Tag Archives: council-tax

What do the Scottish Greens and Guido have in common?

Both today are calling for Land Value Taxation, or at least they seem to be.

The Scottish Greens certainly are. Municipal tax reform in Scotland remains in deadlock and dependent on at least one other party agreeing with the principle of local income tax. That seems unlikely at the moment, even if the Lib Dems capitulate over the SNP’s insistence of greater centralisation (which does not look likely; what would they gain except appalling policy?).

Meanwhile, Guido is raving about the reprinting of Fred Harrison’s Boom Bust: House Prices, Banking and the Depression of 2010 (Guido also pats himself on the back at his prescience for predicting the housing crash in September 2007; modesty prevents me from mentioning that my first blog post on the subject was July 2006 and frankly I could have told you what was going to happen a long time before then).

Fred Harrison? You might remember me linking to this video earlier in the year. Harrison, aka the renegade economist, is a keen exponent of land value taxation and regards it as a crucial tool in the armoury against boom and bust cycles (actually, as the video indicates, he goes a lot further than that).

So yes Guido, Gordon Brown was very very wrong. But somehow I doubt your mate Gideon Osborne is going to be interested in Harrison’s prescription. The son of a baronet and Shadow Chancellor for the Conservative Party, it is his job to protect vested interests, not challenge them.

Was Monday the beginning of the end of the Cameron bubble?

By rights, it should have been. The Tories are in a total mess over the economy. I have to admit, I held my peace on Sunday over this idea about having the Bank of England step in when banks get in trouble. It sounded pretty much identical to what the government is doing now, only with even less oversight, but I felt that I must have been missing something obvious. 36 hours of listening to the empty soundbites emanating from the mouths of Cameron and Osborne and I can safely say it is every bit as vacuous a policy as I thought it was.

Ditto this idea for an Office for Budget Responsibility. We live in an era where the government ignores its own watchdog regarding compensating the people caught up in the Equitable Life scandal; why should they worry about another quango wagging its finger at it?

This issue also threatens to divide the party. Hardliners are unlikely to take this lying down. At a stroke, Osborne has directly contradicted two of the main principles behind Dan Hannan and Douglas Carswell’s much vaunted “plan” – specifically:

* Devolving power to the lowest practicable level
* Replacing the quango state with genuine democracy

Quangos are now the panacea for everything while localism has been completely abandoned. As Carswell and Hannan like to remind people, they speak for a growing number of Tories these days, Tories who thought all that stuff about Cameron representing a new kind of Conservativism actually meant something. All that has been trashed now.

I actually got it wrong yesterday. I assumed that the Tories would underwrite a council tax freeze if inflation was running at 4-5%. Inflation may well be at that point if the Tories seize power at the next election (I hope not, but a massive interest rate cut now looks likely), yet Osborne only committed himself to a 2.5% freeze and even that was contingent on local authorities making cuts in their own public spending. So he isn’t willing to commit to public spending cuts at a national level but he is willing to impose them on perhaps the most efficient arm of the state, local government. Clue, anyone?

But perhaps the greatest indictment of the Tories on Monday was the video below. Highly reminiscent of Spinal Tap (note the shots of people sleeping during the speech – approx 1 min into the video), Osborne and Cameron manage to come across as feckless amateurs who are treating the whole thing like a jolly lark:

Seriously. Does anyone watch that video and not think “novices”?

See also: Sara Bedford, Jackie Ashley.

Osborne calls for more centralisation

That is the effect of calling, similar to Alex Salmond, for a two year council tax freeze. Ploughing national revenue into local government may sound attractive in the short term, but in the longer term it means even less fiscal autonomy. Given this will be happening during a higher than average period of inflation, we’re talking about a real shift here. My rough calculations put that as representing local government going from raising £1 in every £4 it spends to nearer £1:£5. How can the Tories continue to claim to be localists?

Localism: the first big test?

The battlelines over localism are being formed in Scotland. What happens there directly affects the debate over decentralisation in England.

I haven’t been following this closely but my understanding is this: the SNP, which over time plan to replace council tax with a system of local income tax, have worked out a deal with local government whereby local authorities agree to freeze council tax in exchange for a very significant reduction in ringfencing by the Scottish executive. Labour are now hopping up and down making scary predictions about how this will hurt vulnerable people.

