Lib Dems challenge ministers on local government funding

With local council elections less than eight weeks away in England, Lib Dems are getting the message out local government funding.

John Marriott, a former Liberal Democrat councillor in Lincolnshire, writes on the Guardian’s letter page:

“Local government funding has been… the victim of the totally inadequate council tax for decades, and an ever-reducing central grant…

“Local government still has the ability to deliver, but it needs urgent reform, so let’s start by replacing council tax with something more progressive and then complete the transformation of the first tier of local government in England into the unitary format.”

Lord Greaves also has a letter published in the today’s Guardian:

“High-profile, expensive services such as adult and children’s care, major highways, fire and police are vital, but it’s the local neighbourhood services that are most forgotten and which matter so much. These are often run by district councils – or town and parish councils – which are left out of government funding.”

* Newshound: bringing you the best Lib Dem commentary published in print or online.

Read more by or more about .
This entry was posted in News.
Advert

24 Comments

  • John Marriott’s letter argues “let’s start by replacing council tax with something more progressive and then complete the transformation of the first tier of local government in England into the unitary format.”
    Scottish LibDems led by Willie Rennie are already on the case https://www.heraldscotland.com/news/19128655.scottish-liberal-democrats-draw-council-tax-rural-homes-plans/ with plans to replace property-based council tax with a locally administered land value tax, would encouraging a more proportional system of taxation and a five point blueprint for a federal UK https://www.heraldscotland.com/news/19124706.scottish-lib-dems-draw-five-point-blueprint-federal-uk/
    We need to pull up our socks in the English party and start to address the issue of proportional property tax with a conference motion and consistent pressure at Westminster https://fairershare.org.uk/
    Lord Greaves makes the important point that commonplace neighbourhood services – street cleaning, mending pavements, looking after parks properly, tackling antisocial behaviour, youth services, refuse collection, pest control, traffic management, street lighting, community policing, public lavatories, and all the rest have been curtailed as a conseqence of austerity cuts.
    Local authorities have to be able to control their own budgets without reliance on the vicissitude of central government grants. Resilience can only be developed by having a tax base rooted in the local community.
    The high-profile, expensive services such as adult and children’s care, major highways, fire and police may well need national policy and central government support in deprived areas, but the neighbourhood services Lord Greaves refers should be able to continue uninterrupted during times of financial stress when they are often most needed.

  • John Marriott 12th Mar '21 - 1:10pm

    Featured BY NAME on LDV. Now I can die a happy man (that is, if I am still allowed to identify as such).

    For once the Guardian managed to print most of my letter. The letters editor is probably fed up with hearing from me. One thing they did omit was my reference to the Coalition Government using Local Government as a kind of human shield to divert criticism away from it. We in local government were very much the government’s whipping boy, as were the Lib Dems in the 2015 General Election.

    As I said to Andrew Tampion in another current thread, it find it rather sad how the Tories and Labour use local elections as a litmus test of public opinion. Look at Starmer leading on the NHS, for example. That just shows how seriously they take local government. Surely this ought to give the Lib Dems a chance to go back to their roots and exploit the chink in the armour offered for the last time in the 1970s, 80s and 90s, when, through complacency in the case of the Tories, who, in many areas, had never experienced much of a challenge and disinterest in the case of Labour in all but urban areas, a breakthrough in community politics was achieved where electors who take a positive interest in local affairs will often put traditional party allegiance to one side and support the candidate who actually puts themselves about, and not just at election time. As I have said many times before, however, it’s when you have actually win that the fun really begins, especially if you want to keep on winning.

  • @Joe Bourke

    … um. To carry on our discussion from previous threads (I haven’t been on LDV for a fortnight! Which may be a relief to many!) I’m far from convinced on PPT. It seems to be largely a reversion to the old domestic rates – a tax so disliked that it was thought the poll tax was the solution!

    The main negative is that both it & the council tax falls harder on those with less income – even if PPT was paid by landlords – it would get passed on in higher rents and effectively be paid by renters.

    A single person on min. wage now pays about £1,000 in council tax – couples & those with children may pay slightly less per person.

    In general we think as Lib Dems that income tax is the fairest way to pay for government services.

    A local income tax with a personal allowance equal to the minimum wage would give a significant boost to the take home pay of the low paid – both those on the minimum wage & those on below median wages.

