Tag Archives: council tax

An “existential crisis” for English Councils

It has been many years since Councils have felt they had enough funding to provide the services that their residents need. For most of this century they have been cutting many non-essential and non-statutory services, such as youth clubs, and they have been outsourcing some essential services to cheaper and, in some cases, inexperienced and inadequate providers. And the cuts have happened year on year, so what seems unthinkable one year becomes a reality the next.

The core Council services are around housing and social care, for adults and children, plus a number of environmental services such as recycling and waste collection. Social care supports the most vulnerable, from essential care for the elderly and those with disabilities, to support for families in crisis and providing for looked after children. Most Councils also support an active volunteer sector with its increasing provision of food banks, as sure indicator that all is not well with society.

Throughout all this the Westminster government has been adding extra responsibilities to local government, but not the funding needed to meet them, all the while passing the blame onto Councils.

Councils get the bulk of their income from Council tax, business rates and central Government grants. The latter consists of the main revenue support grant, plus ring-fenced grants which simply pass through the Councils accounts and directly out to recipients, such as housing benefits and school funding. The formula for allocating the revenue support grant is shrouded in mystery, but seems to be based on historical assessments of need rather than current need.  It has also reduced on average by 50% in recent years, and some Councils get precisely zero in revenue support.

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Ordinary families are paying more so banks’ owners can pay less

It is budget setting time for councils across the country.

Local councils of all types have to decide what rate of Council Tax to set and budget how they will spend their revenue and capital over the coming year.

Everyone in local government knows how tough things are. Local services are under resourced, struggling and sometimes failing. At the same time, ordinary families face a huge cost of living crisis from rising bills that many in Westminster do not seem to understand.

In Kent County Council, where I lead the Liberal Democrat group, the ruling-Conservatives are raising Council Tax by 3% and cutting services by £28 million.  Inflation, such as rising energy bills and increasing need to help a growing but ageing population take their toll and leave gaps in the budget.

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Is the Big Squeeze set to become the Big Freeze?

Ofgem today announced the price cap will rise by £693 in England, Scotland and Wales, an increase of 54 per cent. This means bills for the average customer will rise to £1,971, up from its previous limit of £1,277.

This is just one factor in the soaring cost of living. Food prices are rapidly increasing. National Insurance is due to be hiked. Borrowers, including some mortgage holders, will feel the impact of the 0.5% hike in interest rates announced by the Bank of England today. Council taxes are due to rise in many areas, though lessened by a one off reduction of £150 to ease the burden of the surge in energy prices.

Those on pre-payment meters, who are often the most insecure in their finances and housing, will typically see their annual bills rise by £708 from £1,309 to £2,017. around £14 a week.

Even for relatively wealthier households, the loss of an average £13 a week to the energy companies will suck money out of the local economy.

The big fear is that households already skimping on heating will begin to sit in the cold affecting their health and wellbeing. The Big Squeeze could become the Big Freeze.

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Being serious about Council services

In the run-up to the Council elections in Scotland in May, can I suggest that the Liberal Democrats offer voters a real solution to the shortfall in Council budgets which has had such a devastating effect on local services.

We should be campaigning for a realignment of the council tax bands to bring them into line with the market value of houses and asking people in all bands, except the lowest, to pay more.  This would be a relatively simple and fair way to raise the extra £250m the Councils say they need just to keep services as they are.   

Before the Scottish Government published its budget, COSLA the local councils umbrella organisation, called for an increase in their funding by £1bn, just to stand still, and preferably a £1.6bn increase to “thrive.”  The budget did indeed give them an extra £1bn, or a 6 per cent increase, but it did not include money for wage increases or increases in National Insurance or the increasing  demand for services (eg home care). It left them £370m short.

Last month, in the final budget statement, the finance secretary Kate Forbes, found an extra £120m.  She suggested this was equivalent of a 4 per cent rise in council tax, hinting there was no need for councils to increase taxes in an election year.  This is an attempt to go back to the old SNP policy of freezing council tax which has led to years of unnecessary austerity in local services.    

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Radical Ideas for the Future

At the moment, virtually all of our policies – save for our stance on the EU – amount to tinkering at the edges of a flawed, if not broken, political system. This is a result of the fact that there is generally a fair amount of consensus within mainstream politics on a number of key issues.

All parties agree that we need to build more housing, that we need more funding of schools, the NHS and the police, and that we need to protect the environment. The major policy debates at the moment concern immigration, nationalisation of public infrastructure, the EU, education and public sector borrowing – most of which are couched in simple binary yes/no terms, depending on whether you support Labour or the Tories.

