The Guardian publishes today what appears to be a well-briefed article suggesting the Lib Dems are thinking of deferring plans to scrap Council Tax in favour of a local income tax:
Liberal Democrats are planning to soften their support for a local income tax to replace the council tax, a key policy for at least three elections. Instead they are expected to propose reforms to adapt the council tax.
Vince Cable, the Liberal Democrat treasury spokesman, is backing the shift in stance. He believes the party should not look to introduce, or press any coalition partners to introduce, a local income tax for at least one parliament. The shift would make the proposal a medium-term goal and serve to lift media focus on the uncertain implications for individual taxpayers during an election campaign.
The local income tax plan, defended on the basis that it is fairer than council tax, has often left the party exposed at election times.
This would certainly be a significant move – Axe the Tax has been a signature campaign for Lib Dems up and down the country for years, insulating local council groups against the unpopularity of council tax rises, and striking a chord with many voters with its easy appeal that such taxes should be based on ability to pay.
It does, of course, have its internal critics. Sue Doughty, former Lib Dem MP (and current PPC) for Guildford, went on the record to blame the policy for her defeat in the 2005 general election. And of course the Land Value Taxers in the party have never been reconciled to the concept of a Local Income Tax.
If the Guardian report is true, it marks a third shift in Lib Dem thinking in recent months, alongside the commitment to cut the overall tax burden for the low-paid and middle classes, and the likely reforms of the party’s commitment to oppose tuition fees. Of course, a political party’s thinking can’t stand still, and it’s certainly arguable that the Lib Dems’ policy development stagnated during the ‘easy years’ post-Iraq and when the Tories were in the doldrums.
But will party members view these shifts as long overdue; or camel back-breaking straws?
UPDATE (11.20am): Vince has issued the following statement:
The Liberal Democrats remain committed to scrapping the unfair Council Tax and we remain committed to introducing a Local Income Tax, based on the ability to pay and this will be a manifesto commitment. I will be working with my colleagues on how these policies can be implemented most effectively.”
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80 Comments
OMG – two weeks after I wrote a letter to the local paper pushing our stance on this!! How silly of me!
Well, it’s just a newspaper story at the moment – our policy is our policy until such stage as it’s, er, not.
Can’t we just scrap all this income tax nonsense and let Jack set the agenda?
I’m getting bored of this slowly, slowly, catchy monkey approach.
“If the Guardian report is true, it marks a third shift in Lib Dem thinking in recent months, alongside the commitment to cut the overall tax burden for the low-paid and middle classes, and the likely reforms of the party’s commitment to oppose tuition fees.”
I must have missed the “shift in thinking” over tuition fees. Can anyone provide more information?
I meant “Jock”, obviously.
The new thinking on tuition fees is that it actually has become a vote loser as graduates now look back and think ‘I had to pay why shouldn’t they’…I think…
This is fine by me. The value of your assets and your wealth should be taken into account as well as your income. All of us struggling to get onto the housing market for the first time don’t need another kick in the teeth from pensioners in 5-bed homes.
Jo:
“The new thinking on tuition fees is that it actually has become a vote loser as graduates now look back and think ‘I had to pay why shouldn’t they’…I think…”
Thanks. Any idea where this comes from? Press release? Press speculation? Word of mouth?
I think it’s purely speculation at the mo – James Graham referred to it in an essay…I think it’s just grown legs since then but I haven’t heard anything official…
“The new thinking on tuition fees is that it actually has become a vote loser as graduates now look back and think ‘I had to pay why shouldn’t they’…I think…”
Presumably introducing Child Benefit was a vote loser as lots of people looked back and said I didn’t get so why should they…
Look – count me out of the debate on tuition fees – I was so poor I never paid them and so have missed the anger I think. Restore grants yes, but fees based on the ability to pay…afraid I couldn’t give a….
So we want to cut taxes, reduce public expenditure, keep the Council Tax, and keep tuition fees. Somebody tell me I’m still asleep…
The latest Liberal Democrats suggestions for LIT (before the Guardian article)included a Land Tax. This meant that all three of the main parties were advocating a tax on property.
Any services ordered by Central Government should be funded centrally and paid for by all, not just by the council tax payer. If Government accepted this, then council tax should fall by about 75%. It is the unfairness of the present council tax system that makes the payers angry. Why should they pay both income tax and council tax for services we all use? The Grant system also needs sorting out. Is it fair that some counties recieve as little as £111 per head of population and others as much as £326 php? I think not, the Government grant should be distributed fairly and not by political persuasion.
