Labour’s planned tax rises

With two years having passed since the start of the SNP’s first ever term in Government, it has become increasingly notable how bereft of alternative policy ideas the Labour party has been. With the mid-point to the next Holyrood election having passed, Scotland’s main opposition has thus far chosen to snipe from the sidelines rather than engage in suggesting any kind of policy alternatives.

Therefore, it was with no small amount of surprise that I learned of their recent decision to resurrect a policy they had previously rejected before the election, and call for a local property tax. A policy announcement from Labour is in itself a rare occasion, but their choice of proposal could only be described as bizarre and ill-judged.

It was with good reason that Jack McConnell promptly abandoned the policy while he was still First Minister when it was recommended in Sir Peter Burt’s report. The discredited proposals that Labour have resurrected call for council tax to be replaced by a local property tax of 1% of the capital value of people’s homes. This would mean significantly larger bills for households across Scotland.

Thanks to council tax having remained frozen since the SNP came to power in 2007, the average council tax bill across Scotland is £987. Contrast this with the average house price of £145,533 which would lead to people paying £1455.30 in local taxes, an increase of £468 per year under Labour’s plans. At a time when many people are experiencing financial difficulties, the return of this proposal could scarcely be less welcome or more misguided.

In the Aberdeenshire Council area, the effects would be even more keenly felt by local residents. Average house prices here are £184,567 and would see an average local property tax of £1,846 compared to the current average council tax bill of £1,111. With a massive increase of £734 per year on average bills for people to deal with, only Edinburgh would see a bigger increase in the whole of Scotland.

Local residents would be further penalised for carrying out any kind of improvement that adds value to their properties. Installing double glazing might make homes more energy efficient, lower heating costs and help combat climate change but if carrying out that kind of improvement means paying more tax, then people will be understandably put off.

As if all these problems weren’t big enough reasons for this policy never to see the light of day, the original report that accompanied it also pointed out that introducing a local property tax could be expected to lead to house prices falling by 15%. On the average house in Aberdeenshire, that would wipe a staggering £27,685 off the value of people’s homes.

Even after seeing the value of their property erode so significantly, the average local property tax would still be higher than the average council tax bill both across Scotland and in the Aberdeenshire Council area currently is. Given the well documented troubles that the housing market has experienced, the impact of this would be simply disastrous to Scotland’s economy.

Clearly a local property tax is a complete non-starter, given the devastating impact that it would have, and any kind of positive benefit from it is extremely difficult to see to say the least. Why Labour has now chosen to try to resurrect this ill thought out and damaging policy after their rejection of the proposal three years ago is beyond me. Perhaps we should be glad that such policy announcements from Labour remain few and far between.