    This would be considerable boost to alleviating poverty in a cost-neutral way. You raise the same amount of tax.

    Clearly there are losers – those householders where there are multiple income tax-payers in a household (although these are quite rich households) and those in say the top third of earners. But we are not against increasing tax on higher earners to alleviate poverty.

    When we had a fully worked out policy on LIT we estimated that it’d save the average household £400 – an excellent campaigning point.

    It was said in previously PPT would mean those living in houses >400k would be worse off. The *average* property price in the South is >400k & >500k in London. So it’s not exactly a vote winner where we have 80% of our target seats.

    There’s also an issue on the very different property prices in different regions which I haven’t got my head around.

    There are two approaches.

    You could set a “national” rate – say x% of property value.

    In which case you are penalising those less well-off where property prices happen to be higher & who are already struggling with higher property prices – through no fault of their own and are probably renting (& as I say effectively renters pay PPT).

    Or you set it so that the same amount is raised in local area – so those in say a £400k property in the South pay the same pay the same as a £200k property in the North. But this goes against what advocates of a PPT want which is to tax property – particularly where it is higher.

  • Joseph Bourke 12th Mar '21 - 3:17pm

    Michael 1,

    “even if PPT was paid by landlords – it would get passed on in higher rents and effectively be paid by renters.” This is just not the case. There have been significant tax changes in rental property in recent years including the restriction of interest deductions. Landlords have to absorb these costs. Rents are set by the market for rental property and are based on disposable income. If wages go up so too do rents. If taxes on income reduce and disposable income increases then market forces push rents up. It is disposable income that drives rents.
    Average house prices in London are high, but they are also skewed by a plethora of very expensive housing. Over 50% of London households live in rented accommodation. If you want an indication of electoral popularity look at how popular the mansion tax proposals by first Vince Cable and then Ed Millibad were. Even the Conservatives have been considering introducing a mansion tax https://www.estateagenttoday.co.uk/breaking-news/2020/2/mansion-tax-on-high-value-houses-being-considered-by-government.
    Are Libdems to now oppose a fairer proportional tax on properties on the basis 80% of our target seats are in higher value areas where the need for housing benefit is the greatest?

  • John Marriott 12th Mar '21 - 3:18pm

    Oh no, not again? I knew as soon as I mentioned reforming local government finance in my Guardian letter and LDV got wind of it the usual suspects and personalities would creep back into the spot light. Talking of shedding light on the problem I’m thinking of the drunkard and the lamp post again.

    All I will say, naive as I am, is that I suppose the logic behind LVT is that land and property doesn’t move, while income can. Whatever system which might replace Council Tax MUST take account of a person’s or a household’s ability to pay. I believe the word is ‘progressive’. When you drill down, it’s all about money, isn’t it, chaps, and whether or not most of us are prepared to pay a little more?

    The Layfield Commission in the 1970s put forward a cogent argument for LIT. Heath was reported as saying that “once Inland Revenue is computerised”, it could cope perfectly well. And so, what’s the problem? Well, there is one big problem. I’m sure that places like Kensington & Chelsea could deliver a positive cornucopia of cash to their local Directors of Finance; but what about places like Lincolnshire, whose low wage economy makes a central government top up essential? Over to you, ‘Michael’ and Joe!

  • Joseph Bourke 12th Mar '21 - 4:02pm

    John Marriott,

    London has two tiers of government – the London Assembly and borough councils. Both are in desperate need of funding. TFL alone has an annual deficit running over 3 billion and over 1 billion even when busiest.
    Places like Kensington & Chelsea include areas like the Grenfell tower block. London has the highest unemployment and greatest number of households suffering deprivation in the country. The fairer share website has an article on its webite Moving to a Proportional Property Tax: Implications for Local Government Finance https://fairershare.org.uk/moving-to-a-proportional-property-tax-implications-for-local-government-finance/

  • @John Marriott

    “as soon as I mentioned reforming local government finance in my Guardian letter and LDV got wind of it the usual suspects and personalities would creep back into the spot light.”

    um… including you 🙂 ?! (and we may both be drunk – at least my path is illuminated).

    @Joseph Bourke

    On renters paying PPT. To take your argument, essentially people’s take home pay will go up (on average) by the amount they are saving in council tax and so rents can go up by that amount. But against LIT this weighs more heavily on those on minimum wage (who pay zero LIT) or low wages (who pay little LIT).

