Forum Brief: Council tax

Wednesday 18th February 2004 at 00:00

Former transport secretary Stephen Byers is to argue on Thursday that businesses are paying too little in council tax.

As the debate over the future of local authority finance rages, the close Downing Street ally will argue that pensioners and the poor are subsidising firms under "unfair" tax arrangements.

Forum Response: Help the Aged

Richard Wilson, incomes policy officer at Help the Aged told ePolitix.com: "Council tax rises of this magnitude, dwarfing the rises that older people have seen in their state or private pensions, will be the final straw for many. There is real anger among those who are on fixed incomes and are liable for the tax, who are seeing their quality of life whittled away by above-inflation rises. The irony is that many of these are the same people who are being encouraged to claim Pension Credit in order to be rewarded for saving for retirement, and who are seeing any benefit immediately wiped out.

"We are already witnessing civil disobedience by older people who are refusing to pay the tax in full and who are prepared to take the consequences. While Help the Aged cannot condone their illegal action, we do understand what is motivating them. There is such a deep sense of injustice that the government must act quickly to reform Council tax and to reform it in such a way as to reflect the concerns of those older people who must pay it. This means reforming Council Tax Benefit (CTB) as well. Take-up of CTB is still lamentably low and getting it to those who qualify must be a priority."

Forum Response: Institute of Directors

James Walsh, parliamentary adviser at the IoD, told ePolitix.com:"Stephen Byers is approaching the problem from the wrong end. The root cause of soaring Council tax bills is waste and inefficiency in our local authorities, not the structure of the business rate system. Only this week we heard that Sir Peter Gershon has identified £15 billion of potential public sector savings - much of it from local government. Instead of imposing a greater share of local government bills on business, policy-makers should be looking for ways to get a tighter grip on runaway town hall spending."

Forum Response: British Retail Consortium

Nigel Smith, BRC director of corporate social responsibility, said: "Retailers pay over £4bn per annum in business rates - a quarter of all collected and more than their fair share. Furthermore, this is set to rise by at least 11 per cent in 2005.

“Government is squeezing more and more from retail rather than solving their own problems. There is even talk of reintroducing local business rates – a system which proved a massive failure in the past.

“This is a totally unjustified attack on the retail sector. We not only pay more than our fair share of local and national tax, but also serve the needs of local communities in a number of other ways such as job creation and participating fully in town centre management.

“Byers should stop seeking others to blame for the muddle that the government he was once part of has made of local government funding."

Forum Response: Federation of Small Businesses

David Bishop, Deputy Head of Parliamentary Affairs at the FSB told ePolitix.com: "Britain's 1.6m businesses will be contributing £19bn to the public purse this year through business rates compared to the £18bn of council tax contributed by 22m householders. For this businesses do not get a vote, they do not get a say in how councils are run and in many cases they do not even get their refuse collected for free. Some difficult decisions need to be made on local government finance but small firms must not be seen as an easy way out."

Forum Response: Local Government Information Unit

Kevin Morton of the Local Government Information Unit said: "The generalised idea from the Institute of Directors and others that councils are all responsible for waste and inefficiency, and enjoy run-away spending, flies in the face of reality. Local government efficiency compares well with that of Whitehall, quangos and the private sector. Moreover, councils are accountable to all in the community through the ballot box on the basis of a one person, one vote franchise.

"One sad symptom of the present council tax crisis is the repeated ministerial threats to cap councils, even some rated as 'excellent' by Whitehall. Ironically, these councils were promised greater local freedom and less central direction.

"A fairer council tax requires more than the addition of extra tax bands in the 2007 revaluation. Within the tax itself, and through the council tax benefit system, there must be local flexibility to protect those on fixed or modest incomes just outside benefit entitlement levels whose homes have risen sharply in value. They must not simply be moved into a higher band with even heavier bills.

"In London, for example, the average property price is now over £250,000. The council tax band defining the average house price - currently 'band D' - should, for London, now start considerably higher than the £68,000 to £88,000 range that it was given for England in 1991.

"Despite this year's increases, central government grant still fails to bridge the longstanding gap between what councils are required to provide and the money available to do it, even for Whitehall's priority services. This, and the restricted revenue-raising options available to councillors, has loaded pressure on householders through the regressive council tax.

"Increasing this burden further has been the relatively falling contribution of the business sector towards council spending since 1990, when the business rate was nationalised and pegged to inflation. Localising control of the business rate would be a huge leap towards councils raising most of their income locally, curbing the tendency for small variations in a council's spending, or in government grant distribution, to cause disproportionate fluctuations in taxpayers' bills. It would broaden councils' revenue raising options, easing the burden on householders.

"Along with a fairer balance between business and domestic taxation, a reformed council tax must strike a similar balance between wealth held in property and income. Through such reform ministers could resolve their own dilemmas over capping, avoiding awkward questions about what local services they deem should be cut, as councillors answered to local electors, and local priorities, for their budgetary decisions."

Wed 18th Feb 2004

Forum Brief: Council tax

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