Jo: I didn’t pay fees for the same reason, but I still think a system based on the ability of 18-21-year-olds’ parents to pay is foolish.
Which of course doesn’t necessarily mean tuition fees but could mean a graduate tax…
I really thought the theme of this posting was Lib Dems change of stance on LIT, not tuition fees.
Wake up people. Nick Clegg was hinting at this during the leadership election.
Is it fair?
Average household incomes – South East England £46,900, North East England £32,700 England and Wales Average £32,700, Winchester £55,650, North East Hamphire £63,475 Westminster £100,000+
Surely a massive £215 extra in government grant hardly makes up for a £14,000 gap in average household income between the South East and the North East.
You were taken in by all the other students running their campaign at uni then Richard, like I nearly was. I resisted the student Lib Dems asking me to sign a petition as I did not mention grants.
It’s a distraction to what should be a campaign on restoring grants and reducing student loans – but perhaps on this issue I am a bit misguided due to my background?
“I really thought the theme of this posting was Lib Dems change of stance on LIT, not tuition fees.”
Yes, you are right about the theme of the posting, but it also said the party had shifted its thinking on tuition fees. That is what I was asking about.
You cannot use average figures for the reasons set out below.
Try loking at median incomes. These are 2005/2006 no later figures available
Leeds £19,900
Weymouth £16,800
Manchester £17,300
North Devon £16,700
Welwyn, Herts. £18,900
Sunderland £14,500
Eastbourne £14.500
The big difference between the median and mean is illustrated in a simple example.
Suppose 19 paupers and 1 billionaire are in a room. Everyone removes all money from their pockets and puts it on a table. Each pauper puts £5 on the table; the billionaire puts £1 billion (i.e.£109) there. The total is then £1,000,000,095. If that money is divided equally among the 20 people, each gets £50,000,004.75. That amount is the mean amount of money that the 20 people brought into the room. But the median amount is £5, since one may divide the group into two groups of 10 people each, and say that everyone in the first group brought in no more than £5, and each person in the second group brought in no less than £5. In a sense, the median is the amount that the typical person brought in. By contrast, the mean is not at all typical, since nobody in the room brought in an amount approximating £50,000,004
Actually – I have been down memory lane, and although very hazy, can remember the reintroduction of grants being on the petition…just to be fair…but I still didn’t sign it.
more fool me!:@)
Cut taxes/public expenditure = fine and perfectly liberal, given the current level of gov. spending and the pressures on low- & middle-income families.
keep the Council Tax = not what’s being proposed as far as i can tell, rather that it shifts to a kind of 2nd-term commitment, so that we retain it in principle but have the deniability factor on the doorstep “yes we would but it’s not one of our main priorities” sort of thing.
keep tuition fees = only whispering at the moment, though with Stephen Williams’ name attached. personally, i think it’s long overdue – the money should be ploughed into early years/secondary education instead. once we’ve got a satisfactory state education sector, Then talk about making uni free.
Where have you seen Stephen’s name attached?
All that is wrong with our Local Income Tax proposal is that it does not go far enough. It is basically daft to collect Income Tax centrally and pass the money to local authorities in a general grant. The whole general grant can and should be replaced by a Local Income Tax.
It’s not my area of speciality, but I’m sure someone should’ve mentioned Land Valuation Tax on this thread by now.
I can see the logic for LIT and LVT seperately but how do we sell LIT + LVT?
David, you are forgetting the Land Tax. If you are going to have LIT it has to be fair. Anyway, the Lib Dem paper on LIT did not bring in enough money, hence the inclusion of a land tax.
Oranjepan a Land tax is mentioned earlier in this thread
Income tax is never fair. It discourages the productive and encourages the unproductive to stay unproductive.
We should not be taxing work and adding value to goods.
If you want some nice socialist sounding terms, income tax penalises the working poor and subsidises the idle rich, even when you have a so-called progressive tax scale.
It makes little political sense either, LIT will hit the youngest hardest, the very group of people who we have a chance of getting to vote for us.
So it is not what is best for the country: it is whats best for the Lib Dem vote. Hmm not sure Vince Cable would agree with you.
Well…we’re not a campaign group – we’re a political party…:@)
We may be a campaign with many thousands of members from all age groups from all across the country, but we all want the same thing – fairer funding for local government, in other words council tax reform.
Your implication that it does not matter what the public think and that the Lib Dem vote is the most important thing. is not a shining example for the Liberal Democrat Party. If your thoughts are mirrored by the rest of the Lib Dem supporters, then your battle is already lost.
