Will Council Tax reforms live up to expectations of Scottish councils and households?

There has been much speculation over the changes to the Council Tax in Scotland as announced yesterday by First Minister Nicola Sturgeon. The PwC Scotland team have been discussing the potential implications.

Adminstrative costs may be an issue

Adam Turner, assistant director in PwC's Government & Public Sector team in Scotland said:

"From the perspective of Scottish Local Authorities, many may still be hoping for more ambitious reforms in the way they are funded.

"The administrative cost of processing means tested exemptions may be a cause for concern for some authorities at a time when they are already facing significant budget challenges.

"It’s clear that the cost of processing exemptions will fall most heavily on those areas with greater proportions of low income households, and where services are already stretched or are being heavily impacted by cuts.

"This may cause some to wonder if the freeze really is being fully funded by Scottish Government.

"With pressures on all fronts, it seems likely that most local authorities will be unable to resist the small sweetener on offer of being able to raise rates by 3% from 2017."

"Complexity and fairness"

Sharon Blain, devolution tax specialist, PwC in Scotland said:

"The council tax reduction scheme is a classic example of needing to balance fairness and simplicity in the tax system.

"While it does add complexity, it also adds an element of fairness as it can reduce council tax for those on lower incomes.

"However, the benefit of the scheme does rely on people applying to their local authority for the exemption and, as is noted by the Scottish Government, there are issues with low uptake of the exemption in particular groups, pension age households in particular.

"Applying for the exemption requires providing information on income, capital and the make up of the household. In addition, those with capital over £16,000 do not currently receive any council tax reduction even if they have no income so will presumably fall outside the new exemption."

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