Rather than trying to join in the political consensus or meet Labour and the Tories halfway (e.g. see our current policy on housing), I genuinely believe that we have an opportunity to pursue an alternative set of policies that will mark us out as distinct.

Along with electoral reform and being pro-European, six policy ideas from various places within the liberal political tradition, come to mind:

1. A national housebuilding company

A national construction company set up to build houses, with the government taking a majority stake and offering financial guarantees. Instead of just pledging a high-sounding number of homes to be built each year and leaving it to the private sector, a government-backed company would have the opportunity to take responsibility for recruiting and training construction workers (with a focus on British workers), building homes and maintaining homes – with profits going back to the Treasury.

Combined with relaxing the rules preventing local authorities from borrowing to fund social housing, a national housebuilding company would be an exciting yet pragmatic way of building homes while balancing the risk and reward of construction projects.

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Live and campaign in an area with a lot of second homes?

East Suffolk Liberal Democrats are campaigning against a loophole that allows second home owners to avoid paying rates by saying they are businesses. A second home, that is available for holiday lets for 140 days a year (they don’t have to actually let it, except in Wales!), can claim to be a business for rates, and all properties of less than £12,000 valuation receive 100% small business rate relief – so they pay nothing. (NB this is not the same as Furnished Holiday Lets.)

In Southwold, more than half the houses are second homes and local people are priced out of …

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SNP’s Council Tax reform: timid, unfair and ill-thought through

Back in December, the Local Tax Commission in Scotland published its report which looked at various ways of raising local taxes. Political parties were urged to bring forward their own proposals. Scottish Conference had a consultation on a well-researched and thorough document. An indicative vote at the end favoured a progressive, fair property and land based tax, which, if formally adopted, would replace our proposal for a local income tax.

The basic principles that you would expect from a local tax is that it’s fair, progressive and takes into account the ability to pay. I have to say I’m not entirely sold on the idea of a property tax, although I can see the arguments for taxing property as opposed to income.  The proposals outlined in the Scottish Lib Dems’ policy document do mean that those in the least valuable properties paying significantly less.

The SNP announced their preferred solution yesterday. They have the choice of so many new powers and all they did was tinker at the edges, putting up the rate for the four highest bands.  Is this really the best they can come up with, embedding the inherent unfairness of the Council Tax yet further?

Let’s look at my street as an example. Under the SNP’s plan, a professional couple in a band D house earning two substantial incomes would pay no more yet a family in a slightly larger property up the street with one worker on a much lower income would pay more. That doesn’t make sense. There has to be a way to deal with that sort of anomaly.

Secondly, the Council Tax is based on property values that, by 2021, will be 30 years old. This is not the fundamental reform that the SNP promised. 

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Opinion: Council tax reform is better than the Mansion Tax

The November 2014 AdLib makes interesting reading. Amongst other issues, it set me thinking about the Mansion Tax. It is axiomatic of any decent society that those most able to pay should contribute the greatest amount towards the cost of maintaining it; especially in respect of social costs.

This seems to be an unpopular concept with many on the right of politics, who would presumably see themselves as paying more; while those on the left may be tempted to adopt it as an unthinking mantra, without considering the practical implications. Nevertheless, we must find fair ways of making the better off pay their fair share.

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David Cameron poaches Lib Dem tax-cuts idea. (But that’s not half as annoying as the Tory ideas my party’s trying to claim.)

It’s amazing how much more popular with David Cameron the Lib Dems’ flagship policy of taking the low-paid out of income tax is these days… Just today he celebrated delivering an income tax cut for 25 million people and lifting 2.4 million low earners out of tax:

It’s all a bit of a contrast from the first 2010 televised leaders’ debate, when David Cameron argued the policy was unaffordable… unlike the Tories’ own proposals for raising the inheritance tax threshold to £1m or tax breaks for married couples, of course.

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Opinion: Why do the government tax people on the value of their home?

View from Launceston CastleI am not a politician or economist, nor am I some great thinker of our age. I am just a normal man, single, living in rented accommodation, in a well-paid job, for my part of the world. Yet I still have to rent out my second bedroom to afford normal things like the internet, satellite TV and the occasional visit to a good restaurant. I have to pay out £830 a month just for my Council Tax, rent, petrol and energy before I even eat, let alone pay for the internet or satellite TV!

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There should be far more rebellions like the one yesterday

A brief footnote to Stephen’s piece yesterday Government suffers defeat in Lords over ‘new poll tax’ changes to council tax benefits. Note what the rebellion was over:

An independent review of the changes to be carried out within three years of them being introduced.