    On London property prices – actually I quoted the average price of a flat – (£600k for a house). You’d be hard pressed to get “an average family” three bedroom house for under £400k in London.

    The median London property price in 2017 (and there has been house price inflation since) was £465k (£650k in Richmond, £487k in Kingston) – compared to £135k in the North East.

    https://data.london.gov.uk/dataset/average-house-prices

    (Apologies for the facts – John M!)

    On the mansion tax – the 2010 manifesto pledge was for tax (1%) on properties worth over £2 million – a very different thing (indeed if memory serves me right – we were so worried about the electoral effect in London of it initially being on properties over £1m – we raised it to £2m) – and then only on the amount over £2m – so you’d pay nothing on a £1,999,999 property.

    You don’t address my point about widely differing property prices in differing regions. There may be solutions – but either they are not fair and/or they don’t tax property.

    During the 2000s where I was councillor we had a Tory Cllr defect to us and he said that they had found one of the most effective campaigns we had and most electorally popular (inc. local elections) was “Axe the council tax, save the average household £400 with a fair local income tax.”

    I am a little confused as to why we should have dropped LIT given it is in line with our political values of fair taxation, helps (significantly) to alleviate poverty and is politically popular.

    … still we like doing that (viz uni fees)!!!!

  • Michael 1,

    rents costs here are the contract rent plus the existing council tax. Some renters pay council tax separately, many in shared accommodation pay rent inclusive of council tax. Students pay no council tax, so the Landlord is able to collect a higher rent than he otherwise would. The same principle applies where tenants are paying a reduced council tax, the landlord is able to collect a higher rent than he otherwise would.
    The analysis undertaken by the fairer share campaign shows that all regions outside London and the SE would see a reduction is council tax bills as a result of moving to a proportional system. If you own your own property…
    – You are likely to see a reduction in property tax – 76% of households (18 million) will pay less.
    – Any increase on what you are currently paying is capped at £1,200
    – You will not need to pay Stamp Duty if you decide to move home.
    There are number of FAQs on the campaign website https://fairershare.org.uk/faq/
    On Labour’s 2015 Mansion tax proposals. a yougov survey found a 72% level of support for the policy https://yougov.co.uk/topics/politics/articles-reports/2014/09/24/labour-tax-benefit-policies-hit-with-voters. With 76% of households benefiting, mansion tax is not so different we can;t learn something about the public reception for such policies.

  • John Marriott 12th Mar '21 - 7:30pm

    We are all in favour of higher taxes, as long as other people are paying them. The problem for areas like the in which I have lived for over forty years is that, unless we get a top up from central government, no system of local finance will treat us fairly.

  • Joseph Bourke 12th Mar '21 - 8:40pm

    John Marriott,

    Kensington and Chelsea has one of the lowest council tax bills in the country. A band D property pays around £1200 (including London assembly and adult social care precepts). That is about 1/3 less than the average across London. The reason is it raises a high level of revenue from a form of land value tax – parking meter fees for the short-term rental of public parking spaces. The borough gets a lot of visitors to the West End and so has the additional costs.
    However, the burden of the council tax is highly regressive across the borough. Parking fees have dissipated during the pandemic and the adult and child care services needed by the less fortunate have been impacted by austerity as elsewhere.
    Is that a fair system of local finance? It depends on where you are sitting. The borough has a large proportion of London’s wealthiest residents including those paying the highest rates of income and other taxes. Should these residents pay more to support their area or your area and all the other areas around London and the rest of the UK that need more resources to meet their needs. Whatever more they pay, it will never be enough and the aim is not to drive people out.
    A system of taxation has two key aims – to be both equitable and economically efficient. Both are equally important. The Mirrlees review concluded that: “Stamp duty should be abolished and council tax reformed so that payments are fully proportional to house value and are based on up-to date values. This reformed council tax, which the review dubs a Housing Services Tax, would effectively stand in place of a VAT on housing consumption.” This is what the Fairer share campaign proposal for a proportional property tax does.
    Local income tax might be an alternative, but it is not necessarily any fairer. It was dropped by Scottish LibDems in 2016 https://www.bbc.co.uk/news/uk-scotland-scotland-politics-35672063 and new proposals based on land value tax developed as noted above.

