BBC News | SCOTLAND | Call for council tax changes

The council tax system in Scotland faces a major shake-up with the possibility that owners of expensive homes will pay more.

An all-party committee of MSPs studied local government finance for 18 months and has now recommended sweeping changes to domestic and business rates.

The committee said:

control of the business rates should be handed back to local authorities;
new council tax bands should be created at the top and bottom ends;
existing bands should be re-evaluated every 10 years;
and council tax should be levied in full on second homes.

The Scottish Parliament's local government committee also recommended a big shift in the balance of local authority funding.

At present, Scotland's 32 local councils get 80% of their money from central government and only 20% from council taxpayers, but the committee wants this to be a 50/50 split.

MSPs believe that one way of achieving this will be for councils to set the business rates instead of the Scottish Executive.

Rates rise

The committee said safeguards would be introduced, including establishing a link between business rates and council tax, along with rules controlling future changes.

But business leaders have already expressed worries about the proposal.

Stefano Boni, federation of small businesses
Stefano Boni: Concerns raised
Stefano Boni, of the Federation of Small Businesses, said: "I believe councils will put rates up immediately.

"They have to find new money from somewhere. That is going to be an easy step for them because the public has a vote at the end of the day and businesses don't."

The committee's convener, Trish Godman, Labour MSP for West Renfrewshire, said the change was essential to preserve strong local government.

"We do not believe that the existing local government finance system is sufficiently robust and part of the problem lies in the balance between the central and local funding of councils' General Fund revenue budgets," she said.

Local income tax

The present system, she claimed, led to blurred accountability as it involved high "gearing" - a 1% change in council spending could trigger a 5% change in council taxes.

The committee has called for further discussions to start "as soon as possible" and for legislation by the executive to be implemented "at the earliest possible opportunity".

Council tax document
The report recommended a number of changes
The report said that in the long term the executive should examine the feasibility of introducing a local income tax in order to reduce the dependence of councils on either central government funding or the council tax.

The Liberal Democrats spokesman on local government, Ian Smith, urged ministers to act upon the committee's recommendations.

He said: "In the longer term the committee recommends that the executive examine the introduction of local income tax.

"This is a long-standing Liberal Democrat policy that I would like to see implemented."

Council taxes for 2002/2003 increased by an average of 4.5%.

The rises range from 10.1% in the Scottish Borders Council area down to 1.9% in Glasgow, although it continues to have the country's highest tax.


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