fiscal arrangement. I would be interested in hearing your thoughts on the impact on trust. Are you confident that trust can be maintained between local government and national Government?
Yes, I am. As I have said, we recognise the views that have been expressed by local government. There is also a shared recognition of the opportunities that the partnership model that is embedded in the Verity house agreement affords local and national Government in taking forward shared priorities, including in the area of council tax reform, which I know is of keen interest to the committee, the Parliament more widely and, indeed, COSLA and individual local authorities.
We are very much committed to partnership working right across all aspects of the new deal with local government and specifically with regard to the council tax freeze. We are committed to ensuring that we can implement it in a way that meets the requirements set by the First Minister that it be fully funded and that it deliver a freeze that will be of benefit to people across Scotland.
11:15
Thank you. I call Pam Gosal.
Good morning, minister. As has been mentioned, one of the primary principles of the Verity house agreement has been violated less than four months after the agreement was made. A key part of the agreement centres around there being a robust and regular process for early budget engagement that is embedded in the physical framework. However, the First Minister neglected to inform COSLA that council tax would be frozen for the coming year before he said so in his speech at the Scottish National Party conference.
Is the Verity house agreement even worth the paper that it is written on? If so, how is failing to consult on the decision to freeze council tax in keeping with the agreement’s principles?
I very much recognise the views and appreciate the concerns that have been expressed by you, Ms Gosal, and by colleagues in local government. We are committed to ensuring that the council tax freeze is delivered in partnership with local government. Engagements are already starting to take place. As I mentioned previously, the First Minister and the Deputy First Minister have both met COSLA specifically to discuss the matter.
As I touched on in an earlier answer, the Verity house agreement on a new deal with local government is significant and wide ranging. For example, on fiscal matters, early engagement in discussions around the budget is taking place.
There is a shared recognition that the agreement presents a tremendous opportunity to advance our shared agenda and our shared priorities with regard to ensuring that we have sustainable public services, that we tackle net zero and that there is a fair and just transition to a net zero economy.
I recognise the views and concerns that have been expressed. I am confident that there is a shared ambition to deliver on the vision and the priorities set out in the Verity house agreement, and we are certainly committed to taking it forward in that spirit.
Could I come back in, please, convener?
Yes.
Minister, you have explained the fact that this has happened, but how do we ensure that it never happens again? Are you or the First Minister or the Scottish Government giving an assurance in that respect? The council tax freeze went ahead without any consultation with any local authorities; we have heard their views on that in committee, and I have heard their views on it outside, too. Local authority leaders and chief executives are not happy that the freeze went ahead without their decision.
I understand the thinking behind the freezing of council tax, but that relationship is what is important here. Are you saying that what happened is a one-off that will never happen again, and that the Government is looking to ensure that such a thing never happens again?
I think that we both recognise that particular circumstances can arise. However, we are jointly committed to the values that underpin the Verity house agreement, and we want to operate and work in a way—jointly and in partnership—that is consistent with the approach set out in it. That is how we will seek to continue to build on the progress that has already been made, in short order, since the agreement was reached.
Thanks very much for those responses. We are obviously very concerned about the relationship with local authorities.
I call Willie Coffey.
Good morning again, minister.
Tom, you mentioned that the council tax freeze that was announced is just one part of the broader and wider agreement made at Verity house, and I want to pick out what your views are on continuing to develop discussions with COSLA in that respect. We know that COSLA as a body has not yet set out its view to us, which is why it is not here today. Can you describe the conversations that are going on with COSLA? You mentioned that the First Minister and the Deputy First Minister are in discussion with the organisation. From your perspective, how is that progressing in terms of the wider Verity house approach?
It is progressing constructively, as is engagement in the pre-budget space. The visitor levy legislation, which we were considering in the previous evidence session, is an excellent example of the partnership working that is being done with local government to develop a proposition in response to a long-term ask from local government. We also touched on the cruise ship levy, which we have committed to. Again, that is a proposition that has come from local government and to which we are responding positively.
I lead on and have direct responsibility for certain aspects of local government finance, and I am committed to working in partnership with local government colleagues to look at the opportunities that we have to further increase the fiscal empowerment of local government. That is reflected in the visitor levy and the cruise ship levy that we have committed to, as well as in the work that we have undertaken on reforming aspects of the council tax, such as the consultation on levying a premium on second homes.
We are making progress and I know that my ministerial colleagues in other portfolios covering a wide range of areas can speak to where they have seen significant progress as a result of that partnership working approach. We are certainly committed to recognising the huge opportunities afforded by working in partnership and with mutual respect with our local government colleagues.
The council tax freeze is bound to have an impact on the fiscal framework, but we know that we will not see that before the budget. Has the Government done any analysis, even at this early stage, of the potential impact of the freeze on that framework?
