Memorandum by Mr Colin Aiken (LGR 06)
1.1 Council Tax (CT), in its present form
has come to the end of its acceptable life and needs to be replaced,
in full, with a new fairer system. At the heart of this new system
must be the core principle that the amount of tax paid by the
individual must be based on the individual's ability to pay from
their disposable income.
1.2 A property based tax is outdated and
causes hardship to the many. Asset rich cash poor, low and/or
fixed income individuals and families are hardest hit. It enforces
reliance upon benefits and is a regressive tax. The underlying
assumption that the value of the property in which an individual
resides reflects their ability to pay is invalid.
1.3 The current system is being manipulated
for political reasons and is now being used as a "stealth
tax". Many people now consider that there is positive discrimination
against those who live in the south. This is wrong and is an abuse
1.4 Only those responsible for the property
(owners and tenants) are liable to pay CT. However, everyone within
the community is entitled to benefit from the services provided
eg police service, fire service and local amenities such as parks,
libraries and sport facilities.
1.5 Annual rises in CT have always exceeded
RPI. Since its introduction in 1993, CT has increased by 112.6%
(source ONS). The year 2003-04 saw an average rise of 12.9%! This
is unacceptable and caused uproar and protests across the country.
Government imposed increases in spending must be supported by
equally appropriate increases in the level of Government funding.
1.6 A fairer and more cost effective system
of local authority funding is possible by using the existing systems
of Income Tax (IT) and VAT. If the basic and higher rates of IT
were increased by 2% and VAT by 1.5%, then Council Tax could be
completely abolished. Some of the benefits of this are:
Every qualifying individual would
contribute, and this contribution would be based on their ability
IT and VAT are accepted and easily
They are both difficult to avoid
Established methods of anti fraud/avoidance
and collection already exist.
Cheaper to administer and collect
(cost saving to be passed on to the tax payer).
2. WHAT IS
2.1 Government grants should provide sufficient
funding that allows local governments to meet their spending commitments
in full without placing unreasonable demands upon their local
council tax payers.
2.2 Central Government dictates approximately
80% of local government spending. This should be fully covered
2.3 The application of Resource Equalisation
must be ceased.
2.4 The amount of grant should be sufficient
enough to ensure that any increases in council tax bills is limited
to no more than the annual rate of inflation.
3. IS THE
3.1 Due to the application of Resource Equalisation,
which is a euphemism for redistribution, the answer will be either
"yes" or "no" depending on where in the country
3.2 For the south, the answer is definitely
"no". The people who live in the south are discriminated
against as funds are redistributed to favoured areas in the midlands
and north. Effectively, people in the south are taxed twice for
their local services.
3.3 The balance of revenue raised should
be split 80/20: the 20% to be raised locally. As mentioned in
paragraph 2.2, Central Government must fund, in total, all dictated
4. SHOULD BUSINESSES
4.1 The return of business rates, in full,
to local authorities is considered highly desirable by many. Potential
Closer bond between business and
Can be used to offset council tax
in full (the total amounts raised are the same. Source ONS).
Local government would have a greater
incentive to attract new businesses into the area.
4.2 Not all areas are the same though and
this brings with it a new set of issues to deal with. For example,
rural areas with low levels of businesses versus urban areas with
high levels of businesses. The business rate income would be hugely
4.3 Additional bureaucracy and costs of
collection would be incurred. These could be largely mitigated
if council tax was abolished.
4.4 It has to be recognised that potential
conflicts of interest could become an issue, particularly if business
leaders and local government officers are one and the same.
4.5 The CBI is very much against this (source
BoF Minutes 8 January 2004, paragraph 2). It says "Locally
set business rates did not work before. Business had to invest
major time and effort in the system but input to local consultation
had little impact on the level of rate set. The system resulted
in significant costs to business with no discernable benefits.
Instead the relationship between business and local authorities
was damagedthe legacy of this has been significant. The
frustration of business with this system led to lobbying for change."
5. IS THE
5.1 The answer to this question is quite
5.2 It is not viable because:
80% of local authority spending is
dictated by Central Government but they do not provide funds to
cover this cost in full.
Resource Equalisation discriminates
against those living in the south.
Government abuse the system by using
it as yet another "stealth tax".
It does not take into account an
individual's ability to pay.
Being based on property value, it
does not reflect an individual's position of wealth.
Only property owners and tenants
are liable to pay this tax, whereas all local residents benefit
from the services provided.
Council Tax is a regressive tax which,
in turn, deepens the benefit trap and adds to the benefit bill,
given that the great majority of those receiving benefit live
in homes in the lowest bands.
The gearing effect causes excessive
upward movement in the amount levied, year on year.
