Simon Pia, writing in today’s Scotsman, provides a welcome reminder that property tax in Scotland is in a mess with politicians of most persuasions (he quite rightly excludes the Scottish Greens & their LVT proposals) have avoided this thorny issue in an attempt to curry populist favour with the electorate. Now I believe in democracy, so why is it wrong that politicians should adopt policies popular with the electorate?

Well in this instance, the council tax freeze was implemented as part of the appeal of Labour and the SNP in a Scottish Parliament election. But the Scottish Parliament does not have the power to set council tax rates. In order to implement its promises following the 2011 election the SNP had, in effect, to bribe local authorities to accept the freeze or face cuts in revenue. This corruption of democracy is made possible by the lack of any constitutional protection for local government’s autonomy – a point elaborated on recently by David O’Neil, the President of COSLA. In short, central government has virtually unfettered freedom to interfere in the affairs of local government even to the extent of abolishing it.

So, if local authorities wish to freeze the council tax – fine. But the Scottish Government should have no power to do so or to appeal to voters in national elections on the basis of this brazen interference with local government’s freedoms and powers.

If, in next year’s Federal elections in Germany, Angela Merkel were to appeal to voters in Lower Saxony by promising to freeze their local taxes, she would be up in front of the Supreme Court for breaching Article 28(2) of the German constitution which entrenches the rights of Länder and Municipalities to regulate their own affairs and set their own tax bases. Scotland’s Holyrood parties don’t need to worry about such a fate.

As Simon Pia argues, we need to sort out property taxation. On the face of it the Scottish Government is very active in this area.

It is proposing reform of Stamp Duty Land Tax.

This afternoon in the Scottish Parliament is expected to pass the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill which will allow the reduction of certain exemptions on business rates.

Tomorrow it will launch a consultation on the future of business rates.

It is committed to a review of the council tax in this Parliament.

But the problem with the Government’s approach is that it is piecemeal. All these reviews are being conducted in isolation from each other. Land and property taxes are far too important to be dealt with on an ad-hoc basis and need to be considered as a whole in relation to the role of land in the economy.

In a previous post, I highlighted the absurdity of an empty industrial building in Glasgow whose owners have avoided over £600,000 in business rates over their 5 years of ownership. When it caught fire in November 2011, Strathclyde Fire and Rescue were expected to put the fire out at great expense and risk to their staff. Strathclyde Fire and Rescue, unlike the property developers that owned the building do pay business rates – over £2 million in just 1 year.

Under the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill, empty industrial properties like this will continue to be exempt from tax despite their owners taking advantage of local services paid for by others.

Meanwhile, five-a-side football pitches, river-gauging stations, wind farms, lighthouses, ambulance stations and advertising panels on bus shelters are all liable to pay business rates. Public parks, diplomatic missions and cash machines in rural areas, on the other hand are exempt. So too is agricultural land and sporting rights which is why the Duke of Westminster who is one of the richest men in Britain pays nothing on the 95,000 acres he owns in Sutherland (though the estate office and a self-catering unit are assessed). Sheik Mohammed bin Rashid al Maktoum, the rule of Dubai also pays nothing on his 62,000 acre Killilan Estate. So whilst the pub, the filling station and the local hotel all pay their share of local taxes, most landowners pay nothing.

The OECD and the Mirrlees Review have both drawn attention to the benefits and importance of land taxes as far and progressive means of public finance.

Why do Scottish and UK politicians continue to duck the issue?

UPDATE 1235 I am grateful to Ed Iglehart for drawing my attention to this short article he wrote on the topic of local government. It includes a useful link to a report commissioned by the Scottish Office for the McIntosh Commission in 1998 – The Constitutional Status of Local government in Other Countries. Also, in response to a comment by Neil King, worth having a look at this presentation from the Norwegian Fire Service were fire and rescue is the responsibility of the municipalities which cope quite well with the responsibility.


  1. Scottish goverment does not have unfettered freedom to interfere in the affairs of local government that why there is a lack of tranparency, accountability and in more than one case integrity in LAs, audit scotland commented on that recently but have no pwers to do anything about it . Why should there be a penny difference in council tax between someone living in glasgow inverness or one of the islands, it should be set to balance the books, but im not sure LAs have books. Public funded organisations of any sorts dont pay rates you do, you pay tax to bureaucratic system who the gives it to bureaucratic public service, who the gives it to another bureaucratic collecting service who then give it bureaucratic goverment to devide it up and put it back in the bureaucratic system it would be cheaper just saying public service is rate free although not service provision free .

  2. Firstly, your allusion to Germany is not relevant because Germany is a federation which the UK (or Scotland) is not. Secondly, relating to this and your last post, how do you answer the potential criticism that, even with a fairer system of local taxation, a place like Kinross is never likely to have a tax base large enough to fund a secondary school, a fire brigade, police force, care home etc. etc.?

    • Whether Germany has a federation or not is irrelevant – it has a constitution that entrenches powers of subsidiary level government. That’s the point. Obviously any scheme of greater autonomy has to be designed to work. Whether Kinross would have its own fire brigade is a question to address. I doubt it would but smaller units allow greater flexibility. For example, in Norway, fire and rescue is responsibility of the kommunes (municipalities), many of which are much smaller than Kinross but they address this by collaborating in ways appropriate to them. For example, the building of a new tunnel might mean a municipality moves from one fire and rescue service to join another because of better access.

  3. So are you saying:

    (1) you would like to see the powers and duties of local government constitutionally guaranteed to be immune from central government interference?; and

    (2) the answer to “the Kinross Question” (i.e. how can these tiny municipalities afford a fire service, school etc.) is that enough of them combine to achieve sufficient critical mass to pay for a school, fire service etc.?

    (BTW, feel free to move these comments to the post about the CERB)

    • a)broadly speaking yes though there will always have to be powers of last resort. b)that’s one way of dealing with the issue but I am not being prescriptive here, merely advocating the principle of smaller local government like most other European countries.

  4. Sorry, wrote last comment before I saw your link to the pdf about the Norwegian Fire Service. Who pays for the fire service – Norwegian central government or the municipalities?

    • Mixture – like most local govt municipalities are financed by local taxes and national subventions. In Norway, out of 28p income tax, around 13p paid direct to municipality, 12p to central govt and 3p to county.

      • I’m sure you’re aware the scenario in Norway you outline simply isn’t possible under the Union, with all Income Tax going to Westminster.
        Let’s get that sorted first, and then in an Independent Scotland we can adopt more enlightened ways to finance all things.
        You write, & do, a raft of brilliant stuff, but there are times you are counter productive. Take a step back on occasion.

        • I agree that with devolved settlement options are limited but with new powers over income tax, Scottish Parliament could, if it so chose, pass this power onto local authorities to increase the % of taxes set and collected locally. In what way is this blog counter-productive – counter-productive to what?

  5. On tax raising allowed under Scotland Bill. You do realise that the second a nationalist Scottish gov, makes any attempt to use this, they will be slaughtered by Unionist parties & press.
    On the rest I’ll not clutter up your comments section, because it’s a general point, and I don’t want you to think it applies to the blog in entirety, as it absolutely doesn’t. Happy to discuss elsewhere.

  6. The issue of responsibility and structure of land taxes should decidedly be centralised and devised using a universal formula, for the simple reason that regional anomalies might create stagnating economics.

  7. This seems to be focussing more on the centralising tendencies of the Scottish Government – a better target for criticism in my view than – than the failings in current levels of subsidiarity shown by local councils in Scotland

  8. Pingback: Scottish land tax & Danish kindergartens | Land Matters