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June 30, 2020

Fiscal powers for councils?

The First Minister’s handling of the pandemic has attracted almost universal (albeit sometimes grudging) praise. But at some point soon, the focal point for the management and monitoring of ‘test and protect’ measures and the gradual reopening of the economy will have to shift towards a more local point of delivery. Which is why we need our local authorities to be equipped for the challenge. And judging by a recent report coming out of Highland Council, that may not be the case. Perhaps now’s the time to invest our councils with new revenue raising powers.

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Highland Council is teetering on the brink. It has been the hardest hit in the UK financially from the Covid-19 crisis in terms of cash lost per head of population, standing at £411 per resident, according to research by the BBC.

The council is the fourth worst hit overall in the UK, with total estimated losses of £96.9 million. It is the council with the highest proportion of furloughed staff, with head of finance at the local authority Ed Foster saying cutting its deficit would not be possible without “shed loads of pain” as most of its expenditure is tied up in staff costs, implying it would mean large-scale redundancies.

As well as £55 million in lost income during the crisis, the Council has had £40 million in additional expenses, with its older population spread throughout a land mass larger than Belgium requiring care workers to travel long distances during the crisis. It also hasn’t helped that NHS Highland has had to step in due to private sector failure, taking over operations at Home Farm care home from HC-One on the Isle of Skye.

Alasdair Christie, chairman of the recovery board set up to steer Highland Council out of the crisis, said the impact could be long-term.

“I think, because of the nature of our economy, we could see increasing unemployment and even more demand for our services,” he said.

This is a Council which has become reliant on tourist income, and especially the high-end, luxury yacht variety. Its major sources of income come from tourist car parks, docking fees and the sale of marine fuel at its 100 harbours. That has all been reduced to almost “zero overnight”, Foster said, with a single car park in Inverness earning £200,000 a month on average prior to the crisis, which was reduced to £75 for April.

Of course, while Highland Council is strapped for cash, there remains plenty of wealth in the Highlands, mostly tied up in its land. Scotland has the most concentrated land ownership in Europe, and no more so than in its rural areas. Research by Andy Wightman has found that 10 per cent of all private rural land in Scotland is owned by just 16 people. Scotland’s richest person, the Danish clothing billionaire Anders Povlsen, owns 220,000 acres across the Highlands.  The idea of a tax on land has long been muted, but Scotland inexplicably remains stuck with the out-of-date and grossly unfair council tax introduced by the Tories almost thirty years ago.

Unsurprisingly, the Economic Recovery Group report had nothing to say about land reform or a land tax, as it was headed up by Benny Higgins, the Chief Executive of the Duke of Buccleuch’s Estates, one of Scotland and the UK’s largest land-owners. But the idea has also been advocated by the Scottish Land Commission, and before that muted by the Commission for Local Tax Reform, both Scottish Government established bodies. Not only could a tax on land and property raise vital revenues, it could incentivise the use of land for productive purposes, rather than as inflationary assets for the super-wealthy. That could lead to a much needed diversification of the Highlands economy and, hopefully, the break-up of large estates.

Highland Council is absorbing most of the costs of its land being a playground for the world’s super-rich, including NHS services and road repair, but is getting little of the revenues. This contradiction has now reached crisis-point. The fact that the value of land has increased more than 450 per cent in the UK since 1995, but that our system of taxing wealth, the Council Tax, has not changed in that time, with its valuations based on 1991 property assessments, and taxes tenants rather than the owners of landed property, shows just how far economic governance has fallen behind the reality of economic power in Scotland.

Highland Council is crying out for a tax on land/landed property – why won’t the Scottish Government let it happen?