  • John Marriott 12th Mar '21 - 10:25pm

    @Joe Bourke
    Should those with wealth pay more? You bet they should. The argument about driving millionaires out has been made before. That’s fine by me. Some patriots, hey?

    You mentioned Grenfell Tower being in Kensington & Chelsea. I also heard that it was following complaints of nearby residents of how ugly they thought the block looked that it decided to beautify it with more sympathetic cladding. So, in the name of cosmetics, a disaster waiting to happen was created.

    But back to those poor millionaires, oligarchs and Middle Eastern princes. I have said at the start that any tax has got to take into account an individual’s ability to pay and these people clearly have more ability than most. In fact, a majority of us could afford to pay a little more, especially if any tax were hypothecated. Just because the Scottish Lib Dems dropped LIT back in 2016 doesn’t convince me that it’s a bad idea.

  • @Joe Bourke

    TVM for further comments. I’m not sure that they contradict me

    On PPT being passed on to renters.

    By your own argument People’s take home pay will increase on average if they don’t have to pay council tax. Landlords will say I’ve this increased cost in PPT – you have more money in your pocket – the market will therefore bear increased costs – therefore I will pass on this cost to you. As you point out some pay reduced council tax such as the unemployed (a maximum of 20% of the council tax). They are likely to be losers as they will pay the average PPT in their rent.

    On the very significant differences in the average (median) value of property.

    As far as I can see fairshare glosses over this. It means that someone in a median property in NE will pay £675, in London £2,325.

    Earnings are higher in London and the SE (with higher living costs – not just housing) but not that much so I suspect you’ll get howls of outrage from Londoners. If you equalise the amounts then it isn’t a property tax any more.

    And this won’t be paid by properties over about £1m. The fairshare scheme caps the increase at £1,200. Band G averages (in 18/19) £3,443 (may be slightly higher in London against which I suspect most £1m properties are in lower band). A £2m property would be paying under 0.3%.

    Fine to say only the South and London will suffer – but at a guess that is prob around 40% of the England.

    Now to be clear I think PPT is prob. an improvement over the council tax. I just think that local income tax is better.

    Now to be fair I don’t know how much LIT would have to be but we said it’d have to 4% over the then Personal Allowance – say 5% now.

    Examples:
    Unemployed in a £100k property (say Band A)
    CT (Council Tax): £183.81 (4.75% of JSA – equiv. to living on nothing for 2.5 weeks a year)
    PPT: £400 (80% passed on of 0.5%) (5 weeks on nothing)
    LIT: £0

    1 person in £150k property (say Band B) on 30 hours on min wage
    CT: £1,144 (may be some CT benefit – say £1000), PPT: £600, LIT: £55.16

    One Median earner (£29,600) in a couple in £300k property (Band C):
    CT: £1,486, PPT: £1,200, LIT: £855

    Two nurse couple (2x£33,864) in £600k property (Band E)
    CT: £2,247.30p, PPT: £3,000 (owner), LIT: £2,088.40p

    One £150,000 earner in couple in £2m property
    CT: £3677.30p, PPT: £4877.30p, LIT: £6875

    Average CT bands for 18/19 – increased by 10% to account for 2 years @ 5% increase.

  • Joseph Bourke 13th Mar '21 - 12:16am

    Michael 1,

    the point is take home pay is unaffected if you are paying council tax in addition to rent and then move to paying rent inclusive of tax. Both your rent costs and disposable income is unchanged. For students they will not pay anymore then currently the landlord will absorb the extra cost. This also applies to reduced council tax tenants. They pay what they can afford in rents and council tax. Landlords will have to absorb the increased costs where they arise, Homeowners will see their council tax become more progressive throughout the country. Based on the fairer share campaign that is 76% of households that will benefit from a reduction. The £1200 cap on increases is, I understand, a transitional provision.

    John Marriott,

    oligarchs and Middle Eastern princes typically don’t pay UK income taxes. They do however tend to own quite a substantial amount of property. I refer you back to the Mirrlees report which studies the tax system in the round. This FT obituary https://www.ft.com/content/9782dc2a-ac5c-11e8-89a1-e5de165fa619 is worth a read.
    ” Mirrlees would later say of his approach to politics and economics that his heart was on the left and his head on the right, and his work in optimal taxation was consistent with that description.”
    Populist rhetoric is fine for electoral politics but not much use when it actually comes to the business of governing or the design of a tax system. Evidence based policy is what we have always prided ourselves on John, with good reason.