Maybe, but we can’t implement all the good things if we aren’t elected. I think it should all be balanced.
“We may be a campaign with many thousands of members from all age groups from all across the country, but we all want the same thing – fairer funding for local government, in other words council tax reform.”
We are the same surely – but with an added headache – getting elected whilst so?
Christine
As you imply,Local Income Tax plus local Land Value Tax is the way it fits together. With no general grant from central government. The local authorities collectively can sort out for themselves the degree of equalisation needed for differnt needs and differnt tax yields in different authorities. Tyhe central government is then clearly out of the way and local responsibility can work.
Tristan
Income taxes are not the least bad taxes. Green taxes, Land Tax and VAT are all clearly better. But income tax can be made to work locally better than green taxes or VAT. If we have to raise revenue through income taxes – and we don’t really have any workable alternative – raising the revenue locally is much better than raising it centrally and redistributing the money to local authorities in a general grant.
David Heigham wrote:
“It is basically daft to collect Income Tax centrally and pass the money to local authorities in a general grant. The whole general grant can and should be replaced by a Local Income Tax.”
Are you really suggesting that there should be no element of redistribution between richer and poorer areas – that 100% of local spending should be raised locally by taxes?
But this tax has to be fair. A basic 3% LIT with a leeway of 3% either way does not add up to a fair tax. Some of us would pay more than others. If you read the Lib Dem suggestions (now defunct it seems) there was always a suggestion that parts of the country considered rich would subsidise the poorer areas.
So how do you decide who is rich and who is poor? My income puts me in with ‘the poor’ even though I live in ‘a rich’ area. How would you compensate me?
LIT is still a discriminating tax, just as is the present system.
Isifair?
Reform of Council Tax has to be seen in the context of the overall tax system.
Wealth is in both income and assets (not just property) Isitfair doesn’t seem to like any replacement tax, be it based on property, land, income or vat.
The argument that Council tax is unfar because of Govt Grants is obviously wrong. Even if your council got £50 more per head and someone else lost out by £50, within a year you’d be back to the same old increases.
And what would pay for the extra grant? extra Vat, extra income tax or extra other taxes.
Council Tax is unfair because it is a bad property tax. In parts of Hampshire it difficult to find a house that is less than band D, the effective bands are just D-H. In other parts of the Country, it’s hard to find a property that is band D or above, the effective range is A-C.
It is in effect pretty much a flat tax on property.
I don’t really buy the argument that a pensioner with no mortgage who brought their house 40 years ago is necessarily worse of them a young couple on a higher income, but who pay a huge mortgage or rent. It has to be a balanced consideration.
I think some measure of variation in taxation levels for different localities is the epitome of fairness as it introduces accountability into the decision-making process and makes local politicians responsible for local conditions rather than assuming subsidies will artificially equalise differential levels of public/private service provision on a broad scale.
I think Stephan conflated 2 issues about taxation. We as a party agreed that we will tax the rich more and the poor less. We favour a reduction in the inequality of outcomes and I approve of that. The recent announcement of policy that we have not had the chance to debate at conference is that we will also reduce the overall tax burden, and specifically the treasurery team will find £20billion worth of cuts that hitherto it has not identified, and did not spot at the last general election.
I am disappointed at Vince Cable’s “clarification” of Lib Dem policy (according to him) on LIT. If this were an episode of “Yes Minister”, the response would be to say “So it’s true then!”.
History shows us that we should implement our radical policies ASAP given the chance. I am wondering if we are going to have any by the time of the next general election.
We say we want to decentralise, but we will never do it in this country while local authorities have so little control over their income. He who pays the piper… etc.
We need to shift the burden of taxation from central government to local government, but we can’t do it while the council tax is still with us. The huge council tax rises would cause the most appalling inequalities.
We need to keep our local income tax policy, and argue for a cut in national income tax and rate support grants to give local authorities real control over their destiny.
Mouse if you look at our website there are several suggestions and some discussion on replacement of the present system. We are always open to ideas and we will always discuss them. We have made an in depth study of the Lib Dem suggestion and reported our findings at our last meeting with Julia Goldsworthy.
Why is the pensioner with no mortgage always cited as the norm? Lots of pensioners rent and are on low income.
The present system and, I have to say, the Lib Dem suggestion, does just that, it assumes that everyone living in a certain area of the country is rich and everyone living in another area is poor. That’s rubbish. If you looked at the median examples I posted earlier, you will see that that is the case.
