The Scottish Government has announced the remit and membership of the Commission on Local Tax reform. I am very pleased to have been nominated as a member of the Commission on Local Tax Reform and look forward to meeting the other Commissioners on Monday at our first meeting.

The Commission will be co-chaired by Local Government Minister Marco Biagi and President of COSLA Councillor David O’Neill. The Commission will meet for first time on February 23 and will report to the Scottish Government and COSLA in the autumn.

Marco Biagi said:

“The Scottish Government believes the current council tax system is unfair and we are acting on our manifesto commitment, and the recommendations of the Local Government and Regeneration Committee, to look at alternative approaches to local taxation.

“The Commission on Local Tax Reform will consider progressive, workable and fair systems, taking into account domestic and international evidence on tax powers and wealth distribution, the autonomy and accountability of local government and the impact on individuals who pay the tax.

“The members bring a broad range of expertise and experience and I look forward to starting this important work.”

David O’Neill said: “A great deal of work lies ahead, but this Commission is a chance to take a step back and think about the best way to pay for the local services that communities rely on every day.

“Across Scotland people are looking for the debate to break new ground, and that’s why I am determined that this Commission will be listening to people and organisations from all parts of the country, and setting out what it would take to give our local communities a real say about what matters most to them, and the best way to pay for it.”

The Commission’s Remit is:

“To identify and examine alternative systems of local taxation that would deliver a fairer system of local taxation to support the funding of services delivered by local government. In doing so, the Commission will consider:

  • The impacts on individuals, households and inequalities in income and wealth;
  • The wider macro-economic, demographic and fiscal impacts, including housing market and land use;
  • The administrative and collection arrangements that apply, including the costs of transition and subsequent operation;
  • Potential timetables for transition, with due regard to the 2017 Local Government elections.
  • The impacts on supporting local democracy, including on the financial accountability and autonomy of Local Government;
  • The revenue raising capacity of the alternatives at both local authority and national levels.

In conducting its work, the Commission will engage with communities across Scotland to assess public perceptions of the emerging findings and to reflect this evidence in its final analysis and recommendations.

The Commission will be supported by an independent secretariat comprising staff seconded from COSLA and the Scottish Government.

The membership is as follows (the Scottish Conservative Party has declined to take part).

  • Councillor Susan Aitken, SNP Local Government Convenor and Leader of SNP Group, Glasgow City Council;
  • Councillor Catriona Bhatia, Leader of Liberal Democrat Group and Deputy Leader, Scottish Borders Council;
  • Marco Biagi MSP, Minister for Local Government and Community Empowerment (Co-Chair);
  • Councillor Angus Campbell, Leader of Comhairle nan Eilean Siar and Leader of the Independent Group at COSLA;
  • Councillor Rhondda Geekie, Leader Of East Dunbartonshire Council and Leader of Labour Group at COSLA;
  • Dr Angela O’Hagan, Research Fellow in the Institute for Society and Social Justice Research and Convenor of the Scottish Women’s Budget Group;
  • Isobel d’Inverno, Convenor of the Tax Committee of the Law Society of Scotland and Director of Corporate Tax at Brodies LLP;
  • Mary Kinnonmonth, Manager of Dundee Citizens Advice Bureau and Member of Citizens Advice Scotland Board of Directors;
  • Dr Jim McCormick, Scotland Advisor, Joseph Rowntree Foundation;
  • Councillor David O’Neill, President of COSLA (Co-Chair);
  • Don Peebles, Head of CIPFA Scotland;
  • Alex Rowley, MSP for Cowdenbeath and Shadow Minister for Local Government and Community Empowerment;
  • Andy Wightman, Writer and Researcher, representing the Scottish Green Party.

 

I will be using this blog to explore in an open manner some of the issues to be resolved in devising an enduring and robust system of local taxation. The focus is very much on what to replace the Council Tax with but of course that replacement could involve not just a better system of domestic property taxation but the repatriation of non-domestic rating, sales taxes, local income taxes and other sources of local finance.

I am very clear that we need a new system of local government finance. Any new property tax should be designed in such a way as to endure over the long-term. It should be more reflective of land and/or property values, more transparent and be capable of contributing a greater proportion of autonomous local finance than is currently the case. Local finance and taxation is a vital part of rebuilding and strengthening local democracy.

Finally, this job is unpaid. On the face of it, this means that I will have to inevitably devote less time some of my other unpaid work on, for example, land reform. However, I plan to launch a crowd-funding appeal soon that will allow me to continue (and indeed increase) the time I can devote to that topic in what is a vital year ahead.

Later this afternoon I will publish a link to the Commission’s website. Meanwhile I welcome all views on the challenge that lies ahead.

Guest Blog by Fred Harrison, Land Research Trust.

Scotland’s First Minister has created an awkward rod for her political back. Her attack on the Coalition Government’s “austerity” policies renders the SNP vulnerable to its enemies in Westminster. Speaking in London on Wednesday (video above, text here), Nicola Sturgeon trashed the UK Government’s policies on three counts. She condemned the economic policies pursued by David Cameron for failing to deliver long-term growth, increased productivity and fairness. Her own government in Holyrood will now be judged on those tests.

Fortunately for the SNP, the new powers on taxation that are being devolved to Scotland will enable her to undertake reforms that can shift Scotland in the direction of an alternative economic path. But this will require a major change to the way Scotland funds its public services. The taxes employed by the London government certainly fail the first test: long-term growth. Tax policies are rigged against people who earn their incomes by working and saving. The revenue system is biased to favour land as an investment asset. And the pages of history leave us in no doubt that those fiscal policies drive the boom/bust business cycle that terminates long-term growth.

