Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 220-239)


11 MAY 2004

  Q220 Mr O'Brien: So this unfair campaign then, the council tax, does it apply to parish councils?

  Mr Lacey: I do not think it does, because the sort of increases you are talking in terms of at parish level are going to be a 10% increase on £50 a, year: two pints of beer a year increase, and if they know that is going to be spent on improvements to the village hall kitchen or providing swings and slides, directly, immediately to their benefit, they will do it.

  Q221 Mr O'Brien: Why should that 10% go on education, or social services?

  Mr Lacey: I cannot explain why they might object to that. The figures are much larger. I think that is the problem. They also feel more divorced from it. We are talking, at parish level, of local facilities, local decisions.

  Q222 Mr O'Brien: Education is local, is it not?

  Mr Lacey: What is "local"?

  Q223 Mr O'Brien: Education and social services are local.

  Mr Lacey: I am talking settlements of two or three thousand. So the one school: if we had local control by the parish council of the school that would be local. I do not suspect we are.

  Q224 Mr O'Brien: It is a question of what you judge to be "local"?

  Mr Lacey: Yes.

  Q225 Mr O'Brien: And the question of—

  Mr Lacey: That is a very difficult word, because we are called "local councils." The county council are called "local government", so the word means totally different things depending on through which end of the telescope you are looking.

  Q226 Mr O'Brien: On the question of the county council, when the county considers their budget for the year, what part does gearing play in that resolve?

  Ms Bakewell: Chris is probably best answering that, but it plays a huge part, because we are aware that if you want to put more money into social services, you want to provide more care in the community, then that is going to have a dramatic impact on the council tax, because a rise of 1% is going to work through to about a 3.5%, 4% rise in council tax; so it does have a dramatic effect?

  Mr Bilsland: That is absolutely right. I think 1% on council tax for the County Council is £1.8 million, 1% on the budget is £4.5 million. So obviously a 1% movement in the budget has a three-fold impact on council tax, and members are very sensitive to that. That means, of course, that when you get such volatility in government grant, you get huge impacts on council tax, and it is impossible to explain that to council tax payers, why these relatively small percentage shifts at one end of the system result in quite big numbers at the other end.

  Q227 Mr O'Brien: What percentage of your expenditure do you think should be raised from local taxes?

  Mr Bilsland: We said at least 50%, and a further 75% should be raised locally, and, of course, if business rates was localised that would immediately take the figure up to about 60%.

  Q228 Mr O'Brien: You are suggesting that 60-75% should be raised locally?

  Mr Bilsland: Between 50% and 75%, yes.

  Q229 Christine Russell: Can we move on to talk directly about the council tax, because those who are in favour of retaining it argue that virtually every country has a form of property tax, and also it is far cheaper to collect than income tax. Why do you feel it should be abolished and replaced by a different form of tax?

  Ms Bakewell: Because it is not related to people's ability to pay. We have seen huge rises in house prices in recent years so that young people quite simply cannot get on the housing ladder. Elderly people are staying in the houses that they moved into when they started their families, they are living in the area.

  Q230 Christine Russell: Can I just stop you at that point. You are talking about young couples. Two young teachers struggling to find affordable housing in Somerset, but still earning a reasonable above the average wage, they are not going to be any better off, are they, if we abolish council tax?

  Ms Bakewell: No, but, as I have already indicated, a lot of people are elderly and it is the elderly who are struggling. Somerset is quite a low-wage economy. We also have some people who have come into the area with quite considerable incomes who could afford to pay more. The house prices have gone up, and I think that local income tax, which would be based on people's disposable income, related to their ability to pay, I think people will see that that was much fairer. Obviously there are people at the upper end of the spectrum.

  Q231 Christine Russell: What evidence have you got for that? From all the surveys that you have done, what evidence have you got that these older people moving into Somerset are prepared to pay more in local income tax?

  Ms Bakewell: All the surveys that we have done out in the market place and door-to-door have come in overwhelmingly in favour of the abolition of council tax and the introduction of a local income tax. People can see that if they have got a low income then they pay very little, and if they have got a high income then they pay more. I think that is predicated towards people's ability to pay, and I think that is fair and people can understand that. They do not understand that it is fair for somebody, an elderly couple that live in what is now a band D or band E property because of the way in which house prices have risen, although when we get to the revaluation it will be worse for them. They are still living on very straightened circumstances; pensions have not kept pace.

  Q232 Christine Russell: In your experience are these people who are saying, "Yes, abolish the council tax", aware that if you introduced a form of local income tax every person who pays income tax, like the poll tax, will in fact have to make a contribution. It would not just be one amount per household?

  Ms Bakewell: Yes, I think they are. They see that if they have income then it is assessed on their ability to pay.

  Q233 Christine Russell: Can I ask about the Association. How do your members in general feel in Somerset? Do you want to see the council tax abolished or do you want to see it reformed?

  Mr Lacey: We are back to: what is the meaning of the word "local". Local income tax can be applied at county level quite easily. You can see the administration coping with 38 different rates, but 20,000 different rates! Therefore, can local income tax deliver to the parishes the ability to vary the tax parish by parish, which is so key and upon which they actually have security for borrowing? Without a local variable tax would we be able to continue to borrow the funds for particularly large projects? So it does strike at the heart of what is local.

  Q234 Chairman: In asking local people whether they prefer local income tax rather than the council tax, have you given them some illustrations of what it would mean on their bills? As I understand it, you are not saying that Somerset should get more money from central government, you are simply saying that the bills should be reallocated. As I understand it, someone in band D is paying at the moment about £20 a week for all the council services. If a lot of pensioners were not having to pay that £20, some groups are going to have to pay a significant amount extra on their income tax, are they not? Have you given any illustrations of what it would mean for people who are very low earners but paying income tax?

  Ms Bakewell: There are illustrations for people based on their income about what the effect of local income tax would have on them. The party has produced a document, yes.

  Q235 Chairman: "The party"—is that the council or is that the Liberal Party?

  Ms Bakewell: No, the Liberal Party. Obviously I am a Liberal Democrat. It is our party policy, so, yes, the party has produced a document.

  Q236 Chairman: The question was whether the county council had done that, as opposed to—

  Ms Bakewell: The county council, as an organisation, has not done that. At this moment in time it is still a political issue.

  Q237 Sir Paul Beresford: What is the political make-up of Somerset?

  Ms Bakewell: 29 Liberal Democrats, 24 Conservatives, five Labour.

  Q238 Christine Russell: Can I just ask you a final question, which is about second homes. I think you indicated earlier that there are a substantial number of second homes in the county of Somerset. What are the districts doing about the council tax discount on those second homes? Have they abolished it?

  Ms Bakewell: Yes.

  Q239 Christine Russell: They have. Across the county?

  Ms Bakewell: All six councils, the five districts in the county, have had a motion through the full council to implement the 90% council tax on second homes, and we have all agreed that the money will go to the local strategic partnerships, that is the district strategic partnerships, to be allocated against their spending priorities which are drawn up from their community plans.

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