Council tax freeze: economic perception and political reality

Being expected to have all the answers to our economic conundrum is a bit of a tough gig in the current climate.  Thank goodness then that the Finance Committee in the Scottish Parliament can call upon the services of Professor David Bell.   His report on the draft Scottish Budget 2011-12, produced in record quick time, provides detailed analysis on a range of measures announced by John Swinney.  The one which garnered all the headlines was his assessment that the council tax freeze would contribute little to the government’s own priority of sustainable economic growth.

You could almost hear Scottish Labour rubbing its hands with glee.  But the burd wonders if they will gain much political capital from trashing this SNP policy.

Treating the council tax freeze as an economic measure fundamentally misses the point.  No matter how John Swinney dressed it up in his budget, this is politics pure and simple.  It’s the perception of what this policy delivers that counts rather than the reality.  And Professor Bell’s analysis actually serves to underline this.

The economic gain to households is marginal.  At best families stand to save a whole 0.3% of their net income.  It’ll not even begin to replace what folks are losing out of their pockets in increased VAT charges after January.  But look again at the groups that do stand to gain something and do the electoral maths.  The families who gain that 0.3% are Scotland’s squeezed middle.  Moreover, a household with two pensioners will be best off, closely followed by families with children.   In short, the ones that vote, and the ones that the SNP need to vote for them in the key marginal seats that will deliver a second term in government, are the net gainers here.

And because Scottish Labour also needs the votes of such individuals in many of the same seats, the party is hardly likely to be dissing the freeze on their doorsteps.  Indeed, it would be a brave opposition that argued for taking more money out of people’s pockets in this election unless for a specific purpose.  It doesn’t matter that the gain is miniscule;  it’s the perception not the reality that counts.  And what’s the alternative?  That a Scottish Labour government would raise the council tax or allow it to be raised?  Without reform?  Hmm.  Everyone knows it’s an unfair tax that disproportionately hurts – yep, pensioners and low to middle income households the most.  Who would vote for that?

If Scottish Labour makes this a key electoral issue they might just open the door to the SNP.  The most recent poll already suggests that this policy has real support from voters.  Anything which draws attention to it serves neatly to draw attention to its architects, thereby helping to resolve the problem – see Lallands Peat Worrier’s superlative post on this –  that the SNP does not appear to be garnering popular support from its most popular policies.  This is dangerous territory for Scottish Labour to tread into.

Moreover, once the “real” election campaign starts, the SNP isn’t going to care that freezing the council tax doesn’t actually make people better off.  It has a populist and popular policy to trumpet and that is what will give it traction and even better, momentum.  The details are semantic and no one will care.  Again, it is the perception of a party being on hard pressed families’ sides rather than the reality that will count.  And even better, the SNP will be able to do this at the time the worst of the ConDem cuts and changes start to bite.

8 thoughts on “Council tax freeze: economic perception and political reality

  1. Pingback: Clinging to November… – Scottish Roundup

  2. Council Tax? Hmmmm – where to start?

    It’s not a very efficient or equitable tax and makes a minority contribution to public finance. It’s got about as many plusses and minuses as the Window Tax (albeit some different ones).

    It’s capacity to irritate those that pay it (when it goes up) is way out of proportion to any economic or service impact, however.

  3. The Council Tax freeze was brought in as preparation for local income tax – it was never designed to be a long term policy & is not sustainable as that. All it does is suppress front line tax & that stands to benefit people who pay the most front line tax.

    Every year you have an increasing opportunity cost by the end of 10/11 the cost will be £210,000,000, the SNP want to make that £280,000,000 by end 11/12.

    That is not perhaps an argument which will weigh heavily on the doorsteps but it does & it will weigh heavily with key groups such as public sector workers, trade unionists, & those on the left who see the SNP as being on the wrong side of the economic argument. These are voters that the SNP needs (many of them are women who we know are less likely to vote SNP anyway).

    That £280,000,000 will have been spent on suppressing taxation which many people can afford to pay, & has not been spent on front line services which in year 11/12 are going to be facing gigantic cuts.

    & how long is the freeze going to continue? The longer it goes on the more difficult it is going to be to stop it. It’s like a runaway train.

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  5. It’s decidedly depressing to see the SNP make a shameless electoral case for a cut (freeze is actually dishonest) which will have disproportionately negative consequences for the public.

    • Not sure how you work out that it will have disproportionately negative consequences for the public? Everyone, in all income deciles, in all household types, will be at least marginally better off. To some people that small amount will go a long way. I’m all for raising tax to pay for decent public services but would rather we focussed on reforming tax and creating a local income tax which is much more progressive.

  6. I find it absurd that taxation powers of the Scottish Parliament are not being used in a way to to attract inward investment into Scotland.A drop of 3p income tax could attract large numbers of small businesses into Scotland from south of the border.
    On the council tax freeze it should not be the government dictating but allowing councils to set their own rates and be held responsible at the ballot box.There is too much micro management going on and the real issues are being over looked.Then again there are votes in all this as you point out.

    • I think there are sound arguments for making us much more entrepreneurial – and at least it would be good to have a debate! And I agree totally on your point about micro management. But until the council tax is reformed or replaced there is little point in devolving power and control right down to local authorities. There are big issues about tax and how we raise what we need for our services but also how we lever in investment and economic growth. Sadly none of them will be discussed at this election.

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