The productivity test is an awkward one. How inefficient is the current tax regime? I will explore that issue at a public conference in Glasgow on 25th February. But there is no doubt that performance of the Scottish economy could be dramatically enhanced if the Sturgeon government decides to rebalance the tax regime. It will need to shift the emphasis away from Income Tax and onto a re-based property tax.

There is no ambiguity about the third test: fairness. At present, the tax regime discriminates against families that rent their homes, and favours the owners of residential property. So the SNP’s commitment to land reform will challenge Ms Sturgeon to find a way of shifting the structure of taxation so that people are treated as equals.

In her London speech, Ms Sturgeon pointed out that the austerity programme was being forcefully opposed throughout Europe. But she is now in a unique position. Unlike the newly elected Greek government, the SNP administration does not have to secure the permission of others to change course. It has the political mandate to launch the reforms that would shift Scotland onto the high productivity growth path. Those reforms would be fair to everyone willing to work by adding to the sum total of Scotland’s wealth and welfare.

Ironically, the SNP government’s enemies within Scotland will not invoke Nicola’s three tests. Already, the opponents of land reform are mobilising their ammunition to try and defend the status quo. The last thing they want is a shift in the direction of efficiency and fairness! The tax regime, after all, was created by those who sought privileged treatment, and to hell with the unfair impact on others. So it will be up to Nicola’s friends to hold her to account, by invoking the three tests to measure the performance of the SNP government.

The attempts by South Cowal Community Development Company (SCCDC) to acquire Castle Toward in Argyll have attracted widespread media attention. See reports here and here as examples.

Last week I was sent an email by one of those behind the acquisition. It was entitled HELP!!! and sought my assistance in trying to resolve the current impasse between the community and Argyll and Bute Council. Alas, I have no magic wand and replied to say that, while I had been following the story, I did not know enough of the detail to provide any advice or assistance. Matters might not have proceeded any further but something was niggling at the back of my mind. I decided to find out the factual details behind the case.

Background

SCCDC first applied to register an interest in Castle Toward under Part 2 of the Land Reform (Scotland) Act 2003 (the community right to buy) in January 2011.(1) This application was rejected by Scottish Ministers because it was “late”. In other words, steps were already being taken to market the land and, as stated in the letter, “Ministers have previously stated that being reactive to a proposed sale of land for specific purposes is not a “good” reason for submitting a “late” application (letter here pdf).

In November 2013, SCCDC applied once more to register an interest in Castle Toward. Scottish Ministers approved this application and it was registered on 23 January 2014 (see letter here 1.1Mb pdf). The effect of registration is that the landowner (Argyll & Bute Council in this case) cannot sell the land without the registered community body being notified, expressing its wish to exercise the right to buy (or not) and having that wish granted by Scottish Ministers.

Argyll and Bute Council notified Scottish Ministers that it proposed to sell the property, SCCDC were then informed and indicated that it wished to exercise its right to buy. Scottish Ministers gave their approval on 22 October 2014 (see letter here pdf). Under the Land Reform Act, the community has six months (from the date on which it indicated it wished to exercise the right to buy) within which to complete the acquisition. This period expired on 31 January 2015.

Case Exposes Flaw

At this point I realised that there was more to this story than just the behaviour and actions of Argyll and Bute Council and that it exposed a significant weakness in the legislation. The act is currently being amended in Parliament as part of the Community Empowerment (Scotland) Bill. Due to lack of time, I took a decision not to follow the Bill through Parliament but I now wish that I had taken more interest.

The flaw in the legislation is that, whilst the community body has six months within which to complete the sale, the landowner can withdraw the land from sale at any time and can refuse to sell the land to the community body. In other words, an owner’s intimation that they plan to sell (which triggers the right to buy process) is not an obligation to sell even if the community wants to exercise its right-to-buy and has the money. It’s rather like offering a child a sweetie if they jump through certain hoops then at the end saying “sorry you cant have the sweetie”.

[Update – note Neil King’s comments below. In this case, the valuation placed on the property under the Land Reform Act is £1.75m. SCCDC are not offering that and thus, in law, the Council are entitled not to conclude a sale].

Of course, the owner cannot sell to anyone else so long as there is a registered interest so the scene is set in certain circumstances for a stalemate such as we have at Castle Toward. This is not the first time that this problem has surfaced. From memory, it has occurred on at least one other occasion.

I had presumed that this (and other weaknesses in the legislation) would have been dealt with during the passage of the Community Empowerment Bill. But I’ve had a quick look at it and it seems the only reform is to make the owner liable for the costs of the valuation should the sale not proceed (Section 44). I have contacted others who have taken a close interest in the legislative process and, although this issue has, apparently, been raised, it has not been dealt with.

Thus I suggest that at Stage 2 of the Bill, an amendment is introduced to the following effect .

Where an owner of land, over which there is a registered interest, decides to sell the land and, as a consequence, triggers the community right to buy, the owner shall be obliged to transfer the land within the six-month period on the terms specified in the legislation. Failure to do so shall allow Scottish Ministers to acquire the land using powers of compulsory purchase.

Is that a) feasible and b) politically acceptable?

NOTES

(1) See the Register of Community Interests in Land for details of registered interests.