Examination of Witnesses (Questions 280-296)
MS CATHY
BAKEWELL, MR
CHRIS BILSLAND
AND MR
PETER LACEY
11 MAY 2004
Q280 Mr Clelland: How many tax payers
in Somerset on your current levels of spending would be better
off under a local income tax and how many would be worse off?
Ms Bakewell: I should imagine
probably—
Q281 Mr Clelland: You do not know. Have
you done any calculations?
Ms Bakewell: No, I do not know
precisely.
Q282 Mr Clelland: So we have got a situation
where you do not know how many people are going to be affected
by this, you do not know how you are going to raise money from
the self-employed, you are not quite sure about that, you are
not quite sure about the effect on business; you are not really
quite sure about much. Why is this Somerset's policy when you
do not know much about how it is going to affect the people of
Somerset?
Ms Bakewell: It will affect the
self-employed in much the same way as their income tax affects
them now: they have to submit returns and—
Q283 Mr Clelland: Yes, but what they
will want to know is: "How much is this going to cost me?"
You do not know that, do you?
Ms Bakewell: No, not at this moment
in time.
Q284 Mr Clelland: So this is the policy
of the county council?
Ms Bakewell: It is.
Q285 Mr Clelland: But you cannot tell
the people of Somerset how it is going to affect them?
Ms Bakewell: It will affect those
who earn more. They will pay more, and those who earn less will
therefore pay less.
Mr Sanders: Are you in government and
should you know the answer to these questions? I would have thought
the obvious answer was, "No." A waste of time asking
you then!
Q286 Sir Paul Beresford: Income tax finalisation
is retrospective. Will you therefore have to have at least a one-off
increase in your balances to accommodate that?
Mr Bilsland: Possibly, yes.
Q287 Mr O'Brien: Could I ask in the first
instance, would the local income tax be carried paying through
PAYE or would there be a separate system?
Mr Bilsland: The research that
we have seen is that it could work through PAYE, and that would
be the most economic option, I think.
Q288 Mr O'Brien: So you have worked out
the tremendous costs that that would have in trying split the
local tax to the national tax?
Mr Bilsland: The costs, I think,
that CIPFA put in the Balance of Funding Review are pretty explicit—I
have not got them to hand here—about what it would cost
to run a local income tax on employers. It is an affordable cost.
It is more expensive than council tax collection, because we know
one of the benefits of council tax collection is that property
is easy to tax, easy to find, nobody disputes that, but it is
still an affordable cost in terms of the tax yield and the cost
of many other tax collections.
Q289 Sir Paul Beresford: One of the problems
with the poll tax was people with accommodation addresses. Do
you anticipate that happening?
Mr Bilsland: Sorry, people with?
Q290 Sir Paul Beresford: Accommodation
addresses. If you lived in Wandsworth it was cheaper than living
in Lambeth, so you put your name down for Wandsworth, not Lambeth?
Mr Bilsland: We still have evidence
of that with second homes, of course, where people chose which
home to tax, but people are not always chasing the cheapest possible
tax option in the way they go about running their affairs.
Q291 Mr O'Brien: Can I ask you what other
tax has been considered to be introduced in addition to the local
income tax or the council tax by Somerset?
Mr Bilsland: I think our submission
to you said that there are other taxes around, there is sales
tax, there are tourism taxes, but these are not sustainable alternative
options to council tax. These are taxes that councils might want
to introduce for different sorts of reasons, perhaps to influence
behavioural changes, but you would not see sales tax, we would
not see tourism type taxes being a big alternative option for
us.
Mr Lacey: We would see that there
is a problem if you go for the alternative sources of funding
these types of tax, that they cannot be localised to the parish
level. I think, therefore, from the parish perspective property
tax in some form is very convenient, very easy. Local income tax
can be done, but it is five places of decimals and all sorts of
problems that that will bring and the question of balances, the
question of risk—all sorts of issues will arise.
Q292 Mr O'Brien: Is Somerset fully compensated
for the service they provide for tourists?
Mr Lacey: My members would say
that the parishes pick up a significant part of the tourist costs
in terms of local provision of public conveniences, in terms of
tourist information centres, in terms of all sorts of support
that the parishes give which is not related to the people of the
parish who pay the tax. It is related to the businesses of the
parish.
Q293 Chairman: If there was a bed tax
for people staying in the village, then that would be easy to
pass on to the parish council, would it not? There would be one
or two hotels in most villages, if there was a hotel at all. They
may be able to pass it on?
Mr Lacey: I do not see a hotel
as the problem; it is the bed and breakfast that is the problem.
That is a significant part of the market.
Q294 Chairman: What about car parking
charges? They could say, could they not, it is in a sense a visitor
tax?
Mr Lacey: It is in a sense. They
tend to be with the district council rather than the parish council.
Q295 Mr O'Brien: Are Somerset compensated
for the services they provide for tourists?
Mr Bilsland: We are not as exposed
as many other tourist areas, but probably not, no.
Q296 Mr Sanders: We have been told that
the changes introduced to the formula grant system in 2003/4 were
done with a view to making the distribution of central government
grant fairer but you have called the arrangement faulty. Maybe
you can explain?
Mr Bilsland: The two big changes
we saw in those were, first of all, resource equalisation. This
was where government moved money from low spending councils into
high spending councils. The philosophy behind that government
move was councils spend more because they need to spend more.
Therefore, we need to shift resources. Areas like Somerset and
the south west generally, which are traditionally and historically
low spending councils, argued the opposite. "We are a low
spending council in Somerset because we are more efficient and
because we have to provide a low level of service because we cannot
afford to provide a high level." It seems very wrong for
us that high spending councils were rewarded for high spending
without an assessment that they needed to spend at those high
levels. The second issue was about the old chestnut of area cost
adjustment, where we have always argued there seems something
very perverse about the idea of taking money away from low wage
economies, like Somerset and the south west, and putting it into
high wage economies like London and the south east. What we saw
in those changes was not the abolition of area cost adjustments,
but we saw them extended into other areas. For example, they were
extended along the M4 boundaries. There is something wrong, is
there not, with a system where areas like Somerset, where wages
are low and seasonal, there is an assumption that, because of
that, our costs are low and therefore we can afford to subsidise
areas in the home counties or inner cities. Those are changes
which not only we opposed but the local newspaper regularly runs
letters about attacks on the west and the problems there.
Chairman: Can I thank you all very much
for your evidence?
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