5.3 The adequacy of council tax varies across
the country. In areas that benefit from Resource Equalisation
then the answer is probably "yes". However, this is
based on a false situation. Due to Resource Equalisation, people
in the south are not only paying for their own local services,
but also part-financing the cost of local services in the midlands
and the north.
5.4 The mindset of local government must
change. It is too readily accepted that costs and spending must
always rise, year on year, with no regard to inflation. This was
clearly laid out in the recent Audit Commission report where they
found that the average 9% increase in spending, whilst justifiable,
was not always unavoidable.
5.5 Due to the abuse of the Council Tax
system, many decent, law abiding citizens now treat it with contempt.
In response to the unacceptable increases, many have refused to
pay, and others continue to do so. Court cases highlight this
fact. It is sad that Government has turned its own electorate
6. WHAT OTHER
6.1 The short answer to this question is
"none". We have an opportunity for change here. Change
for the better. To even consider introducing yet more taxes is
beyond belief. People want less regulation and bureaucracy, not
6.2 This question clearly stems from the
announcement made recently by the LGA. After all the furore and
protests over the last year, in response to the disgraceful increases
in CT for the year 2003-04, it was disappointing, to say the least,
that the LGA has even considered more taxes.
6.3 The suggested raft of new taxes clearly
demonstrates that the LGA have either not listened to the electorate,
or are contemptuous of their wishes. It clearly demonstrates and
proves beyond all reasonable doubt that the LGA do not represent
or care for the views of the electorate.
6.4 The suggestion of:
a reformed property tax with more
relocalisation of business rates;
26% of national income tax or the
equivalent as Local Income Tax;
local vehicle excise duty;
local stamp duty on property transactions;
more charges for services;
charges for utilities street works;
local congestion charges;
6.5 The introduction of any of the suggestions
in 6.4 would result in some of the following:
duplication of bureaucracy;
inflation (higher prices);
increased collection costs (more
staff, more "non jobs", more benefit costs);
legal theft (tax on house sales);
more waste (money raised would be
spent on collection costs, not for the benefit of the local community).
6.6 It is a sad reflection on the leaders
who put forward these suggestions. With all due respect, it shows
how entrenched attitudes are, that there exists a clear lack of
vision and the opportunity for real change has not been grasped.
6.7 Two very basic questions have not been
Do people want all these taxes?
Can the people afford to pay any
more new taxes?
I suggest that the answer to both of these questions
is "No", based on the very many discussions I have had
with those who would be affected.
More importantly though, before even getting
to the thought of new taxes, was the following even considered:
"How can we cut our costs in order to make
better use of our funds?"
7. SHOULD THERE
7.1 Of course there must be limits to expenditure
funded by taxation. You cannot spend more than the taxpayer can
reasonably afford to pay. However, the bulk of local government
spending is dictated by Central Government, and can be as high
7.2 Central Government must fund properly
all demands it imposes on local authorities for spending. National
policies and standards have to be delivered into the local areas
by the local authorities as agents for Central Government. They
have no choice, unless they want to incur fines.
7.3 Any local spending over and above that
specified in 7.2 should be restricted to no more than the annual
rate of inflation. The taxpayer does not have limitless funds.
7.3 Local authorities should continue to
draw up their budgets, and then consult with the local people
regarding the acceptance of these. A representative group of tax
payers could exist within each district. These groups would have
the power to challenge and change budgets where they do not represent
the wishes of the local people.
7.4 At County level, setting the budget
can be agreed during public meetings. The electorate would be
involved, have the opportunity to give their input, recommend
changes and finally vote on the acceptance.
7.5 This approach has key benefits:
councillors remain accountable for
the electorate are involved and engaged
in the decision making process;
better understanding of spending
needs and requirements is achieved;
any increases in costs are already
agreed and accepted before they are announced; and
trust and respect between the electorate
and councillors is improved.
8. TO WHAT
8.1 This question has already been answered
in previous answers throughout this document.
OTHER RELEVANT TOPICS
9.1 There is a false belief by local councillors/officers
that in order to be locally accountable, then they must have tax-raising
powers. Local councillors/officers are accountable to the local
community for the way they execute their duties. See paragraphs
9.2 How the funding is provided that allows
LAs to carry out their duties is a completely separate issue.
9.3 There exists a lack of trust between
Local and Central Government. This results in protection of position
which becomes paramount. Furthermore, it creates a culture of
blame between Central and Local Government. For example, the débâcle
of blame over council tax increases last year, and particularly,
the effect it had on schools. The electorate knew exactly who
was responsible and both Local and Central Government lost credibility
and trust with the electorate by deliberately playing the blame
9.4 There also exists a lack of trust between
the electorate and both Local and Central Government. To consider
giving LAs even more tax-raising powers would be unacceptable
to the electorate.
Colin A Aiken