Many local authorities are using the excuse of cuts in central government grants to increase Council Tax. But some are actually getting on with delivering good services without reaching into taxpayers’ pockets for even more cash.
The City of Westminster has frozen council tax for the sixth year in a row. Taking inflation into account, this amounts to a 23 per cent real terms cut over six years. The freeze will give Westminster the lowest Council Tax in the country and has been made possible by outsourcing, sharing senior staff with neighbouring councils and trimming direct funding of the arts.
Why not use the greater efficiency of the private sector to deliver public services? It is a complete mystery. Westminster also achieved substantial savings by merging administrative jobs with neighbouring Wandsworth and Kensington & Chelsea – what are other councils waiting for?
When is a tax not a tax? When it’s the “Bedroom Tax”, which is in fact a change to housing benefit and not a tax. Campaigners, charities and Ed Miliband have thrown this term around to describe the Government’s recent proposals to reclaim some of the Housing Benefit given to those claimants that have a spare room. As Guido points out, giving someone less in Housing Benefit because they have a spare room is a welfare reform or a benefit cut, but not a tax (regardless of what you think of the measure).
Just in case we’re not clear what a tax is, here is how the Concise Oxford English Dictionary that sits by my desk defines a tax:
A compulsory contribution to state revenue levied by government on personal income and business profits or added to the cost of some goods, service and transactions
So why has a benefit reduction, been labelled a tax? It’s all about the politics of language.
These days raising taxes is seen as a bad thing by all but a few committed ideologues, so labelling something a tax is designed to inspire opposition. It is designed to make people think that the proposals will mean ordinary homeowners face higher bills. As Mark Wallace (formerly of this parish) points out, the fact that many campaigners for higher spending (and in the end higher taxes) now accept that raising taxes is seen as a bad thing is actually very good news in the long run.
So, after you’ve cut through the spin, we’re left with the question: is reducing benefits for under occupancy the right thing to do? In principle yes, but it won’t address the fundamental problem of housing shortages and there are dangers the authorities need to address. The aim of the under occupancy charge is to stop a precious resource like council houses being underused. It is right to do something about the problem of scarce council houses not being given to those who need them the most.
There are some who still believe that a council house should be for life. It is tough to ask someone to leave where they have lived for the last ten years is, but when there are families of four and five queuing up for three bedroom properties how can we justify someone living in a council house with two spare rooms? Clearly there is a balance to be struck, and people should be encouraged to move on when they can.
The taxpayers paying for the system also need to be treated fairly. For many people, the idea of a spare room seems like quite a luxury. Most people my age (myself included) need to live with housemates and rent a room, let alone afford their own place and a spare room. So why should the benefits system provide a better standard for those in receipt of housing benefit than the people paying for those benefits enjoy themselves?
There is a serious risk that undermines the incentive to work.
The under occupancy charge may make the social housing system a little fairer but it only tackles the symptoms of the problem, not the cause. The real problem we face is that we aren’t building enough homes. With taxes depressing people’s income as well, that makes property very hard for many families to afford. Until the Government gets serious about cutting taxes and making it easier to build new homes, these reforms will just be a sticking plaster. There is an absolute thicket of regulation that does nothing but create an administrative burden and slow development, which they could cut away to increase development.
Those opposed to this new welfare reform will campaign against it aggressively. They will find some cases where, if it is applied too inflexibly, the reform creates real hardship. That’s why there should be a hardship fund which has been announced. But all those cases will show is that there does need to be some room for discretion at a local level, not that we should continue to abandon reforms that can make the whole system fairer and more affordable for taxpayers struggling to manage their own finances.
Reacting to David Cameron’s speech on the economy, Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance (TPA), said:
“The Prime Minister is absolutely right that easing the heavy burden of taxes is the best way to help families struggling to make ends meet. But he needs to do more than talk about the need for low taxes. He should ease the enormous pressure on people’s budgets by cutting taxes which depress their wages and increase the prices they pay at the shops.
“If staying the course means pressing on with a vain attempt to raise enough taxes to finance a public sector spending nearly half our national income, it will just mean going down with a sinking ship. The Government should be fiscally responsible, but our deficit is a result of politicians spending too much, not taxpayers paying too little.”
Earlier this year, TPA research showed that the Government has implemented or planned 299 separate tax rises but only 119 separate tax cuts during the course of this parliament. You can read the full report here.
A new book by TPA Research Fellow, Mike Denham, has been published today which exposes how wasteful spending and poor public sector performance is costing taxpayers as much as £140 billion per year.
Many people enjoy hitting their local high street and spending their hard-earned cash in their favourite stores. However, rising business rates are posing an increasingly serious threat to more and more local shops.
These rates are a massive burden and are a major bill which businesses have to pay regardless of whether they are making the money to pay it.
For example, I checked out how much my little neighbourhood bakery in South London has to pay in business rates. I found via www.gov.uk that this small business gets an annual bill for over £5,000 – on top of all the other costs of running the business.
These high costs deter many from setting up their own business.
At a time when the Government is calling for the private sector to step up to the plate and help the economy return to growth, freezing business rates would be a simple way to support businesses. Freezing these rates would be a great way of letting firms grow, prosper and create new jobs.
