Agenda Document Pack - Midlothian Council - 13/09/2023
Midlothian Council · 13 September 2023
Back to Midlothian Council — 13 September 2023 and its agenda
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Notice of Meeting and Agenda Midlothian Council Venue: Chambers/Hybrid - Please note this is a Special Council meeting, Date: Wednesday, 13 September 2023 Time: 14:00 Executive Director : Place Contact: Clerk Name: Democratic Services Clerk Telephone: Clerk Email: democratic.services@midlothian.gov.uk Further Information: This is a meeting which is open to members of the public. Privacy notice: Please note that this meeting may be recorded. The recording may be publicly available following the meeting. If you would like to know how Midlothian Council collects, uses and shares your personal information, please visit our website: www.Midlothian.gov.uk Page 1 of 46
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1 Welcome, Introductions and Apologies 2 Order of Business Including notice of new business submitted as urgent for consideration at the end of the meeting. 3 Declaration of Interest Members should declare any financial and non-financial interests they have in the items of business for consideration, identifying the relevant agenda item and the nature of their interest. 4 Deputations No items for discussion 5 Minutes No items for discussion 6 Questions to the Council Leader No items for discussion 7 Motions No items for discussion 8 Public Reports 8.1 Joint Working Group on Sources of Local Government Funding 130923 3 - 46 9 Private Reports No items for discussion 10 Date of Next Meeting The next meeting will be held on Tuesday 10 October 2023 at 11.00am Page 2 of 46
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Council Wednesday 13 September 2023 Item 8.1 Joint Working Group on Sources of Local Government Funding and Council Tax Reform (Council Tax Bands update) Report by Kevin Anderson, Executive Director Place Report for Decision 1 Recommendations Council are recommended to: • Note the information provided on the Scottish Government’s consultation on a fairer Council Tax; and • Agree the draft consultation response as at Appendix B. 2 Purpose of Report/Executive Summary Scottish Government launched a consultation in July 2023 on Council Tax. Following consideration of the consultation proposals at its meeting on Tuesday 29 August 2023, Council instructed officers to draft a response to the consultation. This report provides Council with the information on the consultation and a draft response for consideration. Council are asked to consider the draft responses to the questions highlighted in yellow at Appendix B, and either agree the response or provide officers with changes to be submitted by the closing date of Wednesday 20 September 2023. Date 7 September 2023 Report Contact: Saty Kaur, Chief Officer Corporate Solutions (Acting) Saty.Kaur@midlothian.gov.uk Page 3 of 46
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2 3 Background/Main Body of Report 3.1 The Scottish Government and the Convention of Scottish Local Authorities (COSLA - on behalf of local government) are inviting responses to the consultation on a fairer council tax system, which concerns the council tax charges (also referred to as multipliers) for properties in valuation bands E to H. 3.2 The consultation lasts for 10 weeks (closing on 20th September). The consultation includes proposals to increase the council tax multiplier for Band E to H properties from 2024/25, with an option to phase any changes in over 2-3 years. 3.3 The Council received a briefing note for elected members (Appendix C) on 18 July 2023 which was circulated to all elected members. 3.4 Council Tax is a local tax, set and administered by each Local Authority, with the Band D rate set annually at budget setting. Council Tax is paid on domestic properties and is dependent on: • The valuation band the property is in, and • The Band D tax rate set by the Local Authority. Revenue achieved from Council Tax is retained fully by the Local Authority and does not form part of the Scottish Government’s funding allocation to the Council. 3.5 The consultation paper is included as Appendix D. In summary, the consultation is seeking views on the relationship between the valuation band of the property and the tax rate set by the Council. The consultation questions are attached in the respondent information form (Appendix E). 3.6 Band D is set by Council annually; and the other bands (A-C and E-H) are proportions of the Band D rate. The proportions are known as multipliers and are set out in the 1992 Local Government Finance Act and are the same for all 32 Local Authorities. Council Tax multipliers can be amended by regulations, and this was carried out for the 2017/18 financial year, following the Commission on Local Tax Reform (Table 1). Page 4 of 46
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3 Table 1 – Council Tax band multipliers pre-2017 and post-2017 with % increases 3.7 Midlothian Council’s Band D Council Tax for 2023/24 is £1514.73/year, as agreed by Council at it’s budget setting meeting on 21 February 2023. 3.8 Table 2 shows the number of properties in each Council Tax Band as at 31 July 2023 and the associated Council Tax annual charge. Note that these numbers are subject to change by the time of Council Tax band setting for 2024/25 due to the ongoing social and private house building programmes in the County. Council tax Band Band A Band B Band C Band D Band E Band F Band G Band H Total number of dwellings on valuation list 987 12708 11214 5913 5568 4515 2882 184 Annual charge (£) 1009.82 1178.13 1346.42 1514.73 1990.19 2461.44 2966.34 3711.08 Table 2 – Council Tax band annual charges and no of dwellings 3.9 The current in-year Council Tax collection rate as at end June 2023 is 27.8%. Table 3 shows the collection rate for the previous 6 financial years since the 2017/18 Council tax multiplier change was introduced. Financial year 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Collection rate (%) 95.1 95.1 95.1 94.2 94.2 94.5 Table 3 – Council Tax collection rates 3.10 The consultation proposes to repeat the 2017 changes resulting in an increase of 7.5%, 12.5%, 17.5% and 22.5% respectively for properties in Bands E-H. Page 5 of 46
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4 3.11 Modelling The consultation proposes that if changes were to take effect from 2024/25, increases could be introduced on a phased approach, with percentage year on year increases over multiple financial years. The example given in the consultation information is Band H increasing by 7.5% in 2024/25, then a further 7.5% in 2025/26 with the final 7.5% in 2026/27 to achieve the proposed 22.5%. 3.12 Applying the proposals in the consultation, the following projections have been made. It should be noted that the following assumptions apply: • Band D Council Tax remains at 2023/24 levels - £1514.73 • Increase in properties in Midlothian is modelled in line with MTFS projections 2024/25 2025/26 2026/27 Projection using Dwellings at 1st August 2023 Projected Yield £62,940,820 £62,940,820 £62,940,820 Projected Yield with increased multiplier £64,133,133 £65,325,437 £66,517,741 Increased Council Tax Income £1,192,312 £2,384,617 £3,576,921 Projection using projected Dwellings per MTFS Projected Yield £64,547,389 £66,153,950 £67,760,511 Projected Yield with increased multiplier £65,770,126 £68,660,290 £71,611,318 £1,222,737 £2,506,339 £3,850,807 Table 4 – Projections 3.13 It should be noted that whilst Council Tax revenue generated remains within the Local Authority and does not form part of the Scottish Government’s funding allocation to local government. However, Council Tax income assumptions do influence the calculation of the funding allocation, meaning that not revenue reflected above, if achieved, would be wholly additional to the Council. 3.14 The consultation invites individual and organisational responses. All changes from the outcome of the consultation will require regulations to be agreed by Scottish Parliament. The consultation anticipates that these could be delivered in time for changes to take effect from the start of the 2024/25 financial year. It should be noted that if changes are agreed as the outcome of the consultation, the Local Authority must still consider its own Council Tax charges as part of its annual budget setting process. Page 6 of 46