In a sense, they both have a point. Local government in Scotland as well as England has very few revenue raising powers and any squeeze will necessitates cuts being made somewhere, and it would not be surprising if the quietest voices had their funding cut the most. But Labour’s solution to this problem is simply to clobber local government with red tape, not to give it more freedom.

There’s another factor that needs to be considered as well: electoral reform in local government last year and the huge numbers of balanced councils it has produced will mean that this year’s budgets will be under more intense scrutiny than ever before. If Labour wishes to defend the vulnerable, by and large they will have their chance, but in the council chamber not Holyrood.

On balance then, I side with the SNP here. Sadly, if Labour are like this in opposition, it doesn’t bode well for getting localism out of them in government either.

Cunning stunt? Buy a calculator

A few days late on this one, but I have been meaning to follow up on this article about Grant Shapp’s cunning stunt over the Christmas holidays:

“Our plan would build more houses than the Government. But the way to do it is not to do it in a centrally planned way. That has always failed.

“The way to do it is to incentivise communities to want to build houses. It works by saying, ‘build these houses and you get a new town centre or other services like a hospital or school.’ The existing community gets the gain, not just those people who move there.

“If people knew that council tax receipts were kept for five or 10 years if they took houses and therefore council tax was lower, they would often be in favour. This way you are building up an array of benefits from being a Yimby, not a Nimby.”

No-one is disputing that if communities had incentives to develop, all things being equal they probably would. But perhaps Mr Shapps ought to buy himself a calculator if he intends to make this incentive reliant on council tax receipts. Because while only a fraction (a quarter to be precise) of local authority revenue is raised from council tax, new developments will continue to have net costs associated with them, not net benefits.

If the Tory policy is for council tax to shoulder a bigger burden of local tax revenue, it’s news to me, and I’m sure it will be news to the millions of people who are unlikely to welcome a massive tax hike to the tune of thousands of pounds. And it must be news to Caroline Spelman and Eric Pickles who have spent the past two-plus years denouncing any attempt of government to even contemplate revaluation by coming up with scare stories about taxing “nice views“.

If Shapps truly wants his dream of creating incentives for new build to become a reality, he’s going to have to be a bit more radical than that. It won’t happen without a significant tax shift onto land values. That isn’t something that David Cameron, Gideon Osborne and the other members of the Tufty Club behind the New Model Tories are likely to contemplate, no matter how many times Grant sleeps in a cardboard box.

Shapps of course must know this; he’s seen how Osborne has been inflated to the point of being hailed the new messiah by the Right for suggesting (modest) cuts in wealth taxes after all, which makes his stunt seem all the more hollow. Almost as hollow, in fact, as this claim:

Mr Shapps points out that the real losers were the Lib Dems whose second place was a foretaste of the disarray that eventually claimed their leader.

W-O-W – this is amazing stuff coming from the man who claimed he had proof that the Lib Dems were running a “poster lottery” (which has subsequently earned Iain Dale the immortal nickname Pravdale) and whose hands appeared to be caught stuck in the YouTube cookie jar. Cunning stunts indeed. Without wanting to revisit old battles, let’s just make one thing clear: just as the Lib Dem’s victory in Dunfermline and West Fife in 2006 had nothing to do with our lack of a leader at the time, winning Ealing Southall would have done nothing to save Menzies Campbell’s job. He would still have quit this autumn. For Shapps to claim that one of the greatest Tory fuckups of 2007 was in fact a bold act of regicide on his part is immodest even by his standards.

It’s nice to see him begin his political rehabilitation however. It is clear he has learned nothing, which suggests that we will have a second chance to have some more fun at the expense of this legend in his own lunchtime before too long.

Clegg’s Council Tax proposals make no sense

I’m afraid my brief excitement that Nick Clegg was about to ditch local income tax proved to be groundless. As Valerie pointed out, he spelt the policy out on the Guardian website earlier this week. At least I think he did:

Mr Clegg added that he is committed to replacing council tax with a local income tax, but that he wants to cut council tax for low- and middle-income families by introducing a progressive tax on those living abroad (sic – is it me or are those two clauses contradictory?).