  • John Marriott 13th Mar '21 - 8:14am

    @Joe Bourke
    “Oligarchs and Middle Eastern Princes don’t pay U.K. income taxes”. Well, they damn well should, or go and live somewhere else.! Now, if that’s what you call “populist rhetoric”, that’s fine by me. I always admit to the fact that the “business of governing” is tough at the best of times; however, you need to get elected first and a catchy slogan is worth a lot more than pages of statistics, especially, as the late great David Penhaligon famously said that you have around eight seconds to get your message across when that leaflet on the doorstep is opened.

    You and people like ‘Michael 1’ have probably forgotten more about economics and statistics than I have ever known; but, quite frankly, want to know. I do not doubt your sincerity and, while rigorous debate might go down well in LDV, I doubt whether this approach would work where it matters, namely in securing votes. By all means continue your arguments; but please don’t dismiss the uninitiated like me as “populist”, just because we do not fit in with your ‘Weltanschauung’. There are an awful lot of us out there, believe me!

  • Joseph Bourke 13th Mar '21 - 12:16pm

    John,

    I don’t doubt at all the power of emotional appeal or a good soundbite in election campaigning. Lloyd George was a master at it with quips like “A fully equipped Duke costs as much to keep up as two Dreadnoughts, and Dukes are just as great a terror, and they last longer.”
    But someone has to do the hard slog of working through the detail of policy in the background. Chris Fox was making the point in the Lords debate on the budget. He was commenting on the abandonment of the Industrial strategy council and the lack of any real substance in the government’s infrastructure plans as represented in the glossy government brochure “Build back better”. Scrutiny of the detail and holding government to account is the function of parliamentary opposition, is it not?
    In your comments above you write ” When you drill down, it’s all about money, isn’t it, chaps, and whether or not most of us are prepared to pay a little more?” I agree that is the nub of it. If we want good quality public services then ‘most of us’ have to be prepared to pay for it. The recent budget increased tax levels by 1% of GDP to the highest proportion of national income since the 1960s and the top 20% of taxpayers pay 15 times the tax of the bottom 20%. That is as it should be, but we need to approach further tax with a degree of caution. How will a local income tax impact graduates who are already paying a 9% surcharge on top of their income tax and national insurance contributions?
    A one of wealth tax is a possibility. The recent report of the wealth commission https://www.lse.ac.uk/News/Latest-news-from-LSE/2020/L-December/Wealth-Commission-report recommends that if the government chooses to raise taxes as part of its response to the Covid-19 crisis, it should implement a one-off wealth tax in preference to increasing taxes on work or spending – “A one-off wealth tax on millionaire couples paid at 1% a year for five years could raise £80 billion to £260 billion in total” This kind of assessment would include non-doms. The assets assessed would include assets such as main homes and pension pots, as well as business and financial wealth, but minus any debts such as mortgages.

  • William Wallace 13th Mar '21 - 12:35pm

    I hate to interrupt this argument, but the future of funding for the different levels of local government has other aspects to consider. One is fiscal redistribution – from richer areas to poorer – which should be made much more explicit, with the criteria clear. Another is distribution of funding and revenue sources between different levels. I note, for example, that major Councils have been resolving some of their financial difficulties by trying to push funding of more local services (like public toilets) on to town councils.

  • Peter Martin 13th Mar '21 - 12:58pm

    “The problem for areas like the in which I have lived for over forty years is that, unless we get a top up from central government, no system of local finance will treat us fairly.”

    Something sensible from John Marriott!

    Any common currency area needs a government to actively engage in policies of fiscal equalisation. In the UK it means that Government needs to look at such parameters as wages, unemployment and house prices to ensure that they are not too diverse. This means countering the natural tendency of money to gravitate to other money. If this isn’t done we end up with empty and derelict houses in one part of the country and unaffordably high house prices in another.

    We all know about £1million plus terraced houses in London. Not so many know about the £1 houses in other parts of the country.

