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How will we continue to fund local government?

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Christine Melsom analyses the current political muddle

Christine writes this guest post on behalf of Is It Fair?, the campaign for the reform of Council Tax

What will happen to Council Tax after the next general election?
The Labour position.
Labour is still wedded to Council Tax.

If they get back in again it is probable – indeed likely – that there will be a property revaluation. This could be disastrous for Council Tax payers. Rather than push general taxation higher (to try to sort out the mess they have got the country into), they will dump as much as possible onto local government and let them take the blame.
The revaluation in Wales was trumpeted as being “revenue-neutral” i.e. the revaluation would not result in any more, or any less, Council Tax being collected: it would just be a redistribution to make the whole thing “fairer”. What they said was that 25% of Council Tax payers would see an increase; 25% would see a decrease and 50% would be unaffected.
What actually happened was that the revaluation ALONE resulted in 9% more Council Tax being demanded. Only 8% ended up paying less, and 32% ended up having to pay more. Some had to pay a LOT more, which is why they also had to bring in a “transitional relief” scheme where people who were bumped up several bands were bumped up one Council Tax band per year until they ended up in what was considered to be the correct band.
If the same revaluation exercise here in England goes the way the revaluation went in Wales – and bearing in mind this government has a record of not learning from past mistakes – the majority of us would end up out of pocket.
And would they also do away with the capping regime?


The Conservative position

The Conservatives also are still wedded to Council Tax. They have said that if they end up with a majority and form the next government, any increase in Council Tax – provided it is not more than 2.5% – will be reimbursed from general taxation for two years – meaning that Council Tax payers will not see an increase in their bills for two years. They are selling this as a Council Tax freeze for two years (which it really isn’t) but – what happens in the third year? Will we see an increase in Council Tax of 5% (actually 5.0625% compounded) – plus whatever the councils think they can get away with in year three?
And – unless we have missed it – the Conservatives have said nothing about how the 2.5% will be calculated, but we understand that this “freeze deal” will apply to each individual precept (County Council, District Council, Police and Fire Authorities).
The Conservatives have also said they would not go ahead with a property revaluation for council tax purposes – but that they would do away with the existing capping regime. They are in favour of the greater use of local referendums to help guide decisions. They claim they will make the local government funding settlement more transparent.


The Liberal Democrats

The Lib Dems still seem to favour a local income tax and/or a land-value tax. Even though they haven’t any chance of becoming the party of government, they may have some influence if there is hung Parliament and if they cosy up to one or other of the two main parties in some cobbled-together coalition.

The others

And – the fringe parties (Greens, UKIP and others – even the BNP) – could have an influence on the make up of the next parliament if it is close-run thing between Labour and Conservative.
Town / Parish precepts
None of the parties has mentioned anything about correcting the anomaly that allows town / parish councils to increase their share of the council tax bill (their precept) by more than the cap that applies to other, higher, authorities.
Being well aware that the cap does not apply to towns and parishes, a growing number of higher-level councils (County/District/Borough/City) are starting to off-load some of their non-statutory duties onto towns and parishes in their area – but keeping the money that they would have had to spend on these duties.
This off-loading has meant that many town and parish precepts have rocketed such that, in a growing number of cases, the amount demanded by the town/parish is as much as, or even more than, the amount demanded by the district/borough council.
In a Green paper in 2000, and in another document issued by the Department for Communities and Local Government in 2002, the current government has admitted that this off-loading can also lead to double taxation, in that householders can be charged twice for the same services.
So – even though the current government have been aware of this possible double-taxation business for 10 years, and have issued Green Papers and other reports about it, neither they, nor any of the other parties, has said anything about putting a stop to it.

The two main aims of Is It Fair are:

  • The fair distribution of Government Grants to all Local Authorities
  • Replace the present Council Tax system with one that is based on ability to pay (from disposable income)

Although the issue of Council Tax and local government funding are unlikely to be high on anyone’s agenda as we go into the general election campaign, it is clear to see that local government funding from central sources will come under increasing pressure for reduction as the next government struggles with the budget deficit. The great danger, if the current system continues, in the years after the general election, is that some local authorities will attempt to maintain services at current levels or above and pile the additional costs not centrally funded directly on to their council tax payers. The greatest reform required will be in the mindsets of elected councillors who must face up to the fact that money will not be available for every project that they would wish for, and that their local residents here in South Tyneside and beyond will be looking for lower cost services with higher value, efficiency, less “empire building” by extremely well paid officials, and a lower tax local economy geared for growth, as this writer to The Shields Gazette almost alludes to.

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Written by curly

February 4, 2010 at 1:27 pm

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