He plans to raise £1bn from non-domiciles to fund council tax cuts for millions of households. His proposals include taxing non-domiciled taxpayers at 10% on their overseas income, in a system similar to that used in the US.

I think the idea of a tax like this on non-doms is an interesting idea, but it isn’t a progressive tax, it’s a flat rate. Secondly, if he’s committed to scrapping local income tax, why this extra policy which will only add confusion to what many regard as an already complex set of proposals?

The argument seems to be that it will take a while to introduce local income tax and we should to this in the meantime. But it will take a while – pretty much the same while – to introduce a tax on non-doms. The argument against going straight from council tax to a form of land value tax has always been that it will “take a while”; indeed the party remains committed to a land value tax in the long term. So why not just do the switch in one fell swoop and leave local income tax out of it altogether?

Clegg’s proposals also seem to contradict one of the fundamental reasons why the Lib Dems are calling for council tax to be scrapped. If the rate that a family pays in council tax is so good at determining whether they are of low- or middle-income, why scrap it at all? I thought the Lib Dem argument was that it is a regressive system? The fact is that outside of Wales, Council Tax has not been evaluated since 1991. People selling houses often find the property leaps up two or more bands once the sale is completed. What Clegg is suggesting here is a system that will benefit an awful lot of people who are currently under-taxed.

These proposals contradict the Lib Dem commitment to increasing the amount that local authorities collect locally. What he’s suggesting is a national tax to subsidise a local tax – in short, that we should go the other way.

In short, this is a mess. The truth is, there’s actually very little you can do to offset a tax that will only raise £1bn that sounds impressive; raise personal allowance by a few quid? The temptation is always to focus on those small taxes that actually raise very little but which cause the public a disproportionate amount of upset – see Gideon Osborne seeking to slash inheritance tax for example. You could do a lot with it on the spending side, but we’re not supposed to do that these days.

Ultimately, this policy is a mess and the way Clegg has presented it is a mess and it is axiomatic of the sort of thing that is all too frequent in Lib Dem policy making: a policy bite which doesn’t accord with our broader strategic vision. I’m sorry if it is “purist” to suggest we need less rather than more of this sort of approach, but that’s my view.

Is Nick Clegg about to ditch local income tax?

Discussing Clegg’s interview with David Mills of GMTV Sunday earlier, it occurred to us that the following quote has potentially enormous implications:

Nick Clegg: Er, yes, but I mean there are other ideas. For instance there are other ideas, I mean for instance I’ve also this week been floating ideas for how I think we should introduce a 10% tax on the non-domestic earnings of so-called ‘non-doms’. In that particular case that raises about £1 billion. I would like that to go to alleviate the burden of Council Tax on those in Band A and band B properties, those on the lower rung of the property ladder, if you like. But it’s just an example of where we can be creative in trying to find that extra money in order to fulfil that pledge, and I’m absolutely confident that we will under my leadership make that fixed pledge by the next general election.

Is this just idle blue skies thinking (which you surely must never do on a TV interview) or a hint that under Clegg the Local Income Tax policy is to be scrapped or at least adapted so that council tax will remain in the picture for the foreseeable future? Because you can’t alleviate the tax for low bands if you are going to scrap the tax altogether.

Is this an unintentional slip, revealing an agenda to move the party away from its existing LIT commitment? He was apparently quoted as saying nice things about site value rating earlier this week although I don’t have chapter and verse. Is a pattern emerging?

Speaking personally, such a shift would be fantastic: despite all the wobbles it could even win my vote (notwithstanding details, etc). Amongst many other party members though it would probably be about as popular as drinking a bucket of cold sick.

This isn’t an issue to be trifled with. If Clegg is thinking along these lines, mere hints will not be good enough. He would have to press it home. It would be a high risk strategy of exactly the kind that so many of us have been calling for him to adopt over the past few weeks.

Dare to do it Nick; you know you want to! 🙂

Tories (and Lib Dems) in a Pickle over Council Tax

Eric Pickles is getting his knickers in a twist about new government guidelines that suggest that “double glazing, central heating and fixed kitchen units” should all be taken into account when adjusting council tax on the basis that (gasp!) they might affect the value of the property.

