So reports the Independent on Sunday:
Owners of second homes could be stripped of their council tax discount under Liberal Democrat plans to raise millions of pounds for town halls.
Danny Alexander, the Lib Dem Chief Secretary to the Treasury, is among ministers who back ending rules that force local authorities to cut bills by 10 to 50 per cent for owners of weekend bolt-holes. In a Commons motion, the Lib Dem president, Tim Farron, suggested the cost of providing the discount could be spent on local services or cutting council tax bills for all…
Mr Farron, whose Cumbrian constituency has more than 3,800 second homes, claims their owners are being bankrolled by poorer local residents. He said: “People living on council estates, maybe working on the minimum wage, are subsidising the council tax of a barrister from Manchester with a second home in the countryside. We are having to put up taxes, scrap certain benefits… it is a case of social justice.”
You can read the full story here.
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27 Comments
I’ve no problem with that, but I can see trouble getting the Tories to go along with it.
“Tim Farron, suggested the cost of providing the discount could be spent on local services or cutting council tax bills for all…”
So even Tim Farron is talking about the possibility of using additional revenue to cut taxes rather than to protect public services from the swingeing cuts that are planned. Depressing.
“Danny Alexander, the Lib Dem Chief Secretary to the Treasury, is among ministers who back ending rules that force local authorities to cut bills by 10 to 50 per cent for owners of weekend bolt-holes.”
The Independent report is a little misleading, isn’t it?
The current “rules” require a minimum discount of 10%. If a particular local authority opts to allow a 50% discount (the maximum) then that’s their decision. They are certainly not “forced” to give a 50% discount.
Both Tim’s local authority (South Lakeland DC) and my own (Sefton MBC), and I suspect most others, charge the maximum of 90%.
Most councils go with the 10% discount, from what I’ve seen. It’s still 10% that doesn’t really need to exist, being little more than a tax bribe for rich people.
Some of them say “second homes which are essential to your job get a 50% discount”, which is reasonable.
Surely that’s 3800 homes getting a really poor level of service for their council tax.
That’s 3800 homes that don’t require schools, doctors, dentists, rubbish collection or care of any kind.
So, what exactly are they getting for their money? Apart from the ability to vote in local elections.
They should probably be getting a 75% discount.
As far as it goes this is a sensible step, but it is a baby step (and not just because most councils only give the minimum 10% discount).
Council Tax itself is one of the weirdest taxes in the world. It’s not a tax on property (because it’s paid by the occupier, not the owner). It’s not even a “hearth tax” (a tax levied on each household, which was used historically) since single people get a discount. Nor is it a poll tax (thank goodness!). It is levied in different amounts depending on the valuation the house had in the early 1990s (in England), but the top band contains an enormous variation in house prices. And to cap it all, other taxpayers spend £4.2 billion to help poor people pay their tax bill. Does any other country in the world have to do that?
(I’m not arguing that we should scrap Council Tax Benefit – unless Council Tax is scrapped too. I’m just pointing out how absurd it is to levy a tax and then create a benefit to help people pay it!)
Local income tax is never going to be agreed with the Conservatives and in any case is not economically efficient (it increases the tax burden on earned income when we should be reducing it). A Land Value Tax imposed uniformly by local authorities on all land (empty, residential or commercial) would be more economically efficient as it targets an “economic rent”: the benefit landowners get from owning a piece of land, but not the benefit they get from an improvement they build on it (like a house). It would also be fairer than Council Tax since tenants would no longer have to pay it and landlords would. In addition, it would provide an incentive to develop unused plots and so increase the supply of housing.
@Leviticus18_23: That’s 3800 homes that don’t require schools, doctors, dentists, rubbish collection or care of any kind.
They don’t require schools, but I would certainly not like to live in a house without rubbish collection, especially over the summer! They also require road maintenance and policing (think of all those burglars and squatters eyeing up those uninhabited houses).
Moreover, most of the local authority budget – especially for schooling – comes from central government. Councils (as far as I know) don’t get any central government grants for people who are not mainly resident there, so it’s perfectly reasonable that the council should have some compensation for the services it does provide.
