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The truths they don't want you to read....

Monday, August 06, 2007

Council Tax to be frozen?

The report in today's Herald suggests that the impact of freezing the Council Tax at current levels will cost £420m. How many better ways are there to spend such an enormous sum?

Probably 420 million.

The Council Tax may well be discredited, but the National Local Income Tax promises to be worse; and although many have nay-sayed my views, no-one has actually challenged the figures I have produced, and how they will severely adversely affect the people of the Western Isles.

But the intention to freeze the figures is a spectacular misjudgement on many levels. There will be plenty of credit to the Executive in the short-term for their stance, but it betrays a lack of thought of the long-term political impact.

Councils get a lot of flak for every Council Tax increase, and I guess that they will for once get the credit for any stand still in the bills.

But the real damage will start to occur in the three years of stasis. Every Council budget cut, every saving that has to be made, and every hard choice, will be blamed on the Executive cutting the budgets, as they seek to make up the £420m shortfall. If you were the Councillor having to close a service, of course you are going to blame someone else - it's not quite the first skill you acquire, but close to it.

But that is going to be as nothing as to the next stage. The Executive introduce the NLIT, and there are two choices:
1. Find another £210m each and every year to keep bills low, or
2. Dramatically increase the NLIT bills to recoup the losses to date.

Well, I think we can rule out option 2; meaning that instead of expecting small sums from the public each and every year, the public sector will now face largish cuts each and every year for a quick and easy (and short-lived) political gain.

And then the losers in the new NLIT - such as the people of the Western Isles - start to scream, and we have some kind of balancing mechanism to prevent large increases or decreases in payments, meaning more bureaucracy, confusion and inevitably more cost to the taxpayer. Just before the next election. Good thinking!

Factor in the Comprehensive Spending Review (i.e. cuts) due to be approved by Gordon Brown shortly, which will result in large cuts for an SNP lead Executive (but, as I said before, without any political fingerprints on the whole decision making process), and suddenly the budgetary process looks complex and precarious. Just before the next election.

Oh, the political innocence of it all.

3 comments:

Anonymous said...

One of the biggest problems with council tax is that government has been able to suppress income tax rises by reducing (or not increasing sufficiently) grants to local govt. This means that councils have had to bear the brunt of national tax freezes by reducing services or raising council tax.
Another of the problems has been the way that council tax makes no distinction as regards a person's ability to pay so a pensioner couple pay the same as their next door neighbour whose income may come from several adults. The fact that council tax was tied into a very tight banding system where the highest band cannot be more than 3 times more expensive than the lowest band meaning that any increases that try and target the wealthy are also going to affect many more people in less valuable properties.
SO the NLIT will be based on peoples earned income and will better reflect the ability to pay. It would be better if loopholes were tied up (e.g. based all income).
As someone who lives in a band B house and receives25% discount as sole occupier I would be better of with a NLIT rate up to 6% however even if the rate were set at 7.5% I would be happier paying NLIT than council tax because there would be others less able to pay who would be benefitting. That's a great step towards socialism.
Your previous assertion that the Western Isles would be subsidising areas of greater wealth does not stack up. Conversion to NLIT would require that councils are not worse off. This would mean that councils would have to receive the a grant from national govt that ensure its income does not reduce because of reduced local income. Places like the W. Isles would then be subsidised by places of greater working population.

Angus said...

Nobody is disputing that an Income Tax is generally fairer than the Council Tax.

Generally, as there is one enormous gaping loophole in the outline legislation that (professionally) I intend to encourage my clients to exploit, and which I will publicise in due course.

Conversion to NLIT would require that councils are not worse off.
This is an extremely naive statment. At what level will 'equality' be set? With the second lowest bills being in Shetland - where they are kept down by use of the Oil Fund - do you really believe that the Executive will underwrite any increase?

Anyone remember the "Special Islands Needs Allowance"? The Comhairle still gets it, but it's impact has been virtually totally eroded by inflation, changes in the basis of calculations and deliberate policy changes. Any 'subsidy' would be temporary and would disappear as quickly as the Executive can manage.

Places like the W. Isles would then be subsidised by places of greater working population.
I assume you mean areas with higher average incomes.

Generally speaking, Bearsden will subsidise Maryhill, which is excellent and fair.

Anyone got any idea how people resident outside Scotland, second-home owners, and those who use a mailing address in England to avoid a Scottish Income Tax will be charged?

I don't have a clue who they intend to do this. Mohammed Al-Fayed lives in the Black Isle. Will he pay a Scottish LIT, or will he claim to live in London (or abroad) and avoid paying any contribution to Highland Regional Council?

Look at your payslip or tax coding notice, and see if it has "/S" at the end of the reference. If so, you are liable for Scottish LIT, based on your post code. Tell the Inland Revenue you now live your brother in London and watch your Scottish LIT liability disappear.

Anonymous said...

'Conversion to NLIT would require that councils are not worse off.
This is an extremely naive statment.'
Maybe naive but I would expect that any changes from the current system of council funding would have to ensure that councils are not left with either a shortfall or a need to cut services. If a LIT is set by national govt, then it is up to national govt. to ensure each council is able to meet its obligations.
And yes I do see that we can end up in the same trap as we have now where national govt. tells council that it must live within its means (translation: this is all the funding you're getting this year you decide what services you have to cut).
How much council tax does M Al F pay at the moment?
'Generally, as there is one enormous gaping loophole in the outline legislation that (professionally) I intend to encourage my clients to exploit, and which I will publicise in due course.'
Perhaps - come the revolution - accountants should up against the same wall as the lawyers! (a vague attempt at humour - honestly)