Research published this week by the Forum of Private Business, Tax priorities for the Coalition, found around 95% of all business owners feeling that the levels of business rates are too high, while two thirds saw no benefits for the amount of money they were taxed. So what can be done to help the shops on our local high street thrive?
We are working with the British Retail Consortium to make the case as to why business rates should be frozen. The website www.FreezeBusinessRates.org has been set up to allow people to contact their MP and ask them if they are going to stick up for small businesses by calling for a freeze in business rates.
So if you want to support local businesses then please do visit the website and urge your MP to back the campaign.
Writing for the Spectator Coffee House blog Matthew Sinclair argues that a Mansion Tax would be an ugly political gesture and a huge burden on those forced to pay while the idea that capital income is ‘unearned’ is beneath contempt.
The Government is expected to raise around £550 billion in tax revenue this financial year. The Centre for Policy Studies estimates that a mansion tax (of £20,000 on properties of £2 million), would raise at most £1 billion, less than 0.2 per cent of revenue. The tax is, however, likely to weaken the market and reduce prices – reducing receipts from other taxes; so even the CPS’s static analysis is probably optimistic.
This proposed tax would be a huge burden on those forced to pay. The rate is not 1 per cent of the property’s value. The standard lifetime of a lease on a new build is 125 years, over which time the government will have confiscated 125 per cent of the value of a £2 million property. And there will be people who own a £2 million property, but can’t afford the £20,000 a year fee. It would be an ugly political gesture that forced them to sell their homes.
The TaxPayers’ Alliance has been running an important campaign – with new research, a viral video and the StopFundingArgentina.org e-petition – to stop British taxpayers’ money being used to support loans to Argentina. We called on the Government to join the United States and other European countries in voting against new loans. In a response to a written question from Rebecca Harris MP, Secretary of State for International Development Justine Greening announced the brilliant news that our representatives will be doing just that:
Rebecca Harris: To ask the Secretary of State for International Development what her policy is on voting financial support to Argentina in (a) the Inter-American Development Bank, (b) the World Bank and (c) other multilateral development banks of which the UK is a shareholder. 
Justine Greening: I have instructed the UK’s representatives at the Inter-American Development Bank and World Bank to vote against all new proposals for financial support to the Government of the Republic of Argentina presented by these institutions, while reserving the right to support proposals that can demonstrate exceptional benefits to the poorest people of Argentina. These are the only Multilateral Development Banks (MDBs), in which the UK is a shareholder, from which the Government of Argentina borrows.
The UK must ensure that the scarce resources of the MDBs are used as effectively as possible to foster development and economic growth. In light of recent actions by the Argentine Government I am no longer confident that further investments in Argentina would be consistent with these objectives. The actions include the failure to comply with the World Bank’s International Centre for Settlement of Investment Disputes rulings; failure to agree to standard IMF Article IV surveillance since 2006; and the recent IMF censure, the first of its kind, as a result of continued failure to remedy breach of data obligations under the IMF Articles of Agreement, seriously undermining our ability to properly assess proposed future loans by the MDBs. This position will be kept under review, subject to the future actions of the Government of the Republic of Argentina and its compliance with its international obligations.
Thank you to the MPs who have helped secure this important change, including Henry Smith, Nigel Adams, Derek Twigg, Andrew Rosindell, Priti Patel, David Ruffley and John Spellar, and the other signatories of EDM 185. Thank you to journalists at the Sun, the Daily Mail, the People, the Daily Express and other newspapers that helped expose what was going on. But, most importantly, thank you to all of you who signed the e-petition at StopFundingArgentina.org. This is a great example of how energetic campaigns can make a real difference.
The Government have announced that, instead of increasing the threshold for Inheritance Tax to £1 million as they promised, the threshold will be frozen. That will mean more and more people paying unfair death duties, on money that has already been taxed. Allister Heath wrote for the Daily Telegraph this morning about the economic damage done by Inheritance Tax. The final report of the 2020 Tax Commission looked at why the tax is so unfair and unpopular.
The Daily Telegraph has revealed further, hidden costs to the taxpayer of high-speed rail. Now council taxpayers who live along the proposed route will be expected to cough up even more for the white elephant. With each family in the UK already paying well over £1,000 for the benefit of a privileged minority, this will come as an unpleasant surprise.
Information hidden in the fine print of a Department for Transport document released last week reveals that contributions would be expectd from those ‘parties who would benefit directly from opportunities and development.’ Businesses and developers could also be expected to chip in.
Taxpayers in Manchester, Leeds, Nottingham and other settlements along the route can expect to be hit with higher Council Tax bills as local authorities attempt to find the extra money. The project was originally expected to be funded entirely from central government tax receipts.
The TaxPayers’ Alliance has continually drawn attention to the flawed business case for HS2 and its hidden costs which will make the final bill at least £17 billion higher than the government claims. As our research has demonstrated, HS2 assumes average business passenger income of £70,000 and relies on a 27 per cent over inflation rise in fares – both of which are unrealistic.