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5 4 Report Implications (Resource, Digital and Risk) 4.1 Resource Any changes to Council Tax bands require to be made to billing and administration systems, as well as notification to residents in reasonable timeframes. 4.2 Digital No additional implications 4.3 Risk Increase to Council Tax may have a negative impact on household budgets. This may have a consequence on collection rates. 4.4 Ensuring Equalities (if required a separate IIA must be completed) No IIA has ben undertaken at this stage. 4.5 Additional Report Implications (See Appendix A) See Appendix A Appendices Appendix A – Additional Report Implications Appendix B – Draft response for consideration Appendix C – COSLA briefing for Elected Members Appendix D – Consultation paper Page 7 of 46
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6 APPENDIX A – Report Implications A.1 Key Priorities within the Single Midlothian Plan Not applicable A.2 Key Drivers for Change Key drivers addressed in this report: Holistic Working Hub and Spoke Modern Sustainable Transformational Preventative Asset-based Continuous Improvement One size fits one None of the above A.3 Key Delivery Streams Key delivery streams addressed in this report: One Council Working with you, for you Preventative and Sustainable Efficient and Modern Innovative and Ambitious None of the above A.4 Delivering Best Value Not applicable A.5 Involving Communities and Other Stakeholders Not applicable A.6 Impact on Performance and Outcomes Not applicable A.7 Adopting a Preventative Approach Not applicable A.8 Supporting Sustainable Development Not applicable Page 8 of 46
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Council Tax Multipliers: Consultation Respondent Information Form Please Note this form must be completed and returned with your response. To find out how we handle your personal data, please see our privacy policy: https://www.gov.scot/privacy/ Are you responding as an individual or an organisation? Individual Organisation Full name or organisation’s name Phone number Address Postcode Email Address The Scottish Government would like your permission to publish your consultation response. Please indicate your publishing preference: Publish response with name Publish response only (without name) Do not publish response We will share your response internally with other Scottish Government policy teams who may be addressing the issues you discuss. They may wish to contact you again in the future, but we require your permission to do so. Are you content for Scottish Government to contact you again in relation to this consultation exercise? Yes Midlothian Council 07341 790240 EH22 1DN Midlothian House, 40 – 46 Buccleuch Street Dalkeith, Midlothian Saty.kaur@midlothian.gov.uk Information for organisations: The option 'Publish response only (without name)’ is available for individual respondents only. If this option is selected, the organisation name will still be published. If you choose the option 'Do not publish response', your organisation name may still be listed as having responded to the consultation in, for example, the analysis report. Page 9 of 46
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About You Questions 1. About you Question 1 [For individual respondents] Please tell us which local authority area(s) you live in Local Authority Area(s): [For organisational respondents] Please tell us which local authority area(s) your organisation operates in Local Authority Area(s): Midlothian Council 2. About you Question 2 If you pay Council Tax, please indicate which Council Tax band(s) apply to the property (or properties) for which you pay Council Tax: Band A Band B Band C Band D Band E Band F Band G Band H I don’t pay Council Tax I don’t know Page 11 of 46
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Consultation Questions 1. Do you think that Council Tax in Scotland should be changed to apply increases to the tax on properties in Bands E, F, G, and H? Yes/ No/ Don’t know Please give reasons for your answer? Mid suggested response: The Council is facing a budget gap of currently £35m from 2024/25 to 2028/29. Council Tax is a key part of the annual budget setting process and as part of Midlothian’s Medium Term Financial Strategy, assumptions have been made of a 3% annual increase in Council Tax already for future years. The consultation provides the opportunity to consider increases to tax on properties to help close the predicted budget gap, albeit there is not enough information to fully understand the implications of any change at this point in time. Therefore, Midlothian Council requests that the Scottish Government provide more detailed information about the proposed scheme and how it will work. More Information: The table below presents current Council Tax charges in Scotland and shows the rate for each band as a proportion of the rates applicable to Band D properties. Band A Band B Band C Band D Band E Band F Band G Band H Scotland Average Council Tax Charge 2023-24 £944 £1,102 £1,259 £1,417 £1,861 £2,302 £2,774 £3,470 Council Tax charges as a proportion of the charge for a property in Band D 0.67 0.78 0.89 1.00 1.31 1.63 1.96 2.45 2. The proposal is to increase the Council Tax on properties in Bands E, F, G and H by 7.5%, 12.5%, 17.5% and 22.5% respectively. Do you agree with the levels of increase set out in this proposal? Yes/ No/ Don’t know Page 12 of 46
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Mid suggested response – the modelling below is based on the proposal above and shows the following yield. It is not clear whether all additional income would remain within the Local Authority area and would not have a negative impact on the current grant settlement: 2024/25 2025/26 2026/27 Projection using Dwellings at 1st August 2023 Projected Yield £62,940,820 £62,940,820 £62,940,820 Projected Yield with increased multiplier £64,133,133 £65,325,437 £66,517,741 Increased Council Tax Income £1,192,312 £2,384,617 £3,576,921 Projection using projected Dwellings per MTFS Projected Yield £64,547,389 £66,153,950 £67,760,511 Projected Yield with increased multiplier £65,770,126 £68,660,290 £71,611,318 £1,222,737 £2,506,339 £3,850,807 However, due to the current distribution formula Midlothian is currently losing a significant amount of Council Tax income through the mechanism of the floor and therefore Midlothian Council requests further information from the Scottish Government with regards the proposed distribution mechanisms which will be applied. 3. If you have answered no to Question 2, what do you think the increases to the Council Tax on properties in Bands E, F, G and H should be? o The increases should be smaller o The increases should be greater o Don’t know Due to the current distribution formula Midlothian is currently losing a significant amount of the Council Tax income through the mechanism of the floor, therefore Midlothian Council requests further information from the Scottish Government with regards the proposed distribution mechanisms which will be applied before this question can be answered. 4. , When should any increases be introduced if the tax on higher band properties is increased as proposed? o Full effect from 2024-25 o Phased-approach over two financial years (2024-25 and 2025-26) o Phased-approach over three financial years (2024-25, 2025-26, and 2026- 27) o Other (Please state) Midlothian suggested response: Given the current Cost of Living crisis and challenges faced by households across a range of household and living costs, energy price fluctuations and the cessation of fixed price utility and mortgage rates, and inflation, a phased approach would be more reasonable for citizens. The Page 13 of 46
