Nicola Sturgeon confirms end to council tax freeze as those living in more expensive homes face higher bills

Nicola Sturgeon confirmed the SNP’s flagship council tax freeze will be scrapped next year as she unveiled proposals that would see people living in more expensive properties pay more tax.

The First Minister said local authorities will have the ability to increase council tax by a maximum of three per cent per year from April 2017, ending the freeze after nine consecutive years.

The announcement came as the SNP leader revealed people in Scotland’s four highest council tax bands face higher rates if the party is re-elected in May. Under the plans, the average band E household would pay £105 more each year while those in the highest band would see their annual bill rise £517.

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The shake-up will generate £100m a year that will be invested in schools through future government settlements, Sturgeon said during a visit to Lasswade High School Centre.  

The 75 per cent of Scottish households that fall in bands A to D will be unaffected by the move, while around 54,000 households living in properties in bands E to H on net incomes of up to £25,000 will be entitled to an exemption, she said.

The relief available for low income households with children will also be extended. A 25 per cent increase in the child allowance within the council tax reduction scheme will benefit 77,000 households - containing almost 140,000 children - by an average of £173 per year, added the First Minister.

Sturgeon said: “These reforms to council tax bands will mean no change for three out of every four Scottish households, with those in lower banded properties paying no more than they do now.

“Households will also still, on average, pay less than those on equivalent bands in England and less than they would be paying had the council tax freeze not been in place.”

Finance Secretary John Swinney confirmed the council tax will remain frozen next year when outlining his 2016-17 draft budget to parliament in December.

The decision to maintain the freeze attracted stinging criticism from local government, though, with some local authorities initially considering raising taxes in the face of budget pressures.

The policy will cease from next April with councils then having the “discretion” to raise council tax by up to three per cent per year, a move that the Scottish Government said could generate up to £70m for council services.

Local authorities will also retain the £70m per year which has funded the freeze, while consultation will take place on assigning a fixed proportion of income tax receipts to councils in order to reduce the levels of local government spend being funded through the general revenue grant.

She said: “As part of our proposals, from April 2017, we will replace the council tax freeze with discretion for councils to increase tax - if they so choose - by a maximum of three per cent a year. This will see councils be more accountable for raising revenue, while ensuring that the rapid and significant rises we saw in the past do not return. 

“Importantly, to ensure the contribution individuals make to the delivery of local services is more closely tied to their earnings, as well as to incentivise councils to support economic growth, we will formally consult local government on the assignment of a portion of the devolved income tax raised in Scotland to councils, reducing their reliance on grant funding from central government.”

Meanwhile, the First Minister said legislation will be introduced to allow councils to end the council tax discounts that apply to second homes from April next year.

A consultation on allowing councils to levy a tax on development as well as vacant and derelict land to reduce land banking and increase supply of homes has also been promised.