A pensioner receives the same state pension wherever they live in the country, yet the banding of their property, say, a two bedroomed house may vary across the country between Band G and band A because this tax is based on property values. So who is the poorer?
“The recent announcement of policy that we have not had the chance to debate at conference is that we will also reduce the overall tax burden, and specifically the treasurery team will find £20billion worth of cuts that hitherto it has not identified, and did not spot at the last general election.”
Don’t forget that Julia Goldsworthy was asked to find £15bn of cuts at least two years ago. No one seems to know whether she managed to do that or not, but if she did Jeremy Browne should find the extra £5bn a doddle.
The question in my mind is what precisely divides us from the Tories these days. If it’s just electoral reform, that could look a little bit self-interested …
Tristan’s right, LIT is not radical, it penalises the young and the workers. It’s inherent unfairness makes it popular with pensioners in expensive big houses because they won’t have to contribute.
More to the point, one of the reasons we pay so much tax in the UK is because there are so many taxes (that’s not as daft as it sounds, Spain has lots of taxes too, but they don’t pay so much in tax because many of them are for trifling amounts). But collecting each one has considerable associated costs.
Why don’t we really get radical, and ditch all of the taxes, pseudo-taxes, licences, duties and contributions (and the army of clerks etc who get paid to collect/rate/invoice/assess them all) and replace them with one flatrate tax – with some ‘green’ penalties for particular activities if you want?
Just as an example, the Council Tax industry involves valuers, appeals assessors, collectors, administrators,invoice printers, benefit assessors, postage costs, pensions for all of the above, etc etc etc. Why not instead, simply take some of the central tax take and dish it out at an agreed rate to each local council on a per capita basis. All councils would start at a similar funding base, those with special problems could apply for more central funding and everyone could see where their money was going.
Isitfair?
Why is the pensioner with no mortgage always sited as the norm?
Er, because it is the norm. If your going to lecture people about means and averages, perhaps you’d provide the % of pensioners without mortgages?
Really your comment that the current system or the Lib Dem alternative assumes everyone in a certain area is rich is “rubbish” to use your own phrase.
But then isitfair seems to have views on weekly bin collection which have nothing to do with whether Council Tax is fair or not.
If you want to keep council tax down, how about getting rid of all the freebies that go to pensioners, like bus passes, reduced charges for council services, winter fuel allowances etc? not keen?
You will of course remember the poll tax where everyone paid the same amount was seen by many people as “fair” – it all depends on perspective.
The median examples only highlight the median, they don’t tell us the range of incomes and it doesn’t include other wealth. Honestly, if someone has an income of £15,000 a year and a £500,000 house and another person has an income of £25,000 and no house, it is utterly perverse to say the one on £25,000 is “better off”.
Stephen tall, I am glad you have aired this on Libdem Voice at last.
I first read about it yesterday on the Conservativehome blog, as “yet another Vince U-turn” together with unflattering photo.
Disconcerted at being told of our policy changes by the conservatives I considered writing to LD Voice but was put off by the way discussion threads are taken over by one or two people fighting over political crumbs.
So decided to go to Cowley Street under “contact us”, and in answer to my question “true or false” was gratified to be told, within the hour,that the Guardian had got it wrong.
So, other members wanting a quick check on current thinking might well be advised to go to party headquarters instead of the party blog.
Elizabeth Patterson
I have to agree – particularly as Stephen Tall’s other “shift in Lib Dem thinking” – over tuition fees – is apparently “purely speculation”.
Too much uncritical relaying of unverified press reports…
Elizabeth – to be fair, it was aired on Lib Dem Voice yesterday morning in this article – I’m afraid I don’t do a 6am shift, which is what ConHome does!
CCF – that the tuition fee policy is likely to be reformed in some way is not purely speculation. See Alex Wilcock’s blog for the most recent discussions. http://loveandliberty.blogspot.com/2008/07/forthcoming-excitement-from-fpc.html
Finally, though I seem to have to repeat this pretty much every week at some point, once a story about the Lib Dems is published in the papers it becomes public domain. As far as possible, we will try and cover it (though we don’t have anything like the resources of ConHome). However, we will always cite our sources so folk can judge for themselves.
This story states quite clearly that it is based on a Guardian report. Our readers can judge for themselves if they find it credible or not.
Elizabeth, I think it should also be pointed out (again) that this is a *volunteer-run* site, and the volunteers all have lives and full-time jobs. ConHome has a salaried staff member, I believe.