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modelling above is based on the three-year phasing as suggested in the consultation. There is not enough information to fully understand what negative impact would occur on collection rates with an increase of Council Tax band values. More information: • Increasing Council Tax on properties in Bands E, F, G and H by 7.5%, 12.5%, 17.5% and 22.5% respectively would increase bills by around £139, £288, £485 and £781 per dwelling in these bands, based on 2023-24 Council Tax rates. • Changes could take effect from 2024-25, or could be introduced as a phased- approach, with year-on-year increases over a number of financial years (e.g. for Band H a £260 increase in each of the next three financial years starting from 2024-25, such that the full £781 (22.5%) increase does not apply until 2027-28). 5. Should the Council Tax Reduction scheme be expanded to protect those on lower incomes from any increases to higher band properties? Yes/ No/ Don’t know Suggested Midlothian response: Yes if the values are to increase. Midlothian Council does not hold enough household income data to be able to compare against the 4 Council Tax Bands that subject to this consultation (E-H) to understand the financial impacts in real terms for each household. Given the current financial challenges that residents are facing, it would be fair to assume here that a higher value property does not equate to a higher household income. In order to protect lower income households, it is imperative that a fair Council Tax Reduction Scheme is in place alongside any increase in Council Tax band. Currently Councils receive Scottish Government funding for the Council Tax Reduction Scheme to replace forgone Council Tax income. There is no information in the consultation to indicate that this would continue. Midlothian Council would require assurance that Scottish Government funding would be in place to fund any expansion of the Council Tax Reduction Scheme. More information: • In 2017, the Council Tax Reduction Scheme was expanded to provide relief to households affected by the changes if their income was in the lower half of incomes in Scotland. • The expanded Council Tax Reduction Scheme relief scheme protected low- income households living in Bands E to H from the increase in their bill caused by the increase in the multipliers, and is still available. 6. The proportion of properties in each valuation bands E - H varies across the country. This means that some councils would benefit more than others Page 14 of 46
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from any increases in council tax in these property bands. Should steps be taken to ensure that all councils benefit proportionately from this policy? Yes/ No/ Don’t know Please give reasons for your answer? Suggested Midlothian response – Yes. All increases in Council Tax should be kept within the Local Authority area and not form part of the grant settlement calculation. Midlothian Council is one of the smallest Local Authority areas but the fastest growing in mainland Scotland. The current distribution formula means that Midlothian repeatedly loses out in funding and is not adequately funded to meet growth and deliver services for its communities. The consultation information does not explain the impact additional Council Tax collected would have on grant distribution. It is fundamental that grant distribution should not result in any additional money raised in Midlothian being re-allocated out-with Midlothian. More information: • If further changes were made to charges for property Bands E to H there would be disproportionate benefits to some council areas where they have more Band E to H properties relative to other councils. • General Revenue Grant is the main source of funding for local authorities. • The distribution of General Revenue Grant could be adjusted to ensure the benefits are shared proportionately by all councils. • This adjustment would mean that any changes would not disproportionately benefit, or disadvantage, any council. 7. Please tell us how changes to Council Tax rates for properties in Bands E, F, G and H might impact you, or the people your organisation represents? More information: We have undertaken initial work to assess the potential impacts of these changes for individuals and communities. We would welcome your views and comments to help us better understand these impacts. Answer: Please provide your views See earlier responses on modelling Page 15 of 46
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8. Please tell us how you think changes to Council Tax rates for properties in Bands E, F, G and H would affect your local area, or Scotland as a whole (please consider social, economic, environment, community, cultural, enterprise impacts that you think are relevant)? More information: We have undertaken initial work to assess the potential impacts of these changes for individuals and communities. We would welcome your views and comments to help us better understand these impacts. Answer: Please provide your views 9. Please tell us how you think changes to Council Tax rates for properties in Bands E, F, G and H might affect Island Communities More information: • If further changes were made to charges for property Bands E to H there would be disproportionate benefits to some council areas where they have more Band E to H properties relative to other councils. • General Revenue Grant is the main source of funding for local authorities. • The distribution of General Revenue Grant could be adjusted to ensure the benefits are shared proportionately by all councils. • This adjustment would mean that any changes would not disproportionately benefit, or disadvantage, any council. Answer: Please provide your views 10. Do you think there would be any equality, human rights, or wellbeing impacts as a result of the proposed increases in Council Tax rates for Nil response Nil response Page 16 of 46
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properties in Bands E, F, G and H ? Please tell us what you think these impacts would be. Answer: Yes No Don’t know Please give reasons for your answer. Midlothian response: As set out above in earlier responses, there is no data held that can align household income with Council Tax rates, therefore the assumption that higher band homes have a higher household income is not a fair and equitable assumption. The Cost of Living crisis is putting additional financial pressure on households. That additional pressure could have a negative impact on wellbeing. For a significant change as proposed, it is expected that a full equalities impact assessment would be undertaken by Scottish Government prior to implementation. Page 17 of 46
