Council tax freeze is cold comfort in cost of living crisis

Direct support to disabled people, people living with long term conditions and unpaid carers would be wiser use of funds.

Last week, First Minister Humza Yousaf announced his intention to freeze council tax in next year’s budget. This took many observers by surprise, not least the Greens, his partners in government and COSLA, the umbrella body for local government. COSLA expressed serious disappointment, arguing that the announcement breached the recently signed Verity House Agreement.

The implications this may have for services provided by local government remain unclear, especially given dispute over how to define a “fully funded” freeze. Long-standing pressures on essential local services such as social care, libraries and community centres may leave many of the people reliant on them worried the freeze risks further cuts. Third sector organisations commissioned by local councils to provide services will also be wondering if contracts may be at risk at a time when the sector is extremely fragile, as outlined in our recent ‘Stretched to the Limit’ report.

Although political and financial tensions have drawn a lot of attention, there’s a more fundamental question: is a council tax freeze the right policy? The First Minister framed it as support for the ongoing cost of living crisis. Few people would refuse support, and the good intentions behind the policy are certainly welcome. Unfortunately, good intentions may not live up to implementation.

The ALLIANCE have repeatedly raised concerns, through in-person and written evidence to the Scottish Parliament, that the current council tax system is a barrier to fairly raising revenues for those essential local services. We recognise that council tax is a fundamentally regressive tax. That is why we supported a recent paper which included welcoming now-scrapped proposals to increase rates on upper bands, raising revenues for services primarily from wealthier households, as an interim measure to replacing it with a fairer system.

Crucially, the regressive nature of council tax is already recognised by reductions and exemptions available to low income households, highlighting the core flaw with the freeze. Groups including disabled people, unpaid carers, women (especially women with caring responsibilities) and people belonging to ethnic minorities are more likely to have lower incomes and therefore already pay less council tax. Although they are much more likely to be struggling with the cost of living, they will get little to no help from freezing council tax.

Even for households paying full council tax, including some eligible for council tax reduction but not claiming it, relative to a 5% increase freezing Band H in Glasgow would save a household around £184 whilst only saving Band A £50. These factors mean the benefits of the freeze will go disproportionately to wealthier households. The poorly targeted nature of support through council tax was previously criticised in February 2022 when the Scottish Government replicated a UK government £150 rebate scheme for Band A to D households. Even then-Finance Secretary Kate Forbes acknowledged this issue but justified the plan due to the need to act quickly.

We’re now over 18 months on and the Scottish Government has had time to consider more targeted schemes, and to do so whilst taking a human rights budgeting approach. In October 2022 the ALLIANCE’s ‘Disabled People, Unpaid Carers and the Cost of Living Crisis’ report highlighted that many people were making concerning cutbacks in heating, meals and powering essential assistive technologies. These cutbacks are having serious consequences on the realisation of people’s rights, including the rights to health and to equal participation in society.

Colleagues across the third sector shared similar evidence as part of a Social Justice and Social Security Committee round table held in direct response to our report. To address the issues we identified, we developed a costed proposal for emergency support. For £372 million, the Scottish Government could offer a £400 payment to two groups: anyone receiving any disability payment, and anyone receiving either Carer’s Allowance or Winter Heating Payment.

It’s therefore disappointing that the government is again considering untargeted tinkering with council tax without considering the human rights impacts of the decision. According to the Fraser of Allander Institute funding a council tax freeze assuming a 5% increase would cost £183 million. Applying that to the ALLIANCE’s earlier proposal could instead fund targeted payments of about £200. The cost of a freeze against an 8% increase plus lost revenue from scrapping other council tax changes would be £417 million, which could fund payments of around £450.

Of course, I’m not suggesting that the ALLIANCE have the only targeted proposals worth considering. For example, other third sector organisations have been calling for further uplifts to the Scottish Child Payment, and each increment of £5 a week would cost approximately £82 million. The Scottish Government has a wealth of possibilities available to them to help people through the cost of living crisis, if it just used a little imagination. The First Minister may have found reheating policies from years past an attractively easy option, but the realities of a council tax freeze will be cold comfort for those struggling the most with their bills.

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