Interesting consequences for amateur buy-to-let landlords who, as long as their additional property is occupied, will not be paying council tax on it. Should their property become vacant they would be hit with a large council tax bill which might cause financial misfortune. Regardless of whether they deserve this or not (my prejudices say they do) the chance of the landlord class losing their assets to bankruptcy is unlikely to appeal to the government.
Seems like something that should be decided locally, but does Farron really have to say stuff like this which sounds like it comes from one of Labour’s class warriors:
“People living on council estates, maybe working on the minimum wage, are subsidising the council tax of a barrister from Manchester with a second home in the countryside”
Given that the barrister from Manchester won’t be using schools or social services, 2 of the biggest areas of spending he is probably subsidising the person on the council estate.
And I wonder if the LD policy of allowing councils to set penal council taxes for people in second homes has been thought through. Would this not encourage second home owners to register and vote where their second home is? Unlikely to be to our advantage!
As has been pointed out this is voluntary and one of the reasons Councils allow discount is because they do not lose revenue. Instead their RSG is adjusted accordingly.
The same applies in reverse. If a Council decides that from now on they will charge 100% then they lose the equivalent of the extra revenue from their grant. The idea that this will generate extra money for Councils is therefore nonsense and not the reason why there should be a change.
In rural areas and seaside Councils where there is a great deal of pressure on housing then a 100% Council Tax charge makes sense. However, it may be that an urban area seeking to attract businesses would want to offer a discount so as to encourage executives to buy or rent second homes there.
This is a social reform not a fiscal one.
There are very strong arguments for giving councils this power – councils where communities suffer from the numbers of second homes should have the power to raise additional revenues.
@ Anthony Aloysius St
Everyone knows that it is up to individual local authorities to decide whether to use extra income to protect services or to cut Council Tax Bills. Perhaps Tim Farron is just wise enough to acknowledge that the choice exists, rather than pretend it will be used in one particular way. Simples!
“Everyone knows that it is up to individual local authorities to decide whether to use extra income to protect services or to cut Council Tax Bills. Perhaps Tim Farron is just wise enough to acknowledge that the choice exists, rather than pretend it will be used in one particular way.”
Perhaps. But given the horrendous size of the cuts, I’d have hoped any Lib Dem would be clear the the priority should be mitigating their effects, not cutting taxes.
Having said that, Peter Black’s comment about leaves me wondering how this would work in any case.
Hopefully this is not just fiction from the Indy. It will be interesting to see how the Tories respond…
@AAS. I would agree, except Council Tax is a Robin Hood tax in reverse tax – robbing the poor to help the rich. So a cut in CT is progressive; but it’s up to democraticly elected councils. PS didn.t you used to post as Herbert Brown?
Will this include MPs with second homes or would they be exempt?
@ Anthony Aloysius St
Not perhaps, definitely.
‘But some Lib Dems want to go even further, and stand by their manifesto commitment to “give local authorities the power to set higher council tax rates for second homes and the option to require specific planning permission for new second homes, in areas where the number of such homes is threatening the viability of a community”. ‘
I might even consider voting Lib Dem again if this happens.
@Peter Black
“However, it may be that an urban area seeking to attract businesses would want to offer a discount so as to encourage executives to buy or rent second homes there. ”
If such a discount were to be offered to attract people to an area surely it would have the effect of forcing house prices up locally (the executives would be no better off as they’d be bidding each other higher on the price with their extra cash), thus undermining the attractiveness of the area to potential employees (other than the executives) who wished to move there and simply buy a first house to live in. The pre-existing homeowners living in the area would benefit from the windfall, so it would amount to a subsidy from those that rent and pay council tax to those that own and pay council tax, as well as undermining the attractiveness of the area to new employees.