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Inverclyde Renfrewshire West Dunbartonshire East Dunbartonshire Glasgow East Renfrewshire North Lanarkshire Falkirk W est Lothian Edinburgh M idlothian East Lothian Clackmannanshire Fife Dundee Angus Aberdeenshire Aberdeen Moray Highland Na h-Eileanan Siar Argyll and Bute Perth and Kinross Stirling North Ayrshire East Ayrshire South Ayrshire Dum fries and Galloway South Lanarkshire Scottish Borders Orkney Shetland Live Well Locally COSLA & Scottish Government Council Tax Consultation COSLA Briefing for Elected Members July 2023 Page 19 of 46
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2 On Wednesday 12 July 2023, COSLA and the Scottish Government launched a joint consultation on a proposal to change the current system of council tax multipliers. The consultation will run for a total of ten weeks, closing on 20 September and seeks the opinions and views of the public and specific stakeholders. Council tax is a local tax set by each individual council which, along with the grant councils receive from the Scottish Government, helps pay for the services councils provide. For individual properties, council tax is determined by eight bands based on the value of a property, with Band A being the lowest and Band H being the highest. The launch follows an agreement by COSLA Leaders at the end of June, that COSLA proceed with a joint consultation with Scottish Government to look at ways of making council tax fairer. The Consultation What is the Proposal? The proposal seeks views on a potential change to the current system of council tax ‘multipliers’. Currently, councils in Scotland set rates of council tax by determining the rate for Band D properties. Charges for properties in Bands A to C and E to H are then calculated as higher and lower proportions (or ‘multipliers’) of this Band D rate. The size of these multipliers is determined by national legislation and applies across Scotland. As you can see in Table 1, the last change to these multipliers was in 2017. Page 20 of 46
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3 Table 1 Comparison Between Pre-2017, Post-2017, and with 2023 Consultation Proposals: Change in Council Tax Multipliers Band A Band B Band C Band D Band E Band F Band G Band H Pre-2017 0.67 0.78 0.89 1.00 1.22 1.44 1.67 2.00 Post- 2017 0.67 0.78 0.89 1.00 1.31 (+7.5%) 1.63 (+12.5%) 1.96 (+17.5%) 2.45 (+22.5%) 2023 Proposals 0.67 0.78 0.89 1.00 1.39 (+7.5%) 1.75 (+12.5%) 2.13 (+17.5%) 2.68 (+22.5%) Source: COSLA and Scottish Government Joint Consultation on Council Tax 2023, Fraser of Allander Institute The current consultation proposes increasing the multipliers for those properties in Bands E to H by the following percentages (average amount for indicative purposes): • Band E: 7.5% (average £139 per year) • Band F: 12.5% (average £288 per year) • Band G: 17.5% (average £485 per year) • Band H: 22.5% (average £781 per year) The proposed changes would only impact those properties in Bands E to H, equating to around 28% of all Scottish properties. While the average annual council tax charge for a household in Bands E to H will rise if the proposals in the consultation are implemented, the average annual Scottish council tax will still remain lower than comparative charges in England and Wales (see: Table 2). Though not wishing to prejudge the outcome, if the consultation’s proposals were implemented, council tax rates for those in Bands A-G would remain lower than the average charge in England, while the average charge for Band D properties would remain significantly lower than in both England and Wales (see: Table 3) The consultation also asks what form the implementation of these proposals should take. Question 4 seeks view on whether any increases should be introduced immediately or phased over two or three financial years, allowing households to adapt to the financial implications. Page 21 of 46
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4 Table 2 England Wales Scotland England, Wales and Scotland Council Tax Comparison Per Band, 2023-24 (if Proposals Implemented) Note: unlike Scotland and England, council tax in Wales has nine bands instead of eight. The highest band, Band I, was introduced in 2005 following the 2003 Welsh revaluation. Band A Band CBand B Band D Band E Band F Band G Band H Band I0 1000 2000 4000 3000 5000 Table 3 2023-24 Average Band D Annual Council Tax Rates Scotland Wales England0 500 1000 2000 1500 2500 1417 1879 2065 Page 22 of 46
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5 Council Tax Reduction The proposals in the consultation would not impact eligibility for council tax reduction. The Council Tax Reduction scheme will continue to offer means-tested reductions of up to 100% to those households who meet the eligibility criteria, regardless of the council tax band a property is in. Following the 2017 change to council tax multipliers, the Council Tax Reduction Scheme was expanded to protect those unable to pay from unaffordable rises in their council tax bill. Question 5 of the consultation seeks views on whether, if the multipliers are increased again, the Scheme should similarly be expanded. Why Are We Consulting? The intention is to make Council Tax fairer and the changes proposed are to try and achieve this. There will be a variety of views about how these proposals will achieve this and we seek as many responses as possible across the country to inform the COSLA/Scottish Government consultation. As seen in Tables 4 and 5, although council tax rates are based on a percentage of a property’s value, lower value properties, and those in the lowest income deciles, currently pay a proportionally higher rate of council tax when compared to that paid by properties of a higher value. However, it is important to note that council tax bands are based on what a property was, or would have been, worth in 1991 – the last time a valuation of properties was carried out. For example, although properties in Band H are worth on average 8x those in Band A, the average council tax paid by Band H properties is only 3x that of Band A. The proposals in the consultation are a first step in rebalancing this. Page 23 of 46
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6 Table 4 The Percentage Charge of Council Tax Compared to Value of Dwelling by Council Tax Band Council Tax Band Maximum House Value - 1 April 1991 Average Council Tax Charge 23/24 % of Charge v Value of Dwelling (mid-value) A Up to £27,000* £868 3.62% B £27,001 to £35,000 £1,013 3.27% C £35,001 to £45,000 £1,157 2.89% D £45,001 to £58,000 £1,302 2.53% E £58,001 to £80,000 £1,711 2.48% F £80,001 to £106,000 £2,116 2.27% G £106,001 to £212,000 £2,550 1.60% H Over £212,000* £3,190 1.33% * Mid-points were used for Band A (£24,000) and Band H (£240,000) for calculation purposes. Please note that the property valuations used in determining council tax bands are based on the actual or projected value of a property in 1991, the last time valuations were carried out. Table 5 Additional Charges Faced by the Top 50% of Earners Income Decile Group Average Additional Charge Average Income (Latest Data) Average Additional Charge as a % of Household Income 6 £201 £27,820 0.72% 7 £201 £31,928 0.63% 8 £222 £37,544 0.59% 9 £258 £46,384 0.56% 10 (i.e. top 10%) £317 £64,896 0.49% Source: Fraser of Allander Institute Page 24 of 46
