Council tax rises of almost 20% needed to keep pace with England – think tank

Local authorities in Scotland will need to hike council tax bills by almost a fifth if they are to keep pace with increases to local government funding in England, a think tank has found.

A report from the Institute for Fiscal Studies (IFS) noted “core spending power” for local government and schools in England is set to increase by 7.4% in real-terms between 2023-24 and 2025-26.

With schools in Scotland funded by local councils, the IFS said: “To match this, Scottish councils would need to increase their council tax by an average of 18-19%.”

After council tax charges were frozen by the Scottish Government for 2024-25, some local authorities have already voted to increase bills by up to 10% in 2025-26.

East Lothian and Scottish Borders Councils have both confirmed bills will rise by 10%, while Fife Council has announced an 8.2% increase and Glasgow 7.5%.

Other local authorities are expected to impose similar rises, with a 10% rise being mooted in North Lanarkshire, and an increase of 8% expected in Edinburgh.

David Phillips, associate director at the IFS, said: “If you look at the funding the Scottish Government is providing to councils in Scotland and you compare that to what is being provided in England, the increases in England over the last two years, the core funding from the Scottish Government isn’t keeping pace with what has been happening in England in the last two years.”

He said the council tax freeze, imposed when Humza Yousaf was first minister but not continued under John Swinney’s administration, “adds to that”.

Speaking at an online IFS briefing ahead of next week’s Scottish Budget vote, Mr Phillips said: “Effectively to keep pace with the overall rate of increase in funding for councils, Scottish councils would need to more than undo the impact of the freeze from last year because the core funding from the Scottish Government hasn’t been keeping pace with England.

“It is partly the council tax freeze this year and it is partly that the Scottish Government has increased its funding less, and that is partly because its overall funding has grown less in percentage terms that down south in England.”

IFS senior economist Stuart Adam stressed the need for the council tax system to be reformed, saying the “bare minimum” required would be for homes across Scotland to be revalued, “allocating properties to bands based on their current value rather than their 1991 value”.

That is basically saying the majority of properties in Scotland are in effect in the wrong council tax band at the moment because of the failure to do a revaluation

He said more than half of all properties in Scotland are currently in the wrong band for council tax.

“If you do a revaluation we estimate that 57% of properties would change bands, just under 30% would go up a band, just under 30% would go down a band,” he said.

“That is basically saying the majority of properties in Scotland are in effect in the wrong council tax band at the moment because of the failure to do a revaluation.

“We would like to see more bands added to the system so that bills more closely relate to property value, or even get rid of bands altogether and just tax a simple percentage of the property value, as happens in Northern Ireland.

“While the priority should be a revaluation, that shouldn’t be a one-off, the Scottish Parliament should legislate for regular revaluations like Wales has just done so we’re not back in the same position in another 34 years’ time.”

A Scottish Government spokesperson said: “We recognise the crucial role councils and their employees play in communities across Scotland.

“That’s why the Scottish Government has made available over £14 billion to local councils this year, a real-terms increase of 4.3%, with a record £15 billion for 2025-26 set out in the Scottish Budget, a real-terms increase of 4.7%.”

The spokesperson added: “It is up to individual local authorities to manage their day-to-day decision-making and allocate the total financial resources available to them on the basis of local needs and priorities.”