As our chief executive Matthew Sinclair said last week, ‘the HS2 business case just isn’t credible and ministers aren’t being honest about the hidden costs or flawed projections that the project is based on.’
The Royal Borough of Windsor and Maidenhead is looking to continue its recent tradition of delivering tax cuts for hard-pressed residents. Council Leader David Burbage proposed a substantial reduction of 3 per cent in the next financial year. It is the fourth year in a row that the Council will have delivered a tax cut for its residents should it pass. What’s most impressive about it is that it has been achieved through a continuing drive against waste and bureaucracy.
They’ve managed to budget for a 3 per cent cut by reducing top-level management costs, through tougher negotiations on contracts with suppliers and other efficiency savings. It has been done without increasing fees and charges for residents or delving into reserves. Refreshingly, the council also reject the ‘spend every penny’ approach. They have planned to add last year’s £1 million underspend to the reserves in the event of a rainy day, rather than frittering it away.
Windsor and Maidenhead has demonstrated that more spending doesn’t necessarily mean better services. Finding lots of small savings – to partner big-ticket savings – can deliver substantially reduced Council Tax bills, a welcome relief for people in the area. Taxpayers need their councils to be more like Windsor and Maidenhead and less like the numerous authorities across the country currently looking at Council Tax hikes.
We’ll be out in Manchester city centre on the 16th February protesting about tax increases in the Greater Manchester area. We’d encourage you to join if you can.
Hammersmith and Fulham Council announced a 3 per cent cut in Council Tax today, the sixth cut in the last seven years. The latest cut reduces the average “band D” council tax bill by £23.44. Since 2007, Council Tax in H&F has fallen by 17 per cent, saving residents a more than welcome £667. Despite what some local authorities would like their residents to believe, a Council Tax cut doesn’t mean that services will be decimated. H&F have some of the best schools in the country, their streets are some of the cleanest in London and crime has fallen significantly over the last seven years.
Local authorities up and down the county should take note and follow H&F’s lead to make savings and deliver lower Council Tax for their residents. In 2013-14, H&F will save more than £5 million through sharing services with nearby boroughs, £2 million through reduced debt payments, £3.3 million through reconfiguring services and £2 million through cutting unnecessary jobs.
With Local Authorities due to announce their rates for 2013-14 in the coming weeks, taxpayers will be hoping their council can be more like Hammersmith and Fulham and less like Rochdale, Harrow, York or any other council planning to increase rates. Politicians in those authorities seem oblivious to the fact that cutting tax does not mean compromising on services. They just have to work harder to make savings and cut out wasteful spending.
The Government has unveiled a series of proposals aimed at limiting people’s ability to make Freedom of Information (FOI) requests. The news is concerning as the Freedom of Information Act has given taxpayers greater ability to scrutinise how their money is spent and how their services are run.
Existing laws already allow public sector bodies to refuse FOI requests if responding to them is deemed too time consuming, but the new proposals would make it easier for them to do this. As the Campaign for Freedom of Information points out, requests involving complex or contentious issues are likely to be refused if the proposals are adopted.
One particularly worrying suggestion would stop reporters from the same media group making requests that cost more than £450 in the same three month period. Under current rules it only matters how much a request costs, not how many times an individual has made requests. This idea would restrict journalists’ ability to report the facts and protect the public interest.
Although the Government feels its proposals to limit access to information will encourage more consistent use of the Freedom of Information Act and ensure better value for money, many taxpayers will feel differently.
Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance has proposed that the Government should be more proactive in publishing information so fewer requests are necessary and costs are reduced. Making the process harder, which would also make it harder to expose wasteful spending, is the wrong approach to making savings.
For a long time the TPA has been concerned about the rise in the number of professional politicians in local government who seem more keen on clambering aboard the gravy train than doing their civic duty and what’s best for taxpayers.
A symbol of the rise of professional politicians has been the increasing number of councillors who sign themselves up to the very generous Local Government Pension Scheme (LGPS). Well, today it was announced that taxpayers will be paying for councillors to join the LGPS no more as they are to be barred from being members of the scheme.
This announcement, on the day that Communities and Local Government Secretary, Eric Pickles, also announced the local government funding settlement for England, is a welcome one that reverses a decision to allow local politicians onto the LGPS made just over ten years ago.
In fact, those who introduced that change evidently felt uneasy about it, since it was announced on September 12th 2001 – the “good day to bury bad news”, as special adviser Jo Moore infamously wrote.
For several years now the TPA has been highlighting the growing number of councillors signing themselves up to the LGPS. We revealed in a paper in January that by 2010-11, over 4,500 councillors had joined the scheme.
Today’s announcement is therefore a victory for us, taxpayers and common sense.
Not that every local councillor is signed up to the LGPS: many local authorities did not allow it and often the best councillors I meet – the ones doing a good and earnest job of representing their residents and taxpayers – were totally opposed to the idea.
After all, councillors already get allowances and the idea that they should then take a pension as well goes against the grain for those who view being a councillor as a civic duty. It also didn’t send a signal that councillors were serious about tackling the huge deficits in the overly generous LGPS when they were merrily jumping on board the scheme.