The Business, Innovation and Skills Committee joined the growing chorus of Business Rates critics yesterday, describing the tax on business premises “not fit for purpose.” Just last week, the former Chief Executive of Tesco, Sir Terry Leahy said that the “ancient” system should be reformed and “probably scrapped” because it hasn’t worked for years.
Indeed, in the Mirlees Review the Institute for Fiscal Studies demonstrated some of the shortcomings of a system which discriminates between different sectors (agriculture is exempt for example) and distorts production decisions.
The on-going furore about how much multinationals pay in Corporation Tax is perhaps the best illustration of how the changing, increasingly global economy has rendered some of our old-fashioned taxes obsolete. The committee suggested a separate system of businesses taxes for the retail as so much shopping now takes place online. This may be true, but there are simpler ways to improve Business Rates.
Our 2020 Tax Commission recommended that control of the tax (specifically the multiplier) should return to local authority control and that they should keep the proceeds. This would give local authorities a direct stake in the success of local businesses and encourage competition between authorities.
At the Autumn Statement in December, George Osborne announced a range of piecemeal, targeted measures to give businesses (some more than others) some respite from relentless rises. They usually go up in line with the Retail Prices Index, but inflation was above-target for four years until February, and this has hit businesses hard. In 2012-13 alone they faced a whopping 5.6 per increase, so a rise of 2 per cent instead of 3.2 per cent is scant consolation.
At the budget in two weeks, if George Osborne cannot significantly overhaul the system, he should take action to lighten the load on businesses. He should cut, or at the very least freeze Business Rates.
Reacting to the report in this morning’s Independent that the Government has dropped plans to allow voters to petition for a recall ballot if they feel their MP has let them down, Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, said:
“If the reports are accurate, it is deeply depressing that the Coalition Government has done a U-turn on recall. Establishing the right of voters to petition for a recall ballot when they feel their MP has let them down would be a powerful accountability mechanism to keep our elected representatives on their toes.
“The measure was in the Conservative and Liberal Democrat manifestos and then enshrined in the Coalition Agreement, so its abandonment is an arrogant move which will only serve to distance the political elite even further from the voters they are supposed to be representing.
“There is a profound irony that the ditching of a commitment which would have gone a long way to restoring public confidence in the political process will only add to voters’ cynicism and distrust of politicians.”
Reacting to the Shadow Chancellor’s proposals to reintroduce the 50p rate of Income Tax, Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, said:
Reintroducing the 50p rate would be an unmitigated disaster for Britain. It flies in the face of the evidence, which shows that cutting the top rate has brought in more cash to treasury coffers and boosted the economy. Ed Balls has rightly identified the need to balance the books, but the best way to do that is to cut spending, not hike taxes.
Essex County Council is set to hike council taxes by 1.49 per cent this year, in order to raise an additional £2.9 million. This means that the Council, which receives 73p in every pound of Council Tax paid by Essex households, has also lost the right to a central government grant available to councils who freeze taxes or keep increases beneath 1 per cent.
This tax increase is an unnecessary imposition on households that have seen the cost of living spiral in recent years as a result of high taxes, stagnant wages, expensive housing and botched government energy policy. Essex could save millions of pounds by cutting wasteful spending instead.
Over the last three years, Essex County Council has spent £50.6 million on external consultants, and £39.6 million on temporary staff. That’s a shocking £90 million, or £30 million a year.
The Council spent £3.3 million on an extra lane on the A176 near Basildon Hospital, in order to ease traffic congestion – a move branded a “huge waste of taxpayers’ money” by Councillor Kerry Smith who pointed out that the problem could be solved for much less by removing a pedestrian crossing instead.
It spent £2.3m on ‘compromise agreements’ over the last 6 years. These have been condemned as an attempt to gag outgoing employees by opposition leader Julie Young, who branded the move “excessive”.
In addition, 36 Essex employees received over £100,000 remuneration in 2011-12. Pruning this back would save taxpayers a packet.
Councillors might consider reading the TaxPayers’ Alliance’s report on 201 ways to cut council tax, which recommends sharing services and personnel, combining senior management posts of finance director and chief executive, freezing recruitment, and considering the formation of unitary authorities out of county councils and their numerous districts.