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7 The proposals contained in the consultation are designed to increase the revenue available to councils. As seen in Table 6, unlike in England and Wales, Scottish councils were subject to a council tax freeze between 2008/09 and 2016/17, significantly impacting the ability of councils to raise revenue to meet the increasing cost of services. Table 6 Yearly Percentage Increase in Average Band D Council Tax in England, Wales and Scotland, 2010/2011 to 2023/24 2010- 11 2011- 12 2012- 13 2013- 14 2014- 15 2015- 16 2016- 17 2017- 18 2018- 19 2019- 20 2020- 21 2021- 22 2022- 23 2023- 24 0 1 3 2 4 6 5 7 % England Wales Scotland The revenue raised by any proposals would go towards funding the key services provided by councils and ensuring that those in higher value properties contribute a fairer share towards the delivery of these essential services. Any change to the current system of council tax multipliers will not be experienced evenly across Scotland. The number of properties in Bands F to H as a percentage of all dwellings varies greatly across councils. Any change to the multipliers will therefore need to carefully consider the varied impact on communities across different parts of the country (see: Table 7) For more information, please contact localgovfinance@cosla.gov.uk To respond to the consultation please follow this link: https://consult.gov.scot/local-government-and-communities/ consultation-on-a-fairer-council-tax/Page 25 of 46
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8 Table 7 Aberdeen City Aberdeenshire Angus Argyll and Bute City of Edinburgh Clackmannanshire Dumfries and Galloway Dundee City East Ayrshire East Dunbartonshire East Lothian East Renfrewshire Falkirk Fife Glasgow City Highland Inverclyde Midlothian Moray Na h-Eileanan Siar North Ayrshire North Lanarkshire Orkney Islands Perth and Kinross Renfrewshire Scotland Scottish Borders Shetland Islands South Ayrshire South Lanarkshire Stirling West Dunbartonshire West Lothian 0% 10% 20% 30% 40% 15% 16% 17% 17% 16% 12% 12% 12% 12% 13% 13% 13% 14% 11% 5% 8% 7% 7% 6% 2% 3% 3% 21% 9% 9% 24% 23% 20% 27% 32% 36% 8% 8% Source: Scottish Government Statistics - Figures including Band E properties per local authority area unavailable at the time of writing. Properties in Council Tax Bands F-H as a Percentage of the Total Number of Dwellings by Local Authority Area, 2022 Page 26 of 46
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COSLA Verity House 19 Haymarket Yards Edinburgh EH12 5BH Visit www.cosla.gov.uk/about-cosla to learn more about our approach, our decision making, and our teams localgovfinance@cosla.gov.uk @COSLA facebook.com/CofSLA Inverclyde Renfrewshire West Dunbartonshire East Dunbartonshire Glasgow East Renfrewshire North Lanarkshire Falkirk West Lothian Edinburgh Midlothian East Lothian Clackmannanshire Fife Dundee Angus Aberdeenshire Aberdeen Moray Highland Na h-Eileanan Siar Argyll and Bute Perth and Kinross Stirling North Ayrshire East Ayrshire South Ayrshire Dumfries and Galloway South Lanarkshire Scottish Borders Orkney Shetland Live Well Locally Page 27 of 46
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Consultation on a Fairer Council Tax July 2023 Page 29 of 46
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Consultation on a Fairer Council Tax Contents Joint Foreword ....................................................................................................................... 2 Background - The Present Council Tax System ................................................................. 3 Council Tax and Local Government Funding ...................................................................... 4 Council Tax and Fairness ..................................................................................................... 4 The 2017 Changes to Council Tax ........................................................................................ 5 The Case for Further Change................................................................................................ 6 Council Tax and Fiscal Policy Scotland .............................................................................. 6 A Proposal for Change .......................................................................................................... 7 Responding to this consultation .......................................................................................... 8 Respondent Information Form............................................................................................ 10 About You Questions .......................................................................................................... 11 Consultation Questions ...................................................................................................... 12 Page 30 of 46
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2 Joint Foreword The Scottish Government and COSLA (on behalf of Local Government) would like to invite you to respond to this consultation on a Fairer Council Tax System, which seeks views on the Council Tax charges (also referred to as multipliers) for properties in valuation Bands E to H. We are committed to our aim of delivering fairer, more inclusive and fiscally sustainable forms of local taxation. Through the Joint Working Group on Sources of Local Government Funding and Council Tax Reform (JWG), we are exploring proposals for meaningful changes to be introduced to Council Tax. This includes changes to reflect the circumstances created by the cost crisis, and also approaches to longer term reform of the system. Council Tax revenue contributes to the huge range of vital services that Councils provide. This includes funding for our schools, social care, support for housing, environmental and waste services, roads and transport, and many more. These are services which we all rely on. We acknowledge the criticisms of the present Council Tax system, which is perceived by some stakeholders as unfair and regressive because it levies a higher tax rate on lower value properties, and a lower rate for higher value properties. The Scottish Government increased the Council Tax Band E to H multipliers in 2017 which went some way to addressing this problem, but Council Tax remains regressive. A chargeable property in a Band H has a Council Tax liability of about three times that of a Band A property, but is, on average, worth about fifteen times the value. The focus of the proposal in this paper is to address the balance of burden within the system, and we seek your views as to whether those in properties in the highest bands should be making a greater contribution, where they can afford to do so. In seeking views on changes to the present Council Tax system, we emphasise the importance of the Council Tax Reduction scheme which protects the most financially vulnerable and ensures that nobody in Scotland will have to meet a Council Tax liability they cannot be expected to afford. This will continue regardless of the property band, or the associated Council Tax charges for that band, that an individual may be liable for. We are pleased to be taking forward this work in partnership, and the proposal contained within this consultation paper is just one change that forms part of a broader range of potential measures that are under consideration, and which taken together will seek to provide fairness to the system by ensuring support to those that need it most. Therefore, we would like to ask for your views and perspectives on the potential change outlined in this paper, in order to make progress on our commitment to a fairer local taxation system. Tom Arthur MSP Minister for Community Wealth and Public Finance Cllr Katie Hagmann COSLA Resource Spokesperson Page 31 of 46
