Council tax farce
12/01/2010
Politicians may be gearing up for the General Election, but there is a conspiracy of silence about council tax in the two main parties vying to form the next Government. Although it continues to hit hardest the millions of people on low and fixed incomes, council tax is a taboo subject. Yet it is an unfair tax because it is based solely on the size of the property you live in and not the size of your income.
So the National Pensioners Convention and many individual Forums of older people are calling for local services provided by councils to be funded through national taxation, rather than partly coming from council tax. At the same time we need a fairer tax regime with the most wealthy in the country pulling their weight, tax loopholes closed, collecting the millions in unpaid tax due from companies and super rich individuals.
In the financial year starting April 2010, councils in England will receive £76 billion that central government raises from general taxation - an increase of £3.2 billion. Enfield is expected to receive £118 million, an increase of £3.6 million and this will be augmented by the local tax collected by all councils - in Enfield’s case about £120 million - and all councils have been ordered to keep any increase below 3%.
So council tax only provides a proportion of the money spent by local authorities. Nationally, it is about 13p for every pound spent by the average council. And we argue it is possible to replace this comparatively small contribution with a small adjustment in the rates of income tax which would, at the same time, save all the time and money spent on collecting council tax.
In Enfield’s case, we believe it costs over £2 million a year just to collect council tax and that works out at more than £18 for each of the 120,000 properties in the borough. Ending council tax would also eliminate the need to assess and grant rebates to some 35,000 Enfield households.
In addition, abandoning council tax would save the council having to send in the bailiffs to collect the money from more than 9,000 Enfield homes in each of the last three years. So far in this financial year, with still four months of the financial year to go, the bailiffs have been sent in to 6,316 Enfield homes to collect council tax.
Enfield has a good record in collecting around 98% of council tax due and more than 99% in rates paid by business, but it still spends time and money chasing debts of some £24 million in council tax and nearly £3 million in business rates.
Council tax is an easy and convenient way for government to collect money and because houses don’t move the yield can be calculated in advance. But the system assumes that the value of your house is related in some way to the disposable income available to the occupants. But we know that many elderly people, in particular, can be asset rich in the house they have worked to pay for, but are now income poor.
Income tax, on the other hand, means that everyone pays according to their earnings or their unearned income. It is based more on one’s ability to pay than on a property’s value which may bear no relation to one’s income.
The present system is unfair because local authorities are in a straitjacket.
They are told how much they will get in grants from central government and told how much they can raise locally which in turn reduces our opportunity to press for an expansion in local amenities, social and care services.
There would, of course, be winners and losers in having an alternative money-raising scheme for local government services based on income tax, but this would fluctuate as people’s financial circumstances changed whereas the current system means that a person’s ability to pay is solely based on the value of their house as levied in 1991.
The real gainers would be some five million or so pensioners who are so poor they are currently exempt from income tax - but still have to pay council tax.
If that is not an anomaly, I don’t know what is.
Monty Meth