It is also important to note (again) that this is not “the party blog”. It has no official status. It is, however, excellent news that the official channel works so well.
Incidentally, I’ve noticed before that (a) you have a lot of interesting views on various subjects and that (b) this isn’t the first time you’ve exhibited a tendency to pull up other people on what’s wrong with the content of *their* blogs. There’s an obvious answer here, you know… 😉
Has Vince Cable refuted the content of the article in the Guardian?
Stephen and Alix, I accept the points you have both made, and appreciate your volunteer efforts to provide a place for informal discussion.
I would be happy to help in a research context.
On my criticism about the site often logjamming with internecine banter, I have to say that I read this particular thread with much satisfaction at the quality of discussion and took away some of the ideas to think about, eg Christine Melsom and Mouse.
Don’t think I belittle bloggers, on the contrary I read them widely; we have evolved from the days when Libdem News and the annual conference were the only ways to keep in touch. I don’t find either essential now.
From the Scotsman . . .
http://news.scotsman.com/scottishnationalparty/SNP–to-woo-Lib.4370840.jp
Stephen Tall
As you wrote that there had been a “shift in thinking”, I assumed that some kind of policy change had been announced.
But apparently all that’s happening is that the policy is under discussion. That’s a bit different, isn’t it? I would guess quite a lot of policy areas are under discussion.
As for repeating press speculation, how hard is it just to email the URL to Cowley Street for comment before writing your post?
LDV – please disregard the above call for all stories to be pre-vetted by Cowley Street before publishing. Very silly.
LDV’s strength is its independence; its weakness is that sometimes it comes across as a little too uncritical. If the party fails to control its own message, it isn’t LDV’s job to cover for it.
I notice it’s always MPs or party officials that become irritated with LDV – and then only on days when a bad news story has appeared in the press and Stephen reports on it. This doesn’t happen to ordinary bloggers so shouldn’t happen to Stephen on LDV surely?
Lib Dem Blogs is as unofficial as LDV – don’t they have equal status in those terms?
Jo: absolutely (although I’ve been fingerwagged for not being a good little party loyalist on my blog at times).
Mouse
Council Tax is payable by the occupier of a house. The amount is the same whether he/she owns it outright, has it on a mortgage, (possibly with negative equity), or “merely” rents it. If you happen to believe in a wealth tax, then one has to admit that Council Tax is a very haphazard way of achieving it.
Of course medians don’t tell us very much about the other parts of the income, (or housing), distribution. However, they do tell us more than averages. If everybody in any LA lived in the houses that were “appropriate” to their incomes, then those median incomes would be paying the median Council Tax bill. The is not true of average incomes and average Council Tax bills.
Actually, as you will know, we have looked at the whole range of incomes from the top to the bottom. The “unfairnesses” are not confined to top, bottom or middle. They are to be found at all ranges of income. However, to make such an analysis, you need to have a view of incomes distributions. Since no suitable data on these is published, we have prefered, wherever possible to concentrate on medians. However, there is published data on the incidence of poverty by region and this confirms where the unfairness tend to occur. In many regions, there are ample Band A houses for those “in poverty” to live in. In others, (notably the South East, the South West and the Eastern Regions), we run out of Band A houses before all those “in poverty” are accommodated.
Finally, there are some, (not very good), published estimates of the number of people within various income ranges in different regions. These also show the same pattern of unfairness as that shown by the median analysis.
We have exposed these other calculations to the various politicians that we have had meetings with.
James – same here – what’s the point in having bloggers if they are run around putting Lib Dem press releases on their blogs like good little girls and boys?!!!
“LDV – please disregard the above call for all stories to be pre-vetted by Cowley Street before publishing. Very silly.”
I assume that refers to my comment, though of course I said nothing about stories being “vetted” by Cowley Street. (Obviously I have to add another question – how hard is it to read a post properly before jumping in with a response?)
What I suggested was that rather than posting a press report followed by comments prefaced with “if this is true … if this is true … if this is true”, and finally posting an update to the effect that “Vince Cable says it’s not true”, it might be better to get that comment first.
In that case, it might turn out – as with the David Davis story on the eve of the Haltemprice by election – that the story was a mistake, or it might turn out that it was still worth running, but with a caveat that it had been denied.
Nothing to do with Cowley Street “vetting” anything – just a bit of elementary common sense.
What you are proposing is the very definition of vetting. And what would be the point? The official response to anything controversial which didn’t come out of the press office directly is to deny it, even if it is true.