    Council funding is an excellent way to push that many back. It has to be collected in the richer areas and spent in the poorer areas so that there are jobs there as well as cheap and affordable houses. It simply doesn’t make any sense for us all to move to the SE in search of higher incomes.

    https://www.thesun.co.uk/fabulous/5491158/derelict-properties-sold-for-just-1-have-now-been-turned-into-stunning-family-homes/

  • Peter Martin 13th Mar '21 - 1:06pm

    I’ve just noticed the previous comment by William Wallace.

    “One is fiscal redistribution – from richer areas to poorer – which should be made much more explicit, with the criteria clear.”

    So, for once, we are in agreement!

  • William Wallace,

    when you say “…fiscal redistribution – from richer areas to poorer – which should be made much more explicit, with the criteria clear”, what do you have in mind? Would this be a Barnet type formula for the English regions?

  • Matt Wardman 13th Mar '21 - 1:48pm

    I don’t plan to re-engage in any debates.

    But I would note that this is potentially all up for consideration in the autumn following Rishi’s announced “Consultations” starting on March 23rd.

    Be ready.

  • John Marriott 13th Mar '21 - 2:30pm

    @Peter Martin
    Gee thanks for nothing, Mr M. Much that I write might be rubbish to you and many other LDV contributors for that matter; but it’s SINCERELY HELD rubbish. Unlike you, I don’t just toss a hand grenade into the room and then retire to observe the damage caused! It’s clear from much of what you write that hubris and you are firm friends. Is that why you are a self confessed refugee from the Labour Party?

  • Peter Martin 13th Mar '21 - 2:56pm

    @ JoeB,

    “Would this be a Barnet type formula for the English regions?”

    Something sensible from Joe Bourke too! Definitely an idea to be considered.

    We shouldn’t leave out Wales and Northern Ireland. Or are they already covered by the existing formula? But I thought Barnet was only for Scotland?

    Northern Ireland does seem to be doing much better economically now than they used to. The rate of unemployment is now comparable with the rest of the UK, whereas it always used to be much higher. If Northern Ireland hadn’t been so neglected in the postwar years then its troubled recent history could so easily have been avoided.

    I can imagine there might be those in the more affluent regions who would be opposed but there are potential benefits for all.

  • @Peter Martin – Council funding is an excellent way to push that many back. It has to be collected in the richer areas and spent in the poorer areas so that there are jobs there as well as cheap and affordable houses.

    It has always irritated me that certain London councils were and are able to advertise their very low council tax, yet omit to mention the government contribution which, in the one’s I’ve looked at over the years, has been more generous than that given out to the shire counties… To me there is no valid reason why someone in a Band D property in London should be receiving a council tax demand for less than someone living out in say Corby in a Band D property.

  • John Marriott 13th Mar '21 - 9:12pm

    Would you believe that, when the Council Tax was first hastily cobbled together, some would argue on the back of a fag packet, following the débâcle of the Poll Tax, some residents were actually complaining that their homes had been placed in too low a band, thus affecting their resale value? Well, it certainly happened around here in Lincolnshire.

Post a Comment

Lib Dem Voice welcomes comments from everyone but we ask you to be polite, to be on topic and to be who you say you are. You can read our comments policy in full here. Please respect it and all readers of the site.

If you are a member of the party, you can have the Lib Dem Logo appear next to your comments to show this. You must be registered for our forum and can then login on this public site with the same username and password.

To have your photo next to your comment please signup your email address with Gravatar.

Your email is never published. Required fields are marked *

*
*
Please complete the name of this site, Liberal Democrat ...?

Advert



Recent Comments

  • David Evershed
    HS2 is the hot topic in Chesham and Amersham. The environmental destruction that HS2 and East West Rail construction is causing is very apparent in Buckinghams...
  • Peter Martin
    @ David Raw, On a point of information: The word "you" in the English language isn't necessarily singular. It can be plural. It would possibly be better,...
  • Little Jackie Paper
    Peter Martin - 'It’s a great pity that the Euroscepticism of the Labour Party largely passed away with Tony Benn.' Well...it's not been remarked on much bu...
  • David Raw
    @ Peter Martin The Greens are no threat to me, Peter. You assume too much. I appreciate their contribution at Holyrood which is not insignificant....
  • Peter Martin
    @ David Raw, I don't have a problem with environmental radicalism but I do trying to understand why anyone on the left thinks it's radical to support a euro-...