Business rates look set to rise to pay for council profligacy 2

Corin Taylor Economics 101

A worrying piece in the Telegraph’s business section states:

"Business is facing a series of Government tax raids to pay for the increasing cost of public services.

MPs from all parties on the Commons Local Government Committee last week threw their support behind additional business rate taxes that could raise £1.5 billion.

At the same time, the Government is increasing taxes and levies on smaller companies, employment, business vehicles and waste, adding to operating costs.

The taxes and levies include:

A new tax on the owners of small family companies that pay themselves using dividends. It may mean couples in business together have to pay another £9,000 a year in tax.

A 16pc increase in the rate of corporation tax paid by small companies is being phased in. It was announced by Gordon Brown in this year’s Budget.

Local authorities are planning road pricing, vehicle pollution charging and even workplace parking taxes.

On 1 October, around 6m people will begin to gain longer statutory holidays – costing business up to £4.4bn, mainly in wages.

Also on 1 October, the National Minimum Wage will increase to £5.52. It has risen by almost 10pc in the last two years.

New skills training levies have been proposed to ensure more employers train staff.

A new form of planning gain tax is being considered to ensure more developments are caught. One favoured option has been put on ice but Gordon Brown wants alternative proposals to be ready for the pre-Budget report in December.

The tax on waste going to landfill sites is rising by £8 a tonne from next year until 2011, effectively doubling the cost of dumping waste in the ground.

Compulsory employer pension contributions will hit from 2012. Under current proposals, firms will have to pay 1pc of salary from the first day that a new member of staff begins work, rising to 3pc of salary by 2014."

All this extra tax revenue is funding central and local government’s insatiable appetite for more spending. An alarming statistic is given: business rates have increased in real terms since 1991, but have fallen in proportion to the total amount spent by local authorities from 29 per cent to 20 per cent.

Local government has enjoyed huge amounts of extra revenue from its three main sources over the last decade – business rates up by more than inflation, council tax doubled, and a massive injection of extra cash from central government, paid for out of general taxation.

The simple question begs itself: what are they doing with all this money? In some cases, cutting services and increasing charges: weekly bin collections reduced to fortnightly, social care for the elderly reduced, fewer meals-on-wheels and new or higher charges for sports facilities. In other cases, paying themselves inflated salaries, as the TPA’s Town Hall Rich List showed.

Both council taxpayers and business rate-payers are being royally ripped-off by many town halls. It is time to call them to order.

Corin Taylor

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These additional taxes make a real and significant difference on the everyday lives of people everywhere, but not a jot of difference on improved service delivery. This insasatiable appetite for money means people won’t be able to afford to go on holiday, buy a newer, safer, greener car, or help look after elderly relatives. Measures like this will not only deter new enterprises from being set up, but drive some of the success we currently enjoy overseas. Central and local government would be well advised to concentrate on better spending the already enormous amount of money it takes each year before taking even more to cover past mistakes.This is the only way to create a ‘success culture’ in the public sector, and also offer some much needed relief to the long-suffering taxpayer.
Acorn

If the long suffering taxpayer has a mind too, have a look at PESA 2007, a treasury publication at, http://www.hm-treasury.gov.uk/media/E/B/pesa07_complete.pdf
Particularly tables 5.4 and 5.5, which give you a split between what central government spends and local government. You will see that local government is spending £141 billion, 26% of the government total. Council Tax and Business Rates together, will fund about a quarter of local government spending. We are doomed, there is no way back to sanity from here.