Council Tax Proposals Breach International Law
18 September, 2016 - 21:27
The Scottish Government has published plans to change the amounts of Council Tax paid by the occupiers of houses in Bands E,F, G and H and the Local Government and Communities Committee is seeking evidence on the reforms (you can read the evidence here).
These changes are part of a wider package of reform proposed by the Government which consists of:
- Increasing the multiplier for properties in Bands E, F, G and H
- Capping any increase in Council Tax rates to 3%
- Redistributing the £100 million or so raised by the changes to higher bands directly to schools
- Ruling out a revaluation of properties which remain on the Valuation Roll at the value they were in 1991. (1)
Scottish Greens believe that this package of reform is timid and fails to meet the ambitions set out by the Commission on Local Tax Reform whose first recommendation was that “the present council tax system must end” Our proposals for reform are outlined in our Fair Tax Paper. Earlier this month I argued that the Government’s proposed changes violated international law, namely the European Charter of Local Self-Government. In this blog I will spell out why I think this is the case.
The European Charter was is a Council of Europe treaty (like the ECHR) and came into force in 1988. The UK ratified all articles of the Treaty in 1998 and under the Scotland Act 1998, the Scottish Parliament and Scottish Ministers are bound to observe and implement international obligations and thus bound by the terms of the Charter. (2) Thus any legal instrument before the Scottish Parliament or executive action by the Scottish Government must comply with its eleven Articles.
In relation to the Council Tax proposals package, the Scottish Government is in breach of at least three articles - Article 4(4), Article 9(1) and Article 9(3).
Article 4(4) provides that,
Powers given to local authorities shall normally be full and exclusive. They may not be undermined or limited by another, central or regional, authority except as provided for by the law.
Both the Council Tax freeze and the proposed 3% rate-cap are in violation of Article 4(4) since the Local Government Finance Act 1992 provides that the Council Tax is a local tax and the rate shall be set by local councils.
Article 9(1) provides that,
Local authorities shall be entitled, within national economic policy, to adequate financial resources of their own, of which they may dispose freely within the framework of their powers.
This means, in the words of the Council of Europe’s Explanatory Notes, that local authorities shall not be deprived of their freedom to determine expenditure priorities. One might argue that ring-fencing in general breaches this Article but the proposed £100 million re-direction of the increase in Council Tax yield is the point at issue here.
Ministers have stated that the £100 million will be re-distributed to schools to help close the attainment gap.(3) At the same time they have said that Local Authorities will “keep every penny of council tax that they raise”.(4) This is technically true since Council Tax receipts in law belong to local authorities and the only way for the Scottish Government to get hold of this cash will be for it to withhold the equivalent in the General Revenue Grant it gives to councils. This will effect a redistribution of finance from those councils (such as Edinburgh) with a high proportion of Band E,F,G and H properties, to those council with the greatest need (however defined) for school attainment funds.
What this means is that the extra yield that legally forms part of the financial resources of local authorities will, in effect, be denied to them through this robbing of Peter to pay Paul. Thus the proposal violates Article 9(1) that obliges the parties to the treaty to uphold the right of local authorities to dispose freely of their own financial resources.
Article 9(3) provides that,
Part at least of the financial resources of local authorities shall derive from local taxes and charges of which, within the limits of statute, they have the power to determine the rate.
Similar to Article 4(4), this means that Councils shall have the right to exercise their own political choice in setting tax rates within the limits of statute. This last point is critical since it makes clear that Parliament can pass laws that limit local authority’s powers of taxation. In the absence of any statute, however, councils are free to set their rate (in this case, the Band D Council Tax rate).
The Scottish Government proposes to introduce rate-capping to limit the increase in Council Tax that local authorities can set to 3%. We have been here before of course with the Council Tax freeze and long before that with rate-capping by Mrs Thatcher’s government in the 1980s. Unlike the Council tax freeze and the proposed 3% cap, the rate-capping of the 1980s was imposed by the Rates Act 1984. In other words, it was a statutory limitation and thus (although the Charter didn’t exist then) would have been compliant with Article 9(3).
By contrast, there is no suggestion that the 3% rate-capping is to be introduced by an Act of the Scottish Parliament. More likely, it will form part of the negotiations surrounding the General Revenue Grant and Councils will be “persuaded” to accept it. Given that the only circumstances in which it is acceptable to rate-cap is through statutory provision, any non-statutory restriction (such as is being proposed) is a violation of Article 9(3).
I would be happy to dicsuss this matter further with anyone interested. Please do get in touch.
For clarity, the Statutory Instrument that is currently being considered by the Local Government and Communities Committee (The Council Tax (Substitution of Proportion) (Scotland) Order 2016) is not unlawful. It is an Order made under powers conferred on Scottish Ministers by Section 74(3) of the Local Government Finance Act 1992.
(1) See Written Answer S5W-00986
Question S5W-00986: Andy Wightman, Lothian, Scottish Green Party, Date Lodged: 22/06/2016To ask the Scottish Government whether it plans to take action to ensure that the valuation of domestic dwellings for the purposes of liability for council tax is updated to reflect the current market value of dwellings rather than the value at 1 April 1991.
Answered by Derek Mackay (12/07/2016):
The Scottish Government does not have such plans. Revaluation of properties for council tax purposes would potentially impose major changes to individuals’ council tax liabilities.
(2) Scotland Act 1998 Schedule 5, Part I, s.7(2)(a)
(3) “It is extra revenue that will be raised from those who are at the highest level of property and redistributed to the schools that are most in need” Nicola Sturgeon, 7 September 2016.
“On the £100 million to be raised from council tax, the resources that are raised by each local authority by the changes that are made to the council tax will of course be collected in their entirety in those local authority areas. However, clearly, there will be a distribution of those resources to ensure that the £100 million is allocated to support young people who are living in poverty and who require additional support to address the consequences of their background for closing the achievement gap.” John Swinney, 13 September 2016
(4) Cabinet Secretary for Finance and the Constitution in reply to Patrick Harvie at General Questions, 8 September 2016.