(Local) tax needn’t be (but is) taxing

10 Points!

Like many people up and down the country we received our council tax bill this week. What was strange about it is that it was higher than last year’s bill. This was despite our local council taking their share of Eric Pickles’ council tax freeze grant and thus promising their residents a 0% increase in council tax.

So, what happened to our council tax bill?

Well, the police and fire service happened.

The Conservative Government have promised residents that they will not pay any more council tax and have emotionally blackmailed local authorities to ensure that councils mortgaged their financial future to deliver on this promise. Unfortunately, local tax is so complicated that despite Mr Pickles’ bluster it was going to be very difficult to actually freeze the amount we would all pay. Chief among those challenges was the police precept.

The police precept is a funny thing. The average member of the public would probably feel quite pleased about the cost of it; after all it is a lot smaller than the amount we pay for our local council tax. As with council tax this is all a mirage. The police precept no more pays for the police than the council tax plays for council services.

The precept is funny in many ways. Unlike other taxes it is raised not by councillors or senior politicians but by unelected police boards that supposedly represent the local community but in reality are of marginal importance in local democratic life. The Government do recognise this and the move to elected police commissioners is meant to provide some democratic accountability.

However, I’m not sure if electoral control of the precept is part of the solution rather than part of the problem. The precept will always be of marginal importance to the police budget and yet increases in it, to be material, will always have to make a big dent in people’s council tax bill.

Oh yeah, and if the police precept is not confusing enough many council tax payers will have four or five lines on their council tax bill. Parish councils and Boris, complement the mix of district councils, metropolitan councils, fire brigades and police precepts.

How can we ever expect people to make sense of their local taxation, and the linkage between that taxation and the services it is meant to deliver, when the taxation itself is so complex?

Council tax alone would not pay for council services; much like the precepts would not pay for the services they purport to represent. Equally, council tax has become a totemic issue for political parties on all sides of the spectrum and thus there is little motivation to really address the complex patchwork of taxes and financial transfers that make up local funding.

Meanwhile, as if the local funding situation is not complex enough local businesses are being faced with a 5.6% increase in business rates this year. At a time when the Government is keen to keep taxes low and is willing to go ‘all in’ to ensure that local councils freeze council tax the rise in business rates seems somewhat incongruous.

I don’t know the way out of this but right now local tax is definitely taxing.

Welovelocalgovernment is a blog written by UK local government officers. If you have a piece you’d like to submit or any comments you’d like to make please drop us a line at: welovelocalgovernment@gmail.com

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2 Comments on “(Local) tax needn’t be (but is) taxing”

  1. Andrew H Says:

    Been like that for years. In my revenue collection days (more than ten years ago) I worked for a District Council which collected the tax on behalf of the County, police and fire. Every year in March people rang up to shout at me about ‘Your Council’ raising the level of tax. I had to point out that in percentage and indeed cash teams the District Council’s rise was the smallest of all of them – and the police had the biggest percentage increase. Then they would tell me it was all right for me as I didn’t have to pay council tax as I worked for the Council. If only …..

    More seriously we’ve tried a tax on property value (General Rates), a tax on people (Community Charge/Poll Tax) and now have a hybrid property tax on bands of property value and reduced if there is only one occupant. The main problems are a refusal of Governments to allow the council tax bands to be increased to today’s values (see moany article in Saturday’s Guardian, with no useful reform suggestions) and Governments reducing grants so council tax is the only revenues stream left. The option is local income tax – which if collected by HMRC leads to a loss of local control, won’t be as simple as council tax and may result in a possible reduction in collection rates. (In year council tax collection rates average 97.3% 2010-11 DCLG data; Income tax possibly 93% or lower 2009-10 as far as I can work out from a NAO report.)

    So like democracy, is council tax the worst option other than all the others tried?

  2. I spent several weeks working out all the details of implementing a Local Income Tax back in 2003. HMRC have everybody’s details and what local authority they live in. It would be simple to administer, and remove the costs of Council Tax Benefit. I think I worked out that the revenue collected by Sheffield then was the same as a 1.75% LIC in Sheffield. But of course, people would shout it down – how DARE!!! you suggest raising my income tax!!!! I *LIKE* paying only £800 on my half million pound house.
    When I left the council two years ago I spent several weeks shovelling all my old paperwork into the bin, and I can’t really work up the enthusiasm to do it all over again in the stubborn face of the whole world refusing to consider doing something to reform the system.

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