In meeting our commitment to ensuring that the freeze is fully funded, we will engage constructively with local government to determine what the quantum should be. That process will be on-going and decisions on the broader fiscal settlement will be taken as part of the budget process, with the budget statement being made to the Parliament next month.
We move on to the theme of reasons for the council tax freeze, and I will bring in Stephanie Callaghan, who joins us online.
Minister, how do you respond to those who say that the council tax freeze is regressive and that it does not benefit the poorest people in society? What do you see as being the benefits of the council tax freeze?
There is a shared recognition of the inherently regressive nature of the council tax overall. The council tax freeze will benefit everyone who pays council tax. We can understand that the council tax might well represent a higher proportion of their income of those who are on lower incomes.
In our role as representatives of our constituencies and regions, we all recognise that there is no part of society or of the people whom we have been elected to serve that has not been touched significantly by the impact of the cost of living crisis. That has certainly been reflected in conversations that I have had with people who are working in advice and money advice services, for example.
The council tax freeze can give people certainty at a time when we see significant fiscal pressure arising from the cost of living. I know that the policy will be welcomed by households across Scotland for providing that certainty going into the next financial year.
I have to agree, minister. That certainty is important for people.
Can you speak to any lessons that have been learned from the previous council tax freeze? How effective was it in tackling inequality? What evidence do you have on that?
We know that the council tax in Scotland is significantly lower than it is in England, for example. The freeze ultimately means that money stays in people’s pockets and they can use it to meet other costs that fall upon them. It is money that they have at their disposal to spend in their local communities in support of local businesses.
We recognise the views that have been expressed on the need to look at longer-term meaningful changes to the council tax system itself, but the freeze will, as I have said and as has been acknowledged, provide certainty in responding to the acute pressure that so many are facing in the cost of living crisis. As for determining the quantum of meeting the freeze, that work will be undertaken through negotiation and engagement with COSLA.
Thank you.
Thanks for those responses, minister. I call Miles Briggs, who has some questions on the powers to freeze council tax.
I want to ask about the Scottish Government’s powers to introduce a full national freeze, given that it appears not to have the necessary powers to do so. Previous freezes have happened under a concordat with councils. Are you confident that you will be able to effect a council tax freeze across Scotland, and how else do you plan to incentivise councils to buy into this measure?
We are seeking to achieve a council tax freeze through partnership and engagement with local government, and the proposal is based on a shared recognition of the point that I touched on earlier about its meaningful impact on households across Scotland. The approach that we are taking is one of on-going negotiation and engagement. As I have said, it is through that process of partnership working with local authorities that we will seek to achieve and—I am confident—deliver the council tax freeze.
This year’s council tax is being increased by about 5.5 per cent on average, while, last year, some councils were talking about a 10 per cent increase; indeed, Orkney put such an increase in place. It is quite clear that different councils are facing different financial pressures. For example, in my region, the City of Edinburgh Council receives the lowest funding per head of population in Scotland. How would the Government respond to a local authority that said, “No, thanks. We want to increase the council tax”, as it would mean, in theory, that the national freeze would not be delivered?
As I have said, we recognise that local authorities have, in previous years, set different rates of council tax, and they will have made their own planning assumptions ahead of the next financial year. That is why the process of negotiation and engagement is very important, because, through that, we will arrive at a quantum that will be fairly representative of what is required to meet the council tax freeze. We are very much committed to working in that space closely and collaboratively to identify an appropriate quantum and, through that, to achieve the outcome of a freeze for all households across Scotland.
What will the maximum quantum look like? I think that 5 per cent would mean £148 million and 8 per cent £417 million, but what about 10 per cent—or even 15 per cent? Where is the Government on this? What money will be on the table? I do not think that it has been outlined by how much the Scottish Government will fund the policy.
I do not want to pre-empt the outcome of the negotiations. We are entering the process with a commitment to working and engaging closely and collaboratively to identify that figure. We will have those discussions with our local government colleagues to ensure that we meet the requirement for the freeze to be fully funded.
As you have touched on, a range of planning assumptions will have underpinned decisions by local authorities on where they might want to go with the council tax. We will allow for that opportunity for negotiation and engagement to take place, as that approach will ultimately inform how we arrive at a fair and representative quantum to deliver the council tax freeze.
Thanks.
According to the Fraser of Allander Institute’s calculations, the freeze would collectively cost councils around £148 million next year, assuming an increase of 5 per cent as there was last year, and they would receive around £417 million if they struck a deal that gave them a rise of around 8 per cent. Surely the Scottish Government carried out some kind of analysis before making a commitment to fully fund the freeze. How much does it expect the freeze to cost? More crucially, where will the money come from?
