Why the Council Tax is unfair. SSP - Scottish Socialist Party

Scrap the unfair Council Tax

Countless numbers of ordinary Scots get into huge debts every year as they struggle to pay enormous Council Tax bills. Here Alan McCombes looks at how the SSP's proposed new Scottish Service Tax would shift the burden of local taxation onto the shoulders of the rich rather than Scotland's lowest paid workers.

Why the Council Tax is unfair

John and Anne live in a modest semi-detached home in Glasgow with their three young children.

Anne stays at home to look after their three-month-old son. John works as a porter in a local hospital where he is paid £5 an hour.

John has to work for six weeks to pay his annual Council Tax bill of £1,141.

Jack and Bridget live in a detached home with their two children. Bridget is a high-flying council executive earning £90,000 a year. Jack is the First Minister of the Scottish Parliament with a salary of £118,000 a year.

Jack has to work five days to pay his Council Tax bill of £1,545.

Then there is Ian who lives in a mansion in Aberdeenshire. Ian - or Sir Ian as he is now known - was Scotland's top earner last year, raking in £600 million in salary, bonuses and stock market wheeling and dealing.

Ian has to work for 50 seconds to pay his Council Tax bill of £1,838.

The Council Tax is a blatantly unfair Tory tax, which reinforces Scotland's grotesque divide between rich and poor.

It was concocted by the last Tory government as a fallback for the hated Poll Tax, which was destroyed by people power in the early 1990s.

It was like mugging an old woman, then giving her back a few coins for her bus fare home. Under the Council Tax, the maximum differential is three to one.

Someone living in a mansion in Pollokshields or Murrayfield will pay just three times more than someone living in a rundown flat in Possil or Craigmillar.

Beaufort Castle near Inverness is one of the most lavish private homes in Europe. Set in 180 acres of beautiful countryside, the 24-bedroom baronial castle is stuffed full of priceless paintings, ornate furniture and exquisite tapestries.

The castle used to be the family seat of one of Scotland's most powerful clans, the Frasers. Now it is owned by Scotland's richest woman, Ann Gloag, whose personal wealth runs to hundreds of millions of pounds.

In 1995, Ann Gloag bought Beaufort for £1.5 million. Today, it's valued at £3 million.

Ann Gloag's total Council Tax bill is £1,878.

It's hard to imagine a more startling contrast between Beaufort Castle and the Scaraway flats in Glasgow. Here hundreds of families are packed into a few tower blocks.

Helena Duffy lives in the flats with her teenage daughter, who is a student. Helena earns £170 a week for 45 weeks as an ancillary worker in Stobhill Hospital. For her two-bedroom flat, 14 floors up, Helena pays £761 a year in Council Tax.

Ann Gloag's home is worth 150 times more than Helena Duffy's home. Ann Gloag earns 100 times more than Helena Duffy. Yet Ann Gloag pays just two and a half times more in Council Tax.

As well as discriminating directly against the poor, the Council Tax also discriminates against people who live in the poorest towns and cities.

For example, Council Tax for a Band D property in Glasgow is £1,141. In prosperous Wandsworth Council in London, Council Tax for a Band D property is just £402.

That means that a Glasgow family living in identical accommodation are forced to pay almost £15 a week more.

Even within Scotland, there are variations. People in the poorest urban areas such as Glasgow, Dundee, Inverclyde and West Dunbartonshire can pay hundreds of pounds a year more than those living in similar properties in more prosperous rural areas.

These variations lead to some extraordinary absurdities. For example, even though the Council Tax is supposed to be based on property values, some three-bedroom semi-detached homes in Glasgow are liable for higher Council Tax than the 100 apartment Balmoral Castle, set in 50,000 acres of prime land.

A radical alternative

The Scottish Socialist Party has launched a radical new alternative to the Council Tax.

The Scottish Service tax developed by Paisley University economists, Geoff Whittam and Mike Danson would be based on income.

It would redistribute wealth from high income households to low and average income households.

The Scottish Service Tax would be set at a uniform rate across Scotland, with the revenues allocated to local councils on the basis of need.

Over 77 per cent of Scottish homes would be better off. Many low income households would stand to save between £20 and £30 a week from the change.

At the other end of the scale, the wealthiest 16 per cent of households would pay more.

Many of these households have benefited from a cash windfall totalling tens of thousands per household since the abolition of the old rates system.

The bill for that windfall was picked up by low paid workers.

There are a a small number of households - around 7 per cent - who would neither gain nor lose from the Scottish Service Tax.

There are six compelling arguments for replacing the Council Tax with the Scottish Service Tax.