If the press office denies something, that doesn’t make it untrue. Furthermore, as has already been pointed out about this specific example, Vince’s response is almost the dictionary definition of a non-denial denial. He must have been cribbing from David Milliband.
Isitfair
In almost every local authority area the vast majority of people are in one of three Council Tax bands. Be that A-C,B-D C-E, D-F, whatever.
As I said before, even for a property tax, Council tax isn’t very good.
I think most people would not accept that fairness is entirely related to % of gross income paid in Council Tax. If they did, then they would support local income tax? Other people don’t think income tax is entirely fair and I’m sure you are aware that many rich people pay far less in income tax as a % than many less well off people.
You really haven’t addressed the point as to why someone with an income of £15,000 who owns outright a £500,000 house should pay less council tax than someone with an income of £25,000 but who may be spending
£12,000 a year on a mortgage for a house which isn’t remotely worth £500,000.
What is more the person in the £500,000 house is likely to have lots of other assets (in goods, if not in cash)
Which is why it needs to be considered as part of the overall tax take. Of course median, means, income teirs area guide but no system can claim to entirely fair or be able to cope with each individual case,
Heres a few food for thought hypothetical outrageous ideas about council tax. (I not really advocating them)
1. Triple it and cut government grants to councils be a similar amount – then people will realise just how unfair it is.
It might even stop the “I pay £1500 council tax and all they do is empty the bins once a fortnight letters” people might get out and find out what was really going on.
2. Pay it direct to the Government and give Councils 4p from income tax instead, that way, the government will get the blame for council tax increases. That might stop increases, at least in election year.
3. Halve the rate for people who rent. Make it more of a wealth tax.
4. Stop some of the exemptions, vicars, empty houses (who pay just 50%)etc instead, charge empty houses 200% after 6 months – lets stop empty homes staying idle.
5. Scrap the single person discount – you can’t tell if a single person uses more or less council resources than a couple – the tax is meant to be on the propety not the individual – so why confuse the issue with the single person discount?
I repeat, I’m not advocating them, just hopefully providing food for thought.
Clegg’s Candid Friend writes “As you wrote that there had been a “shift in thinking”, I assumed that some kind of policy change had been announced.”
However, Stephen Tall wrote about “likely reforms of the party’s commitment to oppose tuition fees”. “Likely” means “change not yet announced”. Otherwise would not be likely.
@Elizabeth
“I would be happy to help in a research context.”
Aha, we shall bear this in mind! We have it in writing 😀
Re: Lib Dem News, agreed, and it is quite a sobering thought that this is all the information that some (even perhaps most) party members get. I got my news and debate online from the start, and I am always struck when I get an all-party copy of Lib Dem News how tremendously out-of-date it is. If only we could set up a cheap information stream for slightly more techno-phobic members…
Steve:
“However, Stephen Tall wrote about “likely reforms of the party’s commitment to oppose tuition fees”. “Likely” means “change not yet announced”. Otherwise would not be likely.”
Apparently it was only a likely shift in thinking? I admit it’s difficult to make coherent sense of the words that were actually used.
Then again, if people are going to claim that “vet” is synonymous with “comment on”, we may as well give up using words at all, and see how we get on with grunts and gestures…
You might be interested in seeing the survey the LGA Lib Dem Group carried out after the 2005 General Election – showing that even among Conservative voters it was viewed more positively than negatively:
http://www.libdemgroup.lga.gov.uk/lga/aio/895212
All the LGA survey “proved” is that Council Tax is very unpopular and that ‘axing’ it was perceived as ‘a good thing’.
What our party has never tested is whether replacing Council Tax with extra income tax would be anything like as popular as simply having a fairer property tax.
A doorstep survey carried out by Lib Dem councillors in Newbury suggested that a fairer property tax would beat LIT in the popularity stakes by around 2:1 – not to mention generational equity and our alleged desire to shift the tax burden off productive work.
LIT? RIP!
So having ditched our 50p in the pound policy, our penny on income tax for education policy and now our Local Income Tax policy – is there anything left of our party that could be called “progressive”?
Is the victory of the Thatcherites in our midst complete?
Oranjepan Says:
7th August 2008 at 4:14 pm
I think some measure of variation in taxation levels for different localities is the epitome of fairness as it introduces accountability into the decision-making process and makes local politicians responsible for local conditions rather than assuming subsidies will artificially equalise differential levels of public/private service provision on a broad scale.
i agreee, personaly i favour the local income tax system becaus ei do think it would be fairer but councils should be able to make there own minds up, the central government should say you we’ll give u a certain amount but u need ot make the rest and they can decided how to do it!
eventually though central taxes should be phased out to a much lower levelso only actually pying for things like the army which are a central govt issue!but this certainly shouldn’t happen by increasing VAT’s as these are the ones that hit the poor the worset, thats why thatcher raised them when she cut higher rate taxes!
