Friday
The Liberal Democratic party has voted, in its annual conference, to continue with its long standing policy of introducing a local income tax in Britain as a source of money for local councils.
The media has treated this as some sort of new thing (which shows how much they know about policy matters), but I am more interested in the classic missing-the-point the whole idea shows.
The point is not whether a local income tax is a better or worse thing than the present 'Council Tax' (although an obvious problem is that in some areas most voters are below the income threshold for income tax - so under a local income tax councils might become even more out of control than they are now), the point is council spending.
I am old enough to remember the hatred the old system of 'rates" (property tax) generated, especially after the 'revaluation' of properties in Scotland.
For all the talk of details of local government finance, what most people really objected to was the level of the rates - and the increase in this tax burden was generated by the increase in local government spending.
The Conservative government of the day got rid of the rates and introduced the 'Community Charge' (the so called Poll Tax). However, opposition to the tax burden continued and indeed got worse. Again for all the talk about the structure of the tax ("it is wrong for the poor to pay as much as the rich" - although the poor did not pay as much as the rich), what most people really objected to was the level of the new tax.
I rather doubt that many people would have rioted if, say, the level of the tax had been ten pounds per person.
Local government spending went up, but people blamed the tax burden on the new tax (rather than on the increase in council spending).
Today people say (quite correctly) that the Council Tax is a terrible burden. However, (absurdly) many people are still missing the point that the tax is a terrible burden because of local government spending and introducing a new tax will not help reduce this spending.
In Britain most people talk about this or that form of local government taxation and they also talk about whether or not central government grants to local councils are fair (the Conservative party is convinced that the Labour government favours Labour councils at the expense of Conservative ones).
But, as far as I can make out, nobody talks about the level of local government spending - and it is the spending that is the root of the problem.
No, it is the link between spending and taxation that is the problem. A centralised tax system ensures that there is little accountability between councils and their electorates, especially when it can be manipulated to subsidise party heartlands.
Remove government subsidy and let councillors rip. Free them of a part of their statutory requirements. I suspect one would see a return of "economy" as a value.
Posted by Philip Chaston at September 27, 2003 11:28 AM
Can anyone explain to me why a rates revaluation would provoke howls of protest? Surely, the same amount of money has to collected (in theory) and most rate valuations will by the roughly the same proportion meaning that people (should) end up paying the same. Well, shouldn't they?
Posted by Patrick Crozier at September 27, 2003 11:54 AM
Philip Chaston writes:
"Remove government subsidy and let councillors rip. Free them of a part of their statutory requirements. I suspect one would see a return of "economy" as a value."
Sadly, this will not work. Most towns act as a microcosm of the country as a whole. The majority of the population will always vote for high services and consequent taxation because it does not have to pay the worst levels.
From what I can see, your analysis that the burden of statutory requirements is a major component of the absurd levels of local taxation in the UK is correct, but freeing councils won't solve the problem while the majority can vote itself endless supplies of lesbian awareness outreach workers and free gold plated taps for council houses, at the expense of the minority.
Posted by G Cooper at September 27, 2003 12:57 PM
Pensions commitments are the biggest problem,these will eventually exceed the entire budget of councils.Whilst there is an apparent increase in services at the candy floss end, real core services like policing and education are contracting.There will also be a real disaster when the current intake of Guardian readers take early retirement.
Posted by Peter Bocking at September 27, 2003 07:50 PM
I am not sure that the argument about smaller areas reliant on tax would wind up with a large level of services over a longer period of time is feasible. Without government subsidy and with higher taxes on companies and residents, the economic effects of higher taxation would appear quite quickly.
However, whilst a welfare state and national government services remained, they would still act as subventions for a locality aiding the development of sink areas.
Devolution of tax would have to be accompanied by the decentralisation of most services before the link between taxation and council services acquired full accountability.
Posted by Philip Chaston at September 27, 2003 11:31 PM
G Cooper
"Sadly, this will not work. Most towns act as a microcosm of the country as a whole. The majority of the population will always vote for high services and consequent taxation because it does not have to pay the worst levels"
But it's a helluvalot easier to move towns than to move countries. If Westminster has 10% income tax and Camden has 40%, off go the payers to Westminster. Result -Camden ends up with no rich to soak and then they'll either have to cut taxes or go bust.
Posted by Cydonia at September 28, 2003 10:27 PM