Yes, I agree Steve. I was just making a suggestion of a policy initiative that might drive discounts. As I said the main driver for this cannot be financial but must be clear policy outcomes. All of the valid outcomes I can see indicate that England must copy Wales and do away with individual Council’s discretion. Having said that there is the case of second homes owned by serving members of the armed forces. At present they are entitled to a 50% discount across the UK. Are we going to take that away? Just asking.
“Not perhaps, definitely.”
Alas, we mere mortals who lack the power of omniscience can’t always be so sure what’s going on in other people’s heads. (Mind you, I assume your own omniscience must have been on the blink when you wrote “perhaps” in your original comment … !)
I disagree with the whole premise of getting rid of the reduction. Quite simply, council taxes are a tax paid in order to fund public services in the locality – services which the residents get the benefit of. However, if it is a second home then the owner will be away most of the time and will therefore be using very few, if any public services locally, but will still be paying a substantial amount towards them. It seems perfectly fair to me for them to get a discount.
@George W. Potter: No, council tax is paid to maintain local government, in the same manner that national taxes maintain national government.
George Potter – That is a bit like saying that an individual with more than one car should only pay one road fund licence because he can only drive one car at a time.
@Leviticus18_23
“Surely that’s 3800 homes getting a really poor level of service for their council tax. That’s 3800 homes that don’t require schools, doctors, dentists, rubbish collection or care of any kind. ”
No, that’s 3800 houses – they aren’t homes if the ‘resident’ lives elsewhere – which aren’t available to people who would very much like to live locally and use all those services to the full, but can’t afford it because house prices have risen so much because of the second-home-owners buying them up. Opportunity cost! They should be taxed until the squeaks pip.
@ Anthony Aloysius St
“Alas, we mere mortals who lack the power of omniscience can’t always be so sure what’s going on in other people’s heads. (Mind you, I assume your own omniscience must have been on the blink when you wrote “perhaps” in your original comment … !)”
Not quite – the definitely referred to the perhaps – i.e. a definite maybe!
“@Leviticus18_23: That’s 3800 homes that don’t require schools, doctors, dentists, rubbish collection or care of any kind.
@Niklas Smith: They don’t require schools, but I would certainly not like to live in a house without rubbish collection, especially over the summer! They also require road maintenance and policing (think of all those burglars and squatters eyeing up those uninhabited houses).”
Yes plus the fire service….
Great move once again by Tim
My elderly mother owns two homes, one where she was brought up and one 120 miles away where she lived and worked as a school teacher. Both are modest properties, one is in a nice rural area one in a city, which was where she could get a job when my father died.
Her parents never owned their own home, and she was widowed in her early forties and brought up 3 boys on her own. My father was a poorly paid civil servant and prior to that he worked in a factory until he was 40 so he did not leave much of a civil service pension. Hard work and careful budgeting enabled her to buy her second home in a place she would ideally have wanted to live. This was our holiday home. Not all second home owners are rich and affluent. Some of them were just careful and worked hard. So what are the real issues and prejudices here.
The main industries in the nice rural area where one home is; living off goverment farming subsidies, goverment service jobs (teachers, nurses and local goverment etc.), tourism, and building and maintaining second homes. Some second homes are owned by local people who rent them out to tourists, some are second homes which are often rented out to tourists. Locals service and maintain them. Who really cares who owns them, they may be local they may not. But they contribute greatly to the local economy, they take in money from outside the area.
The Libdem policy should be to start building more shared ownership, or social housing in those nice pretty rural areas, that way you can control who lives in them and control costs for the occupants. This is issue is often highly localised, roughly 300,000 second homes out of 26million overall. It requires very local and direct intervention, not indiscriminate tax hikes based on a prejudice that as you have a second home you are rich. Fund teh building from income tax, it is more progressive than council tax, and get on with it.
I am curious, do the Libdems propose to restrict where you can live when you retire. For example if I want to sell my house in a city, where I do not really want to live but where I can get a well paid job commensurate with the outcome of my state secondary school education (consequently I pay a lot of tax), will they then stop me moving to a nice rural area and buying a house there when I retire. Well it would deny a local person a property to buy would it not…………. Same problem really, it is (was) a free country.