It would redistribute wealth and income by shifting tens of millions of pounds from the rich to the poor.
It would automatically exempt the lowest income households without a degrading and complicated means test.
It would generate some extra, desperately needed cash to improve local services.
It would be uniform throughout Scotland, which means that people who earn the same would pay the same, irrespective of where they live.
It would be easy to collect and administer, in contrast to the bureaucratic minefield of the Council Tax.
It is based on income rather than property, which means it does not discriminate against larger families.

How the Scottish Service Tax would work

The Scottish Service Tax would be levied on individuals according to their income. Each individual in the household would be assessed.

There would be five ascending rates of SST based on income.

Rate 1) Nil. All income under £10,000 is exempt from Scottish Service Tax.
Rate 2) 4.5 per cent. All income between £10,000 and £30,000 will be taxed at a rate of 4.5 per cent.
Rate 3) 15 per cent. All income between £30,000 and £50,000 will be taxed at a rate of 15 per cent.
Rate 4) l8 per cent. All income between £50,000 and £90,000 will be taxed at a rate of 18 per cent.
Rate 5) 20 per cent. All income above £90,000 will be taxed at a rate of 20 per cent.

To calculate your - or anyone else's - Scottish Service Tax:

Step 1: deduct the first £10,000 of income. (If you earn below £10,000 you will be automatically exempt without having to deal with complicated red tape or form filling.) If you are on £10,000 you will pay NIL.
Step 2: divide all additional income from £10,000 to £30,000 by 100 and multiply by 4.5. Thus, if you are on £15,000 you will pay £225 (4.5 per cent of £5,000 = £225). If you are on £30,000 you will pay £900.
Step 3: divide all further income from £30,000 to £50,000 by 100 then multiply by 15. Add on £900, the amount you will pay up to £30,000. Thus, if you are on £50,000 you will pay £3,900 (£900 plus 15 per cent of £20,000).
Step 4: divide all income from £50,000 to £90,000 by 100 then multiply by 18. Add on £3,900, the amount you pay up to £50,000. Thus, if you are on £90,000 you will pay £11,100 (£3,900 plus 18 per cent of £40,000).
Step 5: divide all income over £90,000 by 100 then multiply by 20. Add on £11,100, the amount you pay up to £90,000. Thus, if you are on £120,000 you will pay £17,100 (£11,100 plus 20 per cent of £30,000).

Scottish Service Tax as a proportion of total income

Percentage of income paid in Service Tax within each income range. (The figures are an average within each range. Those at the lower end of each range will pay less; those at the higher end will pay more; those in the middle will pay the figure cited.)

Under £10,000: 0.0%
£10,000-£15,000: 0.9%
£15,000-£20,000: 1.9%
£20,000-£30,000: 2.6%
£30,000-£40,000: 4.4%
£40,000-£45,000: 6.6%
£45,000-£50,000: 7.2%
£50,000-£70,000: 9.2%
£70,000-£90,000: 11.8%
Over £90,000: 16.1%

Winners and losers

Those who would gain:

Laurie, a self-employed actor, lives with her teenage son in a Band C tenement property in Edinburgh. Last year, she earned just under £10,000. Her Council Tax bill, including a 25 per cent single person's discount is £667.50. Under the Scottish Service Tax she would pay NOTHING. Saving: £55 a month.

Sarah and Ken live in an owner-occupied Band E property in Glasgow. Sarah earns £15,000 and Ken earns £17,000. Their Council Tax bill is £1,395. Under the Scottish Service Tax they would pay £540.

Saving: £71 a month.

Wullie is a call centre worker in Glasgow who earns £11,000 a year. His partner Jackie earns £8,000 a year. They live in a Band B flat and currently pay £887 a year in Council Tax. Under the Scottish Service Tax, they would pay £45. Saving: £70 a month.

Dave is a firefighter in Dundee who lives in a Band D property with his partner Angela and their three children. Dave earns £21,500 and the household Council Tax bill is £1,079. Under the Scottish Service Tax they would pay £517.50. Saving: £47 a month.

Those who would lose:

John and Fiona live in a Band G property in the Highlands. John is a GP who earns £62,000. Fiona is a part-time teacher who earns £13,000 a year. Their Council Tax bill is £1,565. Under the Scottish Service Tax they would pay £6,195. Loss: £386 a month.

Nicola is a high-flying lawyer who lives on her own in a Band H property in Edinburgh. Last year she earned £143,000. Her Council Tax bill, including single person's discount came to £1,500. Under the Scottish Service Tax she would pay £21,700. Loss: £1,683 a month.

Frederick is one of Scotland highest paid chief executives, earning £1,200,000 last year. He lives in a Band H property in Edinburgh with his partner and their children. Their current Council Tax bill is £2,002. Under the Scottish Service Tax they would pay £233,100 a year. Loss: £19,258 a month.

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