75 per cent of county councils are planning to hike council tax this year. With central grant funding for councils falling by 43 per cent over the life of the current parliament, critics have warned that without extra revenue, vital local services will be underfunded and councils pushed towards failure.
However, supporters of high government spending have been increasingly shown to be wrong, with six out of ten local residents telling a recent ICM poll that their services had either stayed the same or actually improved since budget reductions.
Hammersmith and Fulham Council has managed to cut council tax by 20 per cent since 2006 by sharing services and staff with neighbouring councils, and selling unused council-owned buildings.
There are literally tens of millions of pounds worth of savings that could be made without cutting a single library, care home, bin lorry or policeman. Essex County Council should spare a thought for thousands of hard-pressed Essex families and think again before hiking taxes.
Over the weekend we exposed that HS2 Ltd, the body charged with delivering the unnecessary and expensive white elephant, has already wasted an eye-watering sum of taxpayers’ money. Using publicly available data on the Department for Transport website, we revealed that HS2 Ltd has already spent well over £300 million on external payments.
Only the first ten months of data is available for 2013, but it is clear that there has been a massive escalation in HS2′s spending. Between January and October of 2013 HS2 spent £170 million. Of course a large scale project of this nature will incur external costs, but the scale and nature of much of this spending suggests incredibly lax spending controls at a time when government must relentlessly cut waste and ease the burden on taxpayers. In fact, even if you thought the grandiose rail project was justified by its incredibly weak economic case, you would still question many of the items detailed in this spending binge.
This data is made available each month on the DFT website but in order to facilitate scrutiny of HS2 Ltd, we’ve collated every month’s data and put it into one spreadsheet.
You can download it here. As new data comes available we will update the document.
Thanks to TPA analysis of the data we know HS2 is rather fond of spending taxpayers’ money on PR and lobbying. In just 10 months of 2013 it spent over £1 million on PR, external lobbying and media. I’ve written before about HS2’s dodgy PR work , and no amount of spin is going to improve the case for the line.
Speaking of spin, the new HS2 chief executive has been in the media today as part of the latest PR push for the project. “It’s going to be delivered quickly and that costs are going to be controlled” he said. At the same time ministers announced a new further education college to train the next generation of engineers to work on the construction of high speed rail (although no mention of how much that will cost or whether it will be added to the ever expanding HS2 budget).
Here’s just a few of the areas we’ve questioned in recent HS2 spending:
This is just a few examples. If you spot anything else in the data then do leave a comment below.
New figures have revealed that 819 mandarins and quangocrats (excluding local government) earned over £100,000 in 2013, costing taxpayers more than £100 million. The highest paid public official is Ian Nolan, Chief Investment Officer at the £2.7 billion Green Investment Bank, who earns £330,000 a year.
The Green Investment Bank, which employs five officials on over £250,000, is supposed to make up the shortfall in green energy investment to meet unrealistic, draconian targets which will require £200 billion spending this decade. Bad energy policy has already degraded Britain’s once competitive energy market and pushed up bills through stealth taxes which cost each household £200 a year. The Green Investment Bank is not the answer to our energy woes and should be scrapped.
The quango with the most members of staff earning more than £100,000 is NHS England which has more than 300. This comes at a time when the NHS is attempting to make £20 billion in efficiency savings and recover from a number of damning reports into the sub-standard care at some trusts.
Its outgoing chief executive, Sir David Nicholson is currently paid £214,000. He is due to retire this year with a £2m pension pot.
HMRC, the UK Border Agency and the Serious Fraud Office have all faced scandal and repeated failures over the past few years, but still see fit to spend vast amounts of money on officials’ bloated salaries.Other highly paid officials include Denis Hone; former chief executive of the Olympic Delivery Authority, who earned £310,000; and Bernard Gray, Chief of Defence Materiel at the Ministry of Defence, who earned £220,000.
Forty officials enjoyed pay rises in 2013, despite George Osborne’s supposed public sector pay freeze. The average pay for British CEOs and senior officials is £120,830, but here we see public sector officials earning many times that.
Eric Pickles has opened up a new front in the war on council waste by issuing new guidance for local authorities to publish key spending data. The new transparency code will be mandatory for all councils whose gross income exceeds £6.5 million.