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3 Background - The Present Council Tax System Council Tax is a local tax, set and administered by each council and this year is expected to contribute around £2.9 billion to the funding of local public services in Scotland. Almost every household receives a Council Tax Bill, although many benefit from a discount or reduction to that Bill. This includes around 380,660 households (around 15% of all households) which qualify for the Council Tax Reduction (CTR) scheme and have a Council Tax bill that is reduced to zero. The present Council Tax system was introduced in 1993 by the then UK Government. Since the creation of the Scottish Parliament in May 1999, the policy and legislative framework that defines the tax has been wholly devolved to the Scottish Parliament. However, Council Tax is a local tax, and the administration of the system resides with councils. Council Tax is paid by the occupiers of domestic properties, with the amount due to be paid depending on: • the valuation band the property is in, • the Band D tax rate set by the local authority, • any discounts (such as the 25% single person discount), and • exemptions (such as for properties wholly occupied by students) or reductions (the Council Tax Reduction Scheme being the most significant). This consultation asks for your views on a number of questions about the relationship between the valuation band a property is in, and the tax rate set by the council for their local area. Each council determines the tax for Band D properties. The charges for other property bands (A to C and E to H) are proportions of the Band D charge. For instance, a Band A property may be charged approximately two-thirds of the Band D property tax, while a Band G property might face a charge approximately double that of a Band D property. These proportions, referred to as 'multipliers,' are set in law and are the same for all Scottish council areas. The table below presents current average Council Tax charges in Scotland, and shows the rate for each band as a proportion of the rates applicable to Band D properties (the ‘multipliers’). Table 1: Average Scottish Council Tax rates for 2023-24, expressed as a charge and as a proportion of the rate for Band D Band A Band B Band C Band D Band E Band F Band G Band H Scotland Average Council Tax Charge 2023-24 £944 £1,102 £1,259 £1,417 £1,861 £2,302 £2,774 £3,470 Council Tax charges as a proportion of the charge for a property in Band D 0.67 0.78 0.89 1.00 1.31 1.63 1.96 2.45 These multipliers were changed from April 2017, increasing the Council Tax for around 25% of properties. Page 32 of 46
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4 Council Tax and Local Government Funding Revenue from Council Tax is retained in full by councils and is not part of the Scottish Government’s funding allocation to local government. Council Tax is expected to contribute around £2.9 billion towards the funding of local public services in 2023-24. This is an increase on previous years. Council Tax income has corresponded to around 19% of general funding to local government over the past few years. Each local authority’s Council Tax income will vary, depending on the tax rate set, the number of properties in total and the number of properties in each valuation band. Across Scotland, just under three-quarters of all chargeable dwellings are in Bands A to D, but this varies across local authorities. For example, Na h-Eileanan Siar has the largest proportion of dwellings in Bands A to D at 89%, whereas East Renfrewshire has the lowest proportion in Bands A to D at 43%. This variation across local authorities in the proportion of properties in each valuation band is partially compensated for in the distribution of the General Revenue Grant (GRG). The GRG is the main source of funding for local authorities, and is paid by the Scottish Government. It has made up around 65% of the general funding for local government in the past few years. Amongst other variables, the formula used to calculate how the GRG compensates for the differing proportions of properties in each valuation band, in relation to the assumed1 level of Council Tax used in the calculations, was adjusted in 20172 to reflect the changes in Bands E, F, G and H. This adjustment to the GRG means that any changes to the way the assumed Council Tax is calculated for properties in the valuation bands will not disproportionately benefit, or disadvantage, any council. Council Tax and Fairness For many years, a common criticism of Council Tax has been that it is unfair and regressive. This is because when the average Council Tax liability is expressed as a percentage of the estimated property value, the effective tax rate is higher for lower value properties and lower for the higher value properties3. The Scottish Government's CTR scheme aims to address the unfairness in the system by reducing a household’s Council Tax liability based on what they could be expected to afford. The CTR Scheme was introduced in April 2013 following the UK Government’s abolition of Council Tax Benefit. CTR offers means-tested reductions to household Council Tax and is administered by local authorities. The reduction can be any proportion of the liability, up to and including 100% (where the household has their Council Tax liability reduced to zero and pays no Council Tax). Entitlement to CTR and the amount awarded is based on the characteristics, capital, needs and income of the household. This means that regardless of the property band of a dwelling, nobody in Scotland should have to meet a Council Tax liability they cannot be expected to afford. No matter the property band, the scheme protects the most financially vulnerable. The scheme in total reduces the amount of Council Tax income raised across Scotland by around £370 million. The GRG paid by the Scottish Government includes funds in recognition of this income forgone by local 1 We assume a standard Band D rate of about £911. Individual councils are currently able to keep all of their receipts in excess of this. 2 Was effective from 2018-19. 3 The Commission on Local Tax Reform Report (2015) Page 33 of 46
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5 authorities. There is no national equivalent to the CTR scheme in England, and Council Tax support to low-income households is the responsibility of individual councils. This has resulted in the Institute for Fiscal Studies estimating that four out of every five councils in England require each household to contribute a minimum amount (in some cases up to half) of Council Tax, irrespective of their ability to do so. Although the CTR Scheme takes into consideration the amount of Council Tax a household is liable for and their ability to pay, the present Council Tax system retains an inherent unfairness in that it is a regressive tax. Consequently, Council Tax is unlike any other tax in the UK in that the effective tax rate decreases as the value of the tax base increases. All other taxes are either at a flat rate (like Value Added Tax which is charged at 5% or 20% irrespective of the value of the good or service liable to the tax) or progressive (like income tax, which applies higher rates for higher incomes). The root cause of this regressive characteristic lies in the “multipliers” – the proportions of the Band D charge that are used to calculate the charges for properties in all other Bands. In 2015, the Commission on Local Tax Reform4 highlighted how the original multipliers - set out in the 1992 Local Government Finance Act – resulted in properties in Band H paying three times as much Council Tax as a property in Band A despite the fact that the Band H properties were estimated to be worth, on average, fifteen times the value of properties in Band A. The 2017 Changes to Council Tax Council Tax band multipliers can be amended by regulations. This was done from the start of the 2017 Council Tax year, resulting in the tax for properties in Bands E, F, G and H being increased by 7.5%, 12.5%, 17.5% and 22.5% respectively. These higher charges continue, but as most homes in Scotland are in Bands A to D, the increases only affected around 25% of all properties. Table 2: Council Tax band multipliers pre-2017 and post-2017 with % increases Band A Band B Band C Band D Band E Band F Band G Band H Council Tax band multiplier (Pre 2017) 0.67 0.78 0.89 1.00 1.22 1.44 1.67 2.00 Council Tax band multiplier (2017 onwards) 0.67 0.78 0.89 1.00 1.31 1.63 1.96 2.45 % change in average bill 0.0% 0.0% 0.0% 0.0% 7.5% 12.5% 17.5% 22.5% 4 The Commission on Local Tax Reform Report (2015) Page 34 of 46