Income tax is avoided by the rich and passed on to the poor. Any “progressivity” is entirely superficial, evidenced by 100 years of failure to close an ever widening wealth gap – though no doubt some will still claim this is because we haven’t taxed jobs enough!
I’m all in favour of “local choice in revenue raising” but, having approved such a laudable Liberal sentiment back in 1998 (‘Moving Ahead’), we’ve done bugger all to advance it. Our ‘choice’ for councils is the compulsory abandonment of domestic property tax and the forced adoption of a further impost on employment – as if the virtue of it being a ‘local’ levy is enough.
As property prices bottom out in about 18 month’s time, we should be calling for fiscal measures that will prevent the bubble inflating again and deliver generational equity, not more deadweight taxes on the productive economy.
we could just try and close loopholes (there are meant to be quite alot, sadly i dnt no them,haha), and get the swiss etc to cooperate with us over tax dodgers,which they’ve started doing?
also im sure the definition of the word progressive does not say anything about raising taxes Andrew Turvey?
On the contrary, Declan, being a progressive has a huge amount to do with believing in a progressive tax system – one where the more you earn, the more you pay as a proportion of your income.
My point was about the progressiveness (or regressiveness) of the tax system – not the total amount of tax raised. Replacing Council Tax with a LIT will not affect the latter.
Andrew Turvey
I suspect you need to explain to Declan what “progressive taxation” means.
an interesting thread whatever the original facts of the case
1)however those who would advocate LIT in the first term need to be clear that it is actually implementable in that timescale – Lyons records the professional view that it is not. This may be wrong but no-one has addressed this point. We are hoping that the Tory’s bubble will burst under scrutiny – we need to be sure that we can stand up to similar scrutiny ourselves, if we are potential players for government (or a share of) at the next election
2) those that are concerned about promoting localism need to be clear about whether than requires a greater share of taxation to be raised at local level – if it does, and most think so, then the policy at the last election of reducing the local tax take to soften the impact of introducing LIT need to acknowledge the policy conflict inherent in this. Once we do that – what is our USP on this core issue from the Con rhetoric?
3) if LIT raises less than council tax then this reduces the scope for reduction in other taxes which we are also promising, and which would be focused on the lower paid.
4) if the argument is about fairness then there needs to be an analysis that looks at all of tax and spend not just LIT – the overall shift to lower the tax burden and to focus the reduction on the lower paid provided this is not financed by reductions in spending on these groups which Nick has announced goes some way to addressing some of the inherent unfairness of our tax system. We also need to consider what can be achieved more quickly i.e. in the first term through reform of council tax benefit. There is also the issue of inter-generational equity – do we want to shift the tax burden in favour of the elderly (regardless of their wealth) and against the young who may be struggling in the housing / jobs market to bring up a family? Given the intergenerational (in) equity issues arising from decades of housing inflation , notwithstanding the current credit crunch this would seem perverse. More pragmatically, at the last election we had very expensive pledges to help the elderly (free home care and LIT) but in practice they are not floating voters!
5) Most countries have a property tax of some kind at local level – and there are good reasons for this – property prices / values are driven by local circumstances, (location, location, location) and it is relatively easy to collect by local government. One of our key priorities is to have more power at local level, and one of our key USPs from the others who now pretend the same thing is to argue that that wont’ decentralise financially. This is likely to be achievable through some form of LIT AND a local property tax in the medium term – but there are some tough choices to be made about how to get there. It is not for nothing that Mrs Thatcher was brought down by the issue of local taxation.
For all these reasons we need to think this issue through.
“1)however those who would advocate LIT in the first term need to be clear that it is actually implementable in that timescale – Lyons records the professional view that it is not.”
I’d have thought it was. The Council tax took 2 years to introduce from Heseltine announcing that the Poll Tax would go (April 91) to first bills (April 93).
In that time all properties needed to be valued whereas AFAICS all the information needed to operate LIT (ie addresses and income) already exist.
I’d have thought therefore that introduction within four years should be achievable.
i was questioning progressive taxes Andrew Turvey i understand what that means….but in yor comment u simply said progressive on its own, i was simply asking u whether you beleieve there is such a thing as a progressive party who whishes to cut taxes as it seemed in yor comment u didnt agree with this
i meant “i wasnt questioning”, oops!