The reason for this doesn’t really have much to do with the general evilness of the government. It has far more to do with the fact that, um, council tax is a tax which is at least supposed to be based on a property’s value. And who introduced this state of affairs? Why it would be Mr Pickles and his chums in the Conservative Party.

If the Tories are opposed to property taxes, they should propose scrapping them. To propose never revaluing property again is to say that people who live in houses which have, relatively speaking, devalued in recent years should subsidise the winners of the property market. If you don’t like the invasive nature of government inspections, then this is yet another reason for a land value tax – which isn’t based on things like your kitchen or your windows but on the land values which are externally calculated.

But of course they’d never advocate such a thing: it is hard-wired into their genes, as Lloyd George would be able to tell you. Sadly, the Lib Dems are similarly averse to taxing land values, preferring to tax labour instead, which is why Andrew Stunell here becomes a strange bedfellow with Pickles.

For some sanity, we must cross the Atlantic for a sensible editorial in the Philadelphia Inquirer:

Dutiful city taxpayers’ real grievance is with the high percentage of property-tax deadbeats, and with the city for not doing more to collect back taxes, which now amount to more than a half billion dollars, according to Hallwatch.org.

While this new wave of assessments should leave the city property tax system less out of whack, it isn’t the best fix.

The reform commission proposed the better ideas in 2003: A new citywide valuation at full market value (instead of the current, wildly confusing fractional system) and a gradual move to a two-tiered system of taxing land more aggressively than the buildings on it. This “land-value taxation” encourages smart growth while discouraging speculators and slumlords.

Scotland decides, er, what?

Okay, I admit: the Scottish results have got me stumped.

It was the list results that did it. My expectation was, and the polls appeared to back me up, that the Greens were on course to get about the same share of the vote that they had before. Instead, they were wiped out. The Tories were down on list seats as well. So, of course, were the Lib Dems. What stopped the Lib Dems from making no losses was a whopping 4% dip in the West of Scotland, which apparently cost us an MSP.

Why was this? It was already being mooted that the new ballot paper design would harm the smaller parties as people might think they had to vote for “Alex Salmond” AND “SNP” rather than split their ticket. This may well have been a large factor, and the Greens (and other) may need to reconsider their strategy of only fielding list candidates. But in an election with 100,000 spoilt papers, one can’t help but suspect that they were robbed.

The final scores on the doors at least means that the Lib Dems have been spared one particularly nasty decision: the combined SNP/Lib Dem vote is 3 short of a majority. Even if the Greens threw their lot in, that would mean a majority of 1, which isn’t exactly a delicious prospect. Adding Margo Macdonald to the mix might help, but her price would no doubt be pretty high. I could be proven wrong, but I can’t see Nicol Stephen wanting to join such a precarious executive. That doesn’t however mean the SNP wouldn’t be able to negotiate a multi-option referendum, which if they want an independence vote is pretty much their only option now.

I can’t see them getting a majority in favour of Local Income Tax either, unless they come up with some kind of compromise. Imaginative municipal finance reformers might want to consider a package that includes the localisation of a proportion of the existing income tax combined with a land value tax to keep the Greens happy. But maybe that is me disappearing into a Georgist Wonderland.

I suspect the promise to scrap the Graduate Endowment has rather more chance of getting through, which is a shame because I happen to think the Scots don’t know when they are onto a good thing here.

In short, compared to what was widely predicted, it is Labour that seem to come out as the unlikely winners of the Scottish election. Going from 50 seats to 46 is nothing in the grand scheme of things. They can now spend 4 years in opposition making life as difficult for Salmond as possible. Either way, every single decision made by the Scottish Executive will be subject to a degree of scrutiny that we are simply not used to in the UK. That can only be a good thing.

A Taxing Question: Do Lib Dems want the Youth Vote?

Tony VickersA poll by the Hansard Society to coincide with the local elections in May had the Liberal Democrats winning the Youth Vote: 30% of 100,000 pupils in over 200 schools voted Lib Dem, with Labour and Greens tying on 25% and the Tories on 15%. National policies such as free tuition fees and opposition to the Iraq War probably account for it, but the Lib Dems could be about to squander this support. The reason is an unlikely one for the Party that still sings “The Land” at its annual conference: the virtual abandonment of any domestic property tax. Continue reading A Taxing Question: Do Lib Dems want the Youth Vote?