Yup, that shocking idea that after a new policy is introduced, we should leave it a little while and then someone should go and take a look how

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Government suffers defeat in Lords over ‘new poll tax’ changes to council tax benefits

The Government has suffered a defeat today on changes to the system of paying council tax benefit. As part of the Coalition’s existing welfare cuts, council tax relief is being reduced and local authorities are being given the power to set their own eligibility criteria from April 2013. As the Financial Times reported last week:

The coalition has earmarked £100m for councils that promise to limit the sums poorer people must pay to around 8.5 per cent of the full council tax rate – less than half what some local authorities are considering. … Lord Best, president of the Local Government Association, will on Tuesday propose an amendment

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News snippets from the Conservative conference: tax, Europe, migration and more

Conservative Party logoTrouble ahead on tax as Osborne opposes a mansion tax:

We are not going to have a mansion tax, or a new tax that is a percentage value of people’s properties.

Before you rush to spot the loophole in that – what about adding extra higher bands to Council Tax? – he opposed that too. Given Osborne made much of his reputation as was by opposing changes to inheritance tax, perhaps it is on capital gains tax that there will be room fro an agreement with the …

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Andrew Stunell MP writes… Launching the Liberal Democrats’ local election campaign

Local Election Day is now exactly a month away for most of Metropolitan England as well as across the whole of Scotland and Wales. Nick Clegg was in my own area of Stockport earlier today to officially launch the Liberal Democrat local election campaign, visiting a local business and speaking with councillors, business owners and local people.

I’ve no doubt that many of you have been out on the doorstep over the last few months, talking to people and showing them what we are achieving both nationally and locally.

You will already have your big messages in place. Number one has got …

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Cutting council tax – the view from a Lib Dem council

Liberal Democrat run Three Rivers District Council has just set its part of the council tax at an average of £154.30 – just over 2% BELOW the equivalent figure for 2006/07. This is a cash reduction, so next year people will be paying 2.3% less than they were paying six years earlier. When inflation is taken into account, the cut is almost 20%.

Only one other local authority (Hammersmith & Fulham) has achieved a cash reduction over this period – and unlike the London borough, Three Rivers was not previously run by a profligate Labour administration to provide easy targets for …

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Council Tax – why not a premium for second homes?

In addition to the Government’s proposals to allow councils to charge full council tax on second homes, other Liberal Democrat MPs and I have tabled an amendment to the Local Government Finance Bill to give councils the discretion to introduce a Second Home Premium. Second home owners often ask why they should be ‘punished’ in this way just because they choose to spend their money on a second home or because they need a second home for work purposes. They may add, ‘we spend money in the area and we do not have the same call upon services as …

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Opinion: Council dilemma – to raise or not to raise?

As councils across the country wrestle with this year’s Council Tax dilemma, here’s just one example of the dynamics involved.

To Raise or not to Raise? That’s the burning question to be answered early in 2012. Should Stockton Council accept the bribe on offer from the government to keep the Council Tax at the same level as last year, or ignore the offer and raise the tax?

On the surface it sounds like a no-brainer. Why wouldn’t we vote to keep the tax at the same level as last year when all around us residents are having to find more …

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Should councils be able to cap the number of second and holiday homes in their area?

Earlier this week, the Lib Dems’ Communities and Local Government Minister Andrew Stunell wrote here on LibDemVoice about the Coalition’s measures to increase councils’ powers to cut tax relief to those with second homes:

… our plans to allow local authorities to charge an Empty Homes Premium – up to an extra 50% of council tax – on any property that has been vacant for two years or more. Crucially, we are retaining the exemptions for properties empty as a result of the death of an owner, or if the owner has moved into hospital or to give or

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Housing: six things that could be done

As Tim Leunig pointed out last week, housing plays an important role in most people’s concept of social mobility, a point highlighted in Stephen Gilbert’s piece over the summer recounting his own personal circumstances:

Last year I was probably the only MP to be elected while still living with my parents. Of course, I’d moved out of home and, like many others, had to move back again. It’s a symptom of the fact that housing policy in the UK is in crisis. We have millions of people languishing on social housing waiting lists, first-time-buyers priced out of the market

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Andrew Stunell MP writes: Lib Dems should welcome localist reforms of Council Tax

Liberal Democrats have long called for reform to local government finance. No matter what alternative systems we’ve proposed, the key element has always been that the revenue was raised locally, and decisions about how to spend that money were taken locally. As you would expect of a Government with a Liberal Democrat influence, the Coalition is adopting that same approach. The consultation on the relocalisation of Business Rates has just ended, and today’s announcement by DCLG of the Technical Consultation on Council Tax contains a number of positive news stories for Liberal Democrats