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6 The Case for Further Change Although the changes implemented from 2017 resulted in increases for properties in Bands E, F, G and H, Council Tax remains regressive, with the average tax on a Band H property being around three times the Council Tax for a Band A property, despite the fact that Band H properties are estimated to be worth on average fifteen times the value of a Band A property. The chart below plots Council Tax liability as a proportion of household income (Net Equivalised Income5). It shows both the continuing regressive nature of Council Tax (the blue line), and the significant impact of the CTR scheme (the green line) in addressing this. Source: The Commission on Local Tax Reform (Volume 2: Technical Annex). Note equivalisation is a standard methodology that adjusts household income to account for different demands on resources, by considering the household size and composition. Each data point relates to Council Tax liability (before and after the Council Tax Reduction scheme is taken into account) for the median household in each income decile group, expressed as a percentage of equivalised income. This consultation therefore asks for views on further changes to the multipliers that would further address the inherent unfairness of the present Council Tax rates. Council Tax and Fiscal Policy Scotland Such a change would, by definition, result in increased Council Tax for higher value properties, but Council Tax rates are significantly lower in Scotland than elsewhere in the UK. In 2023-24, Council Tax for a Band D property in different councils across Scotland varied between £1,261 and £1,515. In Scotland the average 2023-24 Band D rate (£1,417) is £648 less than in England (£2,065), and £463 less than in Wales (£1,879). 5 Equivalised income is a measure of household income that takes into account differences in household demographic composition and size. Page 35 of 46
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7 A Proposal for Change Changing the Council Tax multipliers requires regulations to be agreed in the Scottish Parliament, as well as changes to local authority billing and administration systems. These could be delivered in time for changes to take effect from the start of the 2024-25 Council Tax year. Repeating the 2017 changes would mean Council Tax would increase by 7.5%, 12.5%, 17.5% and 22.5% for properties valuation Bands E, F, G and H respectively if the rates for Band D properties remained unchanged. The average annual increases, based on 2023-24 Council Tax rates, would be around £139, £288, £485 and £781 per dwelling in these Bands respectively, potentially raising an additional £176 million, with around 28% of all properties being impacted. If changes were to take effect from 2024-25, any increases could be introduced through a phased-approach, with percentage year-on-year increases over a number of financial years (e.g. for Band H around £260 (7.5% based on 2023-24 rates) increase in each of the next three financial years starting from 2024-25, such that the full £781 (22.5%) increase does not apply until 2026-27). The increases will not fully address the fundamental regressivity of Council Tax. The changes would represent a very significant step towards making Council Tax a fairer tax, particularly with the continued presence of the CTR scheme. A repetition of the 2017 changes provides the basis for the questions in the consultation, although we also ask for views on whether higher or lower increases would be more appropriate. The proposals will bring Council Tax more into line with the Scottish Government's fair and progressive approach to taxation, as set out in the Framework for Tax Page 36 of 46
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8 Responding to this Consultation We are inviting responses to this consultation by 20 September 2023. Please respond to this consultation using the Scottish Government's consultation hub, Citizen Space. Access and respond to this consultation online at, https://consult.gov.scot/local- government-and-communities/consultation-on-a-fairer-council-tax You can save and return to your responses while the consultation is still open. Please ensure that consultation responses are submitted before the closing date of 20 September 2023. If you are unable to respond using our consultation hub, please complete the Respondent Information Form and send your responses to: Council Tax and Council Tax Reduction Directorate of Local Government and Communities Scottish Government Victoria Quay Edinburgh EH6 6QQ Responses may also be emailed to, CTConsultation@gov.scot Handling your response If you respond using the consultation hub, you will be directed to the About You page before submitting your response. Please indicate how you wish your response to be handled and, in particular, whether you are content for your response to published. If you ask for your response not to be published, we will regard it as confidential, and we will treat it accordingly. All respondents should be aware that the Scottish Government is subject to the provisions of the Freedom of Information (Scotland) Act 2002 and would therefore have to consider any request made to it under the Act for information relating to responses made to this consultation exercise. If you are unable to respond via Citizen Space, please complete and return the Respondent Information Form included in this document. To find out how we handle your personal data, please see our privacy policy: https://www.gov.scot/privacy/ Next steps in the process Where respondents have given permission for their response to be made public, and after we have checked that they contain no potentially defamatory material, responses will be made available to the public at http://consult.gov.scot Page 37 of 46
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9 If you use the consultation hub to respond, you will receive a copy of your response via email. Following the closing date, all responses will be analysed and considered along with any other available evidence to help us. Responses will be published where we have been given permission to do so. An analysis report will also be made available. Feedback If you have any comments about how this consultation exercise has been conducted, please send them to the contact address above or to, CTConsultation@gov.scot Scottish Government Consultation Process Consultation is an essential part of the policymaking process. It gives us the opportunity to consider your opinion and expertise on a proposed area of work. You can find all our consultations online: http://consult.gov.scot Each consultation details the issues under consideration, as well as a way for you to give us your views, either online, by email or by post. Responses will be analysed and used as part of the decision-making process, along with a range of other available information and evidence. We will publish a report of this analysis for every consultation. Depending on the nature of the consultation exercise the responses received may: • indicate the need for policy development or review • inform the development of a particular policy • help decisions to be made between alternative policy proposals • be used to finalise legislation before it is implemented While details of particular circumstances described in a response to a consultation exercise may usefully inform the policy process, consultation exercises cannot address individual concerns and comments, which should be directed to the relevant public body. Page 38 of 46