As I said in response to Mr Briggs, in the spirit of partnership with local government we will follow a process of careful and considered engagement to determine what the quantum will be, and I do not want to pre-empt that. As for the resourcing of this particular quantum, such decisions will be taken as part of the budget process, and the Deputy First Minister will set out the budget to Parliament in a statement next month.
I have one more question. The First Minister gave a commitment to fully fund the freeze to ensure that councils can maintain their services, despite offering no real clue as to where the money will come from. It is highly likely that different councils would have planned to have different increases in council tax in order to maintain services in their areas. Will the funds that are allocated to local authorities take into account the variety of council tax hikes that each local authority will have planned?
11:30
As I have said, we will arrive at a position through the engagement and consideration that we have committed to having with COSLA. For me to seek to pre-empt the outcome of those discussions at committee would not be consistent with the commitment that we have made and intend to fulfil. We will have those discussions and that engagement in a spirit of partnership with local government. Through that process, we will seek to arrive at a quantum that is commensurate with the commitment to fully fund the council tax freeze.
Have you started talks with local authorities on what that quantum will be, or are you going to start those talks?
We are embarking on that process. As I indicated earlier, the First Minister and the Deputy First Minister met and engaged with COSLA following the announcement on the council tax freeze.
We will go to Mark Griffin, who joins us online.
When Opposition members such as myself ask questions or ask for additional budget, the first thing that ministers say is, “You need to identify where that funding is coming from.” What discussions have the minister and the Cabinet Secretary for Finance had with other cabinet colleagues to identify where the funding for the potential council tax freeze will come from?
The position on the determination of funding will be set out as part of the overall budget process and it will be considered in that context. I note that we will carefully analyse what is announced next week in the autumn statement, which will be key to setting the envelopes within which we will operate, as well as the forecasts from the Office for Budget Responsibility and the Scottish Fiscal Commission, which will set out the context for the fiscal environment in which we operate. We have given that commitment and we have set out the process by which we will arrive at a fully funded council tax freeze. The broader determinations around funding allocations will take place through the budget process. The Deputy First Minister will set out that position to Parliament next month.
You have just said that the council tax freeze will be fully funded, which is a commitment that has come from the First Minister. What is your understanding of what a fully funded council tax freeze means?
As I have stated, I do not want to pre-empt the outcome of the discussions and negotiations that we have committed to having with local government. It is through that process that we will arrive at a quantum that will fully fund the council tax freeze. For me to seek to pre-empt that would be to disrespect that process.
I am not asking you to put a figure on it. I am asking what your definition of a fully funded freeze will be? What does it mean for it to be fully funded?
Again, that is why we have committed to engaging with COSLA. I think that if I were to give a definition without having engaged with COSLA or without having had those discussions, that would be seen as presumptuous. That is why we have committed to the process of engagement, which we will undertake. That will provide the means by which we will determine what the quantum should be.
You can understand that one person’s description of fully funded may be different from another’s. I find it difficult that the minister and First Minister can give a guarantee or a pledge that the council tax freeze will be fully funded without being able to say what a fully funded freeze would look like.
That is why we require negotiation.
The First Minister has also said that the commitment to fully fund the freeze means that councils would be able to maintain their services. Now, obviously, financial planning means that councils will have already been planning what level of council tax they might set, in advance of the announcement. If the funding falls short of that and councils have to either reduce services or make redundancies, what would be the Government’s response?
To understand what planning assumptions local authorities have made is one reason why we have committed to the process of negotiation. Through that, we will arrive at a quantum which meets the commitment to fully fund the council tax freeze. I can appreciate the line of questioning that you are pursuing, Mr Griffin; it is perfectly fair and valid to seek to interrogate me, as a minister, on that. However, having given that commitment to a council tax freeze that is fully funded and delivered in partnership with COSLA, it is important that that process of negotiation and consideration is allowed to take place.
Okay, thank you.
Thank you, minister, for bearing with us on the line of questioning. I will bring in Marie McNair with a question on the long-term plans for council tax.
Minister, looking forward to the longer term, how is the Scottish Government progressing in its ambitions to reform council tax?
We have already made meaningful progress. I referred earlier to the consultation on council tax premiums for second homes, which is a commitment that we have jointly arrived at with COSLA. I have introduced the legislation on that, which I understand that the committee will be considering in due course. That demonstrates the progress that we have made to date.
We continue to have engagement through the joint working group, which will explore ways in which we can meaningfully make improvements to the council tax system, including looking at options for longer-term reform. As part of that, we have committed to a process of a deliberative engagement with COSLA, recognising that it is a priority that we share and that there will be a desire to further advance that work as we go into the new year.
Thanks for that. My other questions have been covered.
It was good to get a little insight into what you are busy with in that regard, minister. That brings us to the end of our questions, so thank you again for being with us for two sessions this morning. It has been very helpful to get your views on the council tax freeze and the on-going discussions with COSLA around that issue.