'Make council tax fairer to help the poorest families'

If tax can assist the Scottish government’s aspirations for a minimum income guarantee, reforming council tax can be a first step in this process.

The SNP-Green agreement this summer promised more talks, leading to a citizens’ assembly. But at some stage, talk has to give way to action.

The Commission on Local Tax Reform, published in 2015, led to some modest changes, including people living in expensive homes paying more. But council tax remains fundamentally regressive, hitting poorer households relatively more than richer ones. Many of these poor households will also be facing the end to the temporary £20 universal credit uplift and the increases in national insurance from April.

Council tax reform can support the Scottish government’s ambitions to deliver a minimum income guarantee in three ways: by making the system better reflect ability to pay; by providing targeted support for those unable to pay; and by raising revenues that can help to fund local services that fall under the umbrella of a minimum income guarantee. Of the taxes that the Scottish parliament has control over, council tax also offers MSPs the greatest flexibility for such reform.

Ministers have already committed to freezing income tax rates during this parliament and to increasing thresholds by a maximum of inflation. Even if this policy were to change in this parliament, Holyrood’s powers over income tax leave limited room for manoeuvre.

A new zero-rate band of Scottish income tax is an option. But given that nearly 45 per cent of adults already pay no income tax, this would be expensive because it would take even more people out of tax altogether. It would also benefit higher earners more than those on the lowest incomes who are already protected by the UK-wide personal allowance. Other devolved taxes, such as the Land and Buildings Transaction Tax, would fail to raise enough to support investment in a minimum income guarantee.

With council tax, there is no need to wait for more powers to be devolved, and no need to wait for Westminster’s go-ahead. Significant consultation and preparation would be needed, but given that each of the parties represented in Holyrood is committed in varying degrees to some kind of reform, if there is a will to do so, the work could begin today.

You can read the article, as published, on The Times website [subscription needed].

The Low Incomes Tax Reform Group has responded to the Scottish Government's call for evidence on proposals for a Minimum Income Guarantee. You can read the submission on the LITRG website.