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10 Council Tax Multipliers: Consultation Respondent Information Form Please Note this form must be completed and returned with your response. To find out how we handle your personal data, please see our privacy policy: https://www.gov.scot/privacy/ Are you responding as an individual or an organisation? Individual Organisation Full name or organisation’s name Phone number Address Postcode Email Address The Scottish Government would like your permission to publish your consultation response. Please indicate your publishing preference: Publish response with name Publish response only (without name) Do not publish response We will share your response internally with other Scottish Government policy teams who may be addressing the issues you discuss. They may wish to contact you again in the future, but we require your permission to do so. Are you content for Scottish Government to contact you again in relation to this consultation exercise? Yes No Information for organisations: The option 'Publish response only (without name)’ is available for individual respondents only. If this option is selected, the organisation name will still be published. If you choose the option 'Do not publish response', your organisation name may still be listed as having responded to the consultation in, for example, the analysis report. Page 39 of 46
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11 About You Questions 1. About you Question 1 [For individual respondents] Please tell us which local authority area(s) you live in Local Authority Area(s): [For organisational respondents] Please tell us which local authority area(s) your organisation operates in Local Authority Area(s): 2. About you Question 2 If you pay Council Tax, please indicate which Council Tax Band(s) apply to the property (or properties) for which you pay Council Tax: Band A Band B Band C Band D Band E Band F Band G Band H I don’t pay Council Tax I don’t know Page 40 of 46
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12 Consultation Questions 1. Do you think that Council Tax in Scotland should be changed to apply increases to the tax on properties in Bands E, F, G, and H? Answer: Yes No Don’t know More Information: The table below presents current Council Tax charges in Scotland and shows the average rate for each Band as a proportion of the rates applicable to Band D properties. Band A Band B Band C Band D Band E Band F Band G Band H Scotland Average Council Tax Charge 2023-24 £944 £1,102 £1,259 £1,417 £1,861 £2,302 £2,774 £3,470 Council Tax charges as a proportion of the charge for a property in Band D 0.67 0.78 0.89 1.00 1.31 1.63 1.96 2.45 Please give reasons for your answer? Free Text 2. The proposal is to increase the Council Tax on properties in Bands E, F, G and H by 7.5%, 12.5%, 17.5% and 22.5% respectively. Do you agree with the levels of increase set out in this proposal? Answer: Yes No Don’t know Page 41 of 46
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13 3. If you have answered no to Question 2, what do you think the increases to the Council Tax on properties in Bands E, F, G and H should be? The increases should be smaller The increases should be greater Don’t know 4. When should any increases be introduced if the tax on higher band properties is increased as proposed? Full effect from 2024-25 Phased-approach over two financial years (2024-25 and 2025-26) Phased-approach over three financial years (2024-25, 2025-26, and 2026-27) Other (Please state) More information: • Increasing Council Tax on properties in Bands E, F, G and H by 7.5%, 12.5%, 17.5% and 22.5% respectively would result in average council tax increases of £139, £288, £485 and £781 per dwelling in these bands respectively, based on 2023-24 Council Tax rates. • Changes could take effect from 2024-25, or could be introduced as a phased-approach, with year-on-year increases over a number of financial years (e.g. for Band H a £260 increase in each of the next three financial years starting from 2024-25, such that the full £781 (22.5%) increase does not apply until 2027-28). 5. Should the Council Tax Reduction scheme be expanded to protect those on lower incomes from any increases to higher Band properties? Answer: Yes No Don’t know More information: • In 2017, the Council Tax Reduction Scheme was expanded to provide relief to households affected by the changes if their income was in the lower half of incomes in Scotland. • The expanded Council Tax Reduction Scheme relief scheme protected low-income households living in Bands E to H from the increase in their bill caused by the increase in the multipliers, and is still available. 6. Please tell us how changes to Council Tax rates for properties in Bands E, F, G and H might impact you, or the people your organisation represents? Page 42 of 46
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14 More information: We have undertaken initial work to assess the potential impacts of these changes for individuals and communities. We would welcome your views and comments to help us better understand these impacts. Answer: Please provide your views 7. Please tell us how you think changes to Council Tax rates for properties in Bands E, F, G and H would affect your local area, or Scotland as a whole (please consider social, economic, environment, community, cultural, enterprise impacts that you think are relevant)? More information: We have undertaken initial work to assess the potential impacts of these changes for individuals and communities. We would welcome your views and comments to help us better understand these impacts. Answer: Please provide your views 8. Please tell us how you think changes to Council Tax rates for properties in Bands E, F, G and H might affect Island Communities? Answer: Please provide your views Page 43 of 46
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15 9. Do you think there would be any equality, human rights, or wellbeing impacts as a result of the proposed increases in Council Tax rates for properties in Bands E, F, G and H? Please tell us what you think these impacts would be. Answer: Yes No Don’t know Please give reasons for your answer. Page 44 of 46
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© Crown copyright 2023 This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open- government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gsi.gov.uk. Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned. This publication is available at www.gov.scot Any enquiries regarding this publication should be sent to us at The Scottish Government St Andrew’s House Edinburgh EH1 3DG ISBN: 978-1-83521-132-8 (web only) Published by The Scottish Government, July 2023 Produced for The Scottish Government by APS Group Scotland, 21 Tennant Street, Edinburgh EH6 5NA PPDAS1326142 (07/23) w w w . g o v . s c o tPage 45 of 46
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