This rubbish about the practicalities of implementing LIT in the first term is madness.
Is Vince going to be sticking to this line when enough people really understand that it is property owners who gain from their income tax spending.
This quick video makes it clear enough: http://fiscalreform.blogspot.com/2008/07/ricardos-law-great-tax-clawback-scam.html
The practical and implementable approach is to fix the bugs in Council Tax:
– It should be the property owner, not the tenant that pays
– There should be more bands added to the top
– All bands should be proportional to the land value, not the property value (no one should be penalised for improving their home)
– The tax should be payable irrespective of how many people are in the house (a tricky one for the single pensioner in a 4 bed house)
The problem with implementation is because we’re not looking at where our tax policy should be. The land is a “common”. We should each be entitled to a dividend – the surplus value – from revenue raised by taxing it. The same applies to the global commons of taxing the atmosphere.
Thankfully, we’ll be getting an introduction to Systemic Fiscal Reform at the ALTER event at conference, and Vince will be responding to some truly innovative and bold tax proposals.
Neale Upstone
If a tax on property owner is introduced, site value is the best tax base in all ways. Is there any particular need to band site values? I would much rather just bury all the anamolies of Concil Tax.
There is no practical way in which site value taxes can raise all the money which local government now spends. Raising tax centrally and distributing the proceeds by formula to local government to make up the difference just obscures whether local or central government is responsible. The central tax which can best be transformed into an effective local tax is income tax on income from employment (including self-employment and pensions). If we believe in responsible local authorities, we need to transfer all or much of that tax to local authorities.
How we time the transfer of much of income tax to the local authorities so as to fit in with reforming property taxes is quite tricky: I can see it might take two Parliaments.
The first problem is that equalisation between the authorities needs to be sorted out. The only fair base for equalisation of needs to spend is what it costs a fairly efficient authority to deliver each service. This is proven to be practicable. However, the present system does not work like that; it is much less fair. Equalisation of resources is now based on the yield from the present local taxes. We need to plan for transition to the new, better forms of local revenue.
The second problem is setting up the new taxes so that they work smoothly. That can be done partly in parallel with the sorting out of equalisation.
When we have sorted out the first two aspects, we have to enable each local authority to make a reasonably smooth transition from the old to the new. That is practical, but is the most complex of all the problems.
Tackling all this competently will probably take more than five years. But LibDem changes are meant to be purposeful, coherent and built to last. They take longer than Tory and Labour “initiatives”, and will last much longer.
But the way, you present the general cases for tax on the “commons” is a bit misleading. Taxing site values can and should act as a cogestion tax changing economic behaviour, but in uncongested areas an attraction of site value tax is that it should have relatively slight effects on activity in the market for land (unless it is raised very high). Tax on say CO2 emissions is aimed quite specifically at charging out to the polluters the full economic cost of their activities: the parallel would be a pure congestion charge on land value. The “dividend” concept arose from thinking in terms of site value tax in uncongested areas. Taxes intended to make economic activites bear their full costs are simply better taxes in that they may impose on the economy not near-zero costs, but positive benefits.
All taxes on wealth generation (including income tax and profits tax) are inflationary and ‘welfare negative’, i.e. they end up making us all poorer. Does this Party really think it is ‘progressive’ to tax earnings, while leaving wealth accumulation untaxed? Because that’s what happens if you scrap Council Tax – for all its faults the only property tax we’ve got – and add to income tax, albeit locally. LIT cancels out all the good redistributive effects of the rest of our tax reform package.
LVT is the most progressive and the most green tax of all, precisely because it allows us to lift taxes on earnings – starting by lifting those on low incomes out of tax altogether. The solution lies in merging property taxes into the income tax system, as is done in Sweden. LIT supporters often say “look at Sweden” but omit to mention that their “income tax” includes a substantial “wealth” element, which is overwhelmingly property.
So we actually can please everyone in this Party by introducing a national LVT, merging it into Income Tax, scrapping Council Tax and allowing councils to have some of it all! But by saying “not yet” to domestic LVT (we agreed to SVR in place of Business Rates and other LVT ‘long term’) we put a future Lib Dem Government in a bad place – as potentially the only country in the developed world without a domestic property tax. Noty somewhere I think the successors to Lloyd George want to be…..
Finally, for goodness sake lets not pretend we can do without some element of central government grant. Or that to have LIT we need set up hundreds of different local tax administrations. Precepting works fine.