Councils will be required to publish spending on corporate credit cards, money raised from parking charges, trade union facility time, contracts and tenders, property assets, and grants to voluntary and community groups. There are of course some councils who do publish this data, allowing residents to scrutinise what is being done with their cash, but too many local authorities need to vastly improve their transparency.
Spending over £500, transactions on government cards and procurement information for values over £5,000 would be published quarterly under the new rules. Details of officers’ salaries over £50,000, land and assets owned, and grants to voluntary, community and social enterprise groups would be published annually.
The TaxPayers’ Alliance has led the way in pushing for greater transparency in local government, with its Town Hall Rich List, and reports on taxpayer funding of trade unions, empty property rates and councillors allowances. Much of the data that will now be published has previously only been available thanks to TPA reports like our research into local authority middle management pay.
Allowing taxpayers to access more data on how their money is spent will hopefully make councils more accountable. With local government required to find further savings, it has never been more important to know how your council spends your money.
A recent poll found that 75 per cent of councils plan to respond to reductions in central government funding by hiking Council Tax, rather than cutting waste and bureaucracy. Yet six out of ten people polled in a recent ICM survey thought that their local public services had improved despite spending cuts. Councils can cut spending without cutting services.
Clearly there is a significant gulf between the opinions of the people paying the bills and the politicians who are meant to represent them. Ensuring councils make their spending public ought to concentrate the minds of councillors on the wishes of the people who elect them.
Mr Pickles said that:
“Councils need to make sensible savings to help freeze Council Tax and protect front-line services. This new wave of town hall transparency will empower armchair auditors to expose municipal waste – from surplus offices and corporate credit cards to trade union ‘pilgrims’, and help councillors drive down costs. Greater power for local government must go hand in hand with greater local transparency and local accountability.”
In the last two decades, councils have become bloated at our expense. It’s time they let you know what they have been doing with your money.
The new transparency code will strengthen local accountability by empowering local people to identify wasteful spending. It is a real exercise in giving power to the people.
Jonathan Isaby of the TaxPayers’ Alliance issued the following response to today’s announcement by IPSA on MPs’ pay:
In recommending this pay hike at a time when wages are stagnating for millions across the country, IPSA has demonstrated itself to be not fit for purpose. This unaccountable bureaucratic monster of a quango, which was supposed to help restore public faith in Parliament after the 2009 MPs’ expenses scandal, has in fact just succeeded in turning the clock back four years.
He also commented on the revelation that IPSA spent more than £70,000 on opinion research seeking the public’s view on MPs’ pay, only to completely disregard it (see notes to editors for details):
It beggars belief that IPSA felt it an appropriate use of taxpayers’ money to run up a bill in excess of £70,000 on opinion surveys, citizens’ juries and focus groups. But it is beyond contempt that IPSA completely ignored the very research which showed the public to think that MPs’ pay is currently ‘broadly fair’. The body which ought to be representing the interests of voters and taxpayers has unceremoniously put two fingers up at the lot of us.
The IPSA website reveals two payments to COMRES for “Consultation MP Pay & Pension” of £33,273 and £37,593 on 10/05/2012 and 29/06/2012 respectively. See the spreadsheet “Expenditure over £25,000 – 2013 (updated to November” at http://lowtax.es/1bGvIJ0)
Reacting to reports that IPSA are to propose an 11 per cent pay increase for MPs, Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said:
“It is totally unacceptable to hike politicians pay just as families across the UK struggle with stagnant wages and rising prices.
Taxpayers will be furious that the pay rise comes at a time when MPs urge public pay restraint and the Chancellor tells us he can’t afford to ease the burden of taxes on hard-pressed households and businesses.
IPSA’s own polling and research shows that the current level of pay to be broadly fair and that the public simply do not back the increase. This
announcement amounts to an unaccountable quango putting up two fingers to taxpayers. The rise must be rejected.”
At the TaxPayers’ Alliance, we strongly oppose the big increase in MPs’ pay proposed by the “IPSA” quango. We have set up a petition which you can sign below to support action to scrap the proposed pay hike and ensure that there is proper accountability for future decisions over MPs’ pay. We will send the petition to MPs and IPSA, as part of our response to their consultation.
On 5 November 2012, we launched our ‘Freeze Business Rates’ campaign with the British Retail Consortium, and since then thousands of our supporters have written to their MPs urging them to support a freeze in business rates. It was disappointing to say the least that in his Budget earlier this year, George Osborne didn’t listen to not only us and our supporters, but also to people like Ian Shaw from Rochdale. Mr Shaw was forced to close his Fish and Chip shop a few months ago and cited the cripplingly high business rates he had to pay as the main contributory factor. If the Government genuinely wants small businesses in particular to thrive (at the weekend, George Osborne said “small firms are the lifeblood of our economy”) it cannot continue to punish people like Mr Shaw.
It has been widely reported that the Chancellor is going to announce in his Autumn Statement tomorrow that the rise in business rates next year will be capped at 2 per cent. Although a cap is better than a 3.2 per cent increase, it does not go far enough. Business rates went up 4.6 per cent in 2011, 5.6 per cent in 2012 and 2.6 per cent this year, and the very least George Osborne could do is freeze them next year.
Businesses cannot pay tax, no more than a car, a television, or a house can. Just because Council Tax is levied on your home doesn’t mean your home pays the bill. You do, and business taxes are either passed on to consumers through higher prices; employees through lower wages; or, as in the example I gave earlier, businesses may not be able to survive the crippling costs of business taxes. They may be forced to close their doors for good, and have to make their staff redundant.
So come on George, give businesses a break and commit to a freeze in business rates for at least the next two years.
Hammersmith and Fulham Council will cut Council Tax for an impressive seventh year out of eight next year. This represents a cut of 20% since 2006, and a return to a low level of tax last seen in 1999. Whilst the average cost to UK households in Council Tax has doubled to £1,439 per year, Hammersmith and Fulham plans to reduce its Band D rate by 3% to £735.
The cost of housing and energy has put more and more pressure on households in recent years, and with 75% of county councils reportedly planning to hike Council Tax, the cost of living is only set to keep going up. So it is great to see a council granting its residents a real reprieve from the cost of living crisis.
Hammersmith and Fulham shares £300 million of its public services with the Royal Borough of Kensington and Chelsea and Westminster City Council. Together they will have saved £43 million a year by 2015/16.
They have reformed the way services are delivered – less as a direct provider and more as a commissioner of services. This has included outsourcing street cleaning, parks maintenance, human resources and finance support. It has also encouraged its staff, and other local voluntary groups providing services, to set up staff mutual and social enterprises to improve efficiency.
They have reduced their debt by £100 million since 2004 by selling unused council buildings, like Fulham Town Hall, Hammersmith Irish Centre and Shepherd’s Bush Village Hall. This represents a nearly 60% reduction in debt, which has further eased the burden on taxpayers by cutting back on debt repayment.
Cutting Council Tax represents a real saving for hard-pressed families. Too often, advocates of higher government spending ignore those who are squeezed by an oppressive tax burden.
The government will have cut central grant funding for councils by 43% by 2015. Profligate councils and the anti-cuts brigade have fiercely opposed spending reductions. They claimed that local services would suffer, communities would be left poorer, care for the vulnerable would be slashed, and jobs would be lost. All that has been missing from the critics’ rhetoric are the four horsemen of the apocalypse.
Local Government Association Chairman Sir Merrick Cockell recently said “uncertainty and risk which will put even more stress on vital local services and push councils toward failure.”
But as the cuts have been implemented, the critics have been increasingly proved wrong. Six out of ten people in the UK feel that the quality of their local public services has either not worsened or actually improved, according to a recent ICM poll.
The message is clear: spending cuts work. Sensible spending reductions, paired with significant tax cuts, are popular as well as the right thing to do. And the public know this.
Our ‘201 Ways to Save’ report, authored by Cllr Harry Phibbs of Hammersmith and Fulham, highlighted a number of ways councils can save money. They can share services with neighbouring councils, freeze recruitment, combine executive staff roles and publish corporate credit card use. They can buy supplies in bulk rather than at various prices for the same product.
Other councils must follow the example of Hammersmith and Fulham. Hiking Council Tax while many families are still struggling to get by is an insult and should not be tolerated.