Scots have been warned that they face “eye-watering” council tax hikes after the SNP handed town halls unrestrained powers to ramp up bills.
Unveiling her budget at Holyrood on Thursday, Kate Forbes, the finance secretary, revealed that for the first time since the SNP came to power in 2007, there will be no freeze or cap on rises to council tax that can be imposed on households from April.
The surprise move means councils will be allowed to increase bills by as much as they like, following years of real terms budget cuts imposed by Holyrood.
Ms Forbes also unveiled a stealth income tax raid on middle and high earners, of up to £269 per year, by freezing the threshold at which the higher rate kicks in instead of increasing it with inflation.
The move means another 35,000 Scots will be sucked into paying the higher rate from April, in a move projected to bring in £106 million.
A further 440,000 Scots who were already in the bracket will also see their tax liabilities increase once they get their annual pay rise in April, according to official forecasts.
Government’s £35 billion block grant
The moves were announced despite the Scottish Government receiving a record block grant, of around £35 billion, from the Treasury.
After the SNP came to power in 2007, there was a council tax freeze in place for a decade, with increases afterwards capped at three per cent. The freeze then returned last year due to the pandemic.
However, Ms Forbes said that from next year there would be no limit on the rates councils could set, which it was warned was likely to lead to a sharp hike in bills as town halls seek to compensate for a real-terms funding cut.
“The SNP have quietly opened the door to massive council tax rises next year,” Liz Smith, the Scottish Tory finance spokeswoman, said.
“The government have completely removed the cap on tax hikes at an incredibly difficult time, when many Scots are already struggling to get by.
“Instead of giving our communities a fair deal, the SNP have cut funding in real terms and passed the buck onto local councils.”
She added: “The SNP are leaving local councils with a horrid choice between failing to deliver essential services or making up the shortfall through eye-watering tax rises.”
Forbes accursed of sneaking out tax change
Ms Forbes was accused of attempting to sneak out the change, after she declined to mention it in a lengthy speech, before referring to it briefly in response to a question from one of her backbenchers.
She claimed councils had been asking for more freedom for several years and that she was “pleased” to offer them “complete flexibility to set the council tax rate that is appropriate to their local authority area”.
However, Alex Cole-Hamilton, the Scottish LibDem leader, accused Ms Forbes of putting councils “in an arm lock”, adding that the block grant means “more money for central government” which is not being passed on to local authorities.
“It’s clear that Kate Forbes wants councillors to take the blame for the decisions she has taken,” he said.
The Scottish Tories said that from next year, the number of people paying more income tax because they lived in Scotland would rise by 66,000 to 453,000 as a result of the stealth tax hike.
A 41 per cent higher rate in Scotland kicks in at £43,663. However, a lower 40 per cent higher rate in England does not apply until earnings reach £50,270.
Someone earning £50,000 in Scotland will pay £1,489 more in income tax than their counterparts in England and Wales.
