Yousaf freezes council tax to help with cost-of-living crisis

The announcement came as a surprise to councils and the SNP's partners in government, the Scottish Greens, who were only given a few hours' notice of the fait accompli.

The Greens said they were "concerned about the effect this freeze could have on already-strained frontline public services if it is not properly funded".

The council umbrella body Cosla said it had been blindsided by the change, which it said would have "longer term implications for all councils right across the country".

The First Minister also announced that the Scottish Government would try to borrow money on the international bond markets for the first time to fund infrastructure projects, saying it would help prepare the country for independence and raise its profile among investors.

The bonds are seen as a more efficient alternative to the Scottish Government's current borrowing from the Treasury of around £450m a year, rather than additional borrowing.

The Scottish Government recently consulted on restructuring council tax, proposing bills for Band E to Band H homes go up by 7.5%, 12.5%, 17.5% and 22.5% respectively in April.

The change, last done in 2017, would have affected around a quarter of all homes in Scotland and been on top of the local annual rises imposed by councils themselves.

The structural change would have raised an extra £176m a year for councils.

However in his keynote speech to the SNP conference in Aberdeen, the First Minister U-turned in the face of growing opposition to the plan.

He said: “We’re committed to fundamentally reforming local taxation and we will re-energise our work to do that. We have consulted on what level the council tax should be next year.

“I can announce to the people of Scotland that, next year, your council tax will be frozen.

“That’s the SNP delivering for people when they need it the most.”

Although the freeze will apply to all homes, backtracking on the structural change will be of most benefit to those in bigger homes and more affluent areas.

Mr Yousaf promised to make tackling poverty his key mission as First Minister.

His aides later denied the change of plan was linked to the general election next year, leading to laughter from the media in the post-speech briefing.

The SNP came to power in 2007 promising to replace council tax with a local income tax but the plan proved unworkable.

The council tax was frozen as a stop gap, but the measure lasted nine years until 2017.

The Scottish Government paid councils £90m to freeze the tax in 2021/22 because of the pandemic, but since 2022/23 councils have been free to raise bills by whatever they choose.

The return of the freeze in 2024/25 is likely to cost the Scottish Government around £100m if it compensates councils for foregoing a 3% rise, but this will now be subject to negotiations.

Mr Yousaf told his party not to feel sorry for itself after its defeat in the recent Rutherglen & Hamilton West by-election, but stand up for Scotland and talk up the SNP’s record.

He told delegates that as well as campaigning for independence he was actively preparing for it through government reforms.

He said that since 2014, the Scottish Government had set up institutions such as a new social security system, a tax agency, a national investment bank and offices overseas.

He said: “We are going to take further steps that will both provide direct benefits under devolution and will prepare us for independence. 

“Today I am announcing our most ambitious proposal yet. I can confirm that by the end of this parliament the SNP Government will – subject of course to due diligence and market testing - go directly to the international bond market for the first time in our own right.

“To fund vital infrastructure like affordable housing projects, we will issue Scotland’s first ever bond. This will bring Scotland to the attention of investors across the world.

“And it will raise our profile as a place where investment returns can be made.

“In doing so, we will show the world not only that we are a country to invest in today.

“We will also demonstrate the credibility to international markets that we will need when we become an independent country.”

He insisted support for independence could be built into a “sustained majority” by focussing on the “why” rather than the “how” of independence, its benefits rather than process.

The Scottish Government later said Mr Yousaf had commissioned initial work in order to issue bonds by 2026, including "detailed analysis to ensure value for money, and consideration of investment opportunities in Scotland".

Although the Scottish Government was empowered to issue bonds by the 2016 Scotland Act, Mr Yousaf's team said recent changes to the fiscal framework between the UK and Scottish governments made going to the market more attractive than Treasury borrowing.

Mr Yousaf said: "This will be a first for the Scottish Government and is a significant undertaking.

“Investment in infrastructure is key to supporting the three priorities I have outlined for the Scottish Government over the next three years – delivering high quality public services, boosting a green and thriving economy, and ensuring equality of opportunity for everyone.”

In a brief passage, he thanked his predecessor Nicola Sturgeon, saying she “transformed Scotland” and led the country through the “toughest of times” amid the pandemic.

He also confirmed £100m extra a year to tackle NHS waiting list backlogs in each of the next three years and a £500,000 fund to help women escape domestic abuse.

Using Treasury financial instruments, he said the Scottish Government would invest up to £500m to anchor a new supply chain industry for the offshore wind sector.

In a closing section on independence, he said: "That which we seek for our nation is neither unwise, nor untested. It is neither unreasonable, nor unobtainable.

“Rather, it has been the stated ambition of nations the world over, for the simple reason that independence works.

“One of the world’s oldest nations will become its youngest independent state. And with the vitality of youth, we can step out into that world anew. Into the bright light of a new dawn.”

On the council tax freeze, Green MSP Ross Greer said: “We are concerned about the effect this freeze could have on already-strained frontline public services if it is not properly funded.

“Our local councils and people who rely on services like social care, schools and early years centres must not lose out as a result of this announcement.”

A spokesperson for the council umbrella group Cosla said:  “We have just heard the announcement made at the SNP Conference in relation to freezing council tax. We were unaware of it in advance.  

“This has longer term implications for all councils right across the country, at a time when we know there are acute financial pressures, and where we are jointly looking at all local revenue raising options.

“We will need to consider the implications for Cosla and Local Government with our members when we get more of the detail.  This will also need to be examined against the principles of the recently signed Verity House Agreement.”

Scottish Tory leader Douglas Ross said Mr Yousaf’s top priority remained independence. 

“Other announcements, such as on the NHS backlog and council tax, aimed at attempting to clean up the SNP’s previous mistakes were all sidelined by Humza Yousaf’s nationalist obsession.

"It is clear that no other issue will get a look in during the SNP’s campaign at the next year’s General Election.”

Labour Shadow Scottish Secretary Ian Murray said “The SNP’s lack of direction is laid bare in this jumble of screeching U-turns and tired old pitches for independence.

“Humza Yousaf has told his party to focus on the ‘why’ rather than the ‘how’ of independence, but the truth is he’s not got a real plan for either. "

Roz Foyer, general secretary of the Scottish Trades Union Congress (STUC) said: “Across Scotland, our public services are in crisis.

“Local authorities are increasingly strapped for cash and are facing huge budget cuts.  Sequential council tax freezes without adequate compensation is one of the key reasons why local services are in such a mess.

“While it is right that people are supported through this cost of living crisis, this cannot be at the expense of funding local services that we all rely on.

“A decade after promising to replace the Council Tax, we urgently need to see a real alternative that taxes wealth and is redistributed fairly.

“Local services are crying out for investment and today’s announcement combined with a decade of inaction will only make the situation worse.”

The TaxPayers' Alliance said Scots would “breathe a sigh of relief” at the freeze.

A spokesperson said: “The Scottish government should ensure that this is delivered sustainably through spending control to protect taxpayers in the long term.”

Pamela Nash, chief executive of Scotland in Union and a Labour election candidate, said: “Humza Yousaf confirmed that the very first words of the SNP manifesto will be about independence. That exposes exactly what the SNP is about - the break-up of Britain comes before everything else.”