The first minister announced on Wednesday that after months of pressure from council leaders, her government would end a nine-year freeze on council tax rates next year, and increase the four highest bands by between £108 and £517 a year.
Scotland’s 32 local authorities will also be allowed to raise local rates by a maximum of 3% from April 2017, capping that at £70m across Scotland. This invited immediate accusations from council leaders that continued central control was undermining local democracy.
Promising that, in future, councils would also get a share of Scottish income tax receipts, Sturgeon said the package was fair and progressive, since three out of four households would pay no more than now.
She would also extend help with tax bills to 127,000 poorer families and pensioners living in higher band properties, and for poorer households with children.
Sturgeon said the additional funds raised would allow ministers to spend £100m on schools, a riposte to opposition calls for a 1p rise in income tax to raise up to £475m for education, but Sturgeon admitted that it was not yet clear how those funds would be distributed.
Ministers also planned to discuss new powers for councils to tax derelict land, as proposed by the Scottish Green party, she said.
“What I’m setting out today, short, medium and long term is substantial change to how councils are funded,” Sturgeon said. “Tax policy isn’t some political virility symbol. We need to make sure we have tax changes that are fair, reasonable, measured and introduced for a purpose.”
Labour accused Sturgeon of breaching successive manifesto pledges to scrap the council tax system and ignoring warnings about its unfairness from an official inquiry into local taxation. Council leaders, trade unions and local government experts were also caustic about the package.
Sturgeon’s decision to prioritise low tax bills at the expense of full-scale reform comes despite the polls showing that she is likely to win by a record landslide in the Scottish elections in May, which will give the Scottish National party another five years of unchallenged control at Holyrood.
Despite backing a full revaluation of council tax bands, which have been unchanged since 1991, experts warned that it would be difficult and unpopular with voters.
Cllr Kevin Keenan, a finance spokesman for the Convention of Scottish Local Authorities, an umbrella body, said it was “bizarre” that the SNP had done nothing to change a system that it had attacked repeatedly since winning power in 2007 with a pledge to introduce local income tax instead.
Councils complain they are wrestling with £350m in cuts and laying off up to 15,000 staff after their overall budgets were cut by 3.5% last month.
Investigations by the Guardian have established that councils have amassed record levels of debt and extra liabilities, with borrowing equal to £6,200 for each household – twice the level held by English councils. Debt and private finance liabilities cost councils £1.5bn a year.
Keenan said: “Putting self-interest ahead of real change could have serious consequences for the lives of Scottish people, particularly coming on the back of such a terrible settlement for local government.”
“What today boils down to is that they have done nothing of substance, they have taken a system made it more complicated and less transparent for individuals and more complex for councils to administer. They have muddied the waters.”
Prof Richard Kerley, a local government specialist at Queen Margaret University near Edinburgh, said the package was “fairly thin gruel” because it simply modified a system in place for 25 years. Since tax bands were agreed in 1991, this meant that 57% of Scottish homes were now under or overvalued; the highest rate was based on homes valued at £221,000 25 years ago that could now be worth millions of pounds.
Ministers could have completely dropped council tax bands and tied tax rates to actual property values, allowed authorities to test tax increases above 3% with local referendums and let councils to keep local business rates.
“The grossest failure in this is the refusal to revalue [homes]; it’s absolutely extraordinary,” Kerley said. “It just seems a grotesque dereliction to say that we’re going to ignore that and we’re going to continue [with a 1991-based system] for who knows how many years?”
Andy Wightman, a land reform expert and Scottish Greens candidate who sat on last year’s council funding commission, said that without a full revaluation of council tax bands based on true property values, the current system was a nonsense.
He said the Scottish Greens, who are planning to target younger, radical and centre-left SNP voters at the Holyrood election, would campaign vigorously for a new local tax based on land values by attacking Sturgeon’s package.
“The council tax freeze has damaged local services, cost jobs and affected important community facilities,” Wightman said. “It’s hard to see how today’s proposals from the first minister will arrest that decline. The Scottish government has endorsed a regressive tax structure in clear contradiction to their claims to want to be progressive with tax powers.”
This article was written by Severin Carrell Scotland editor, for theguardian.com on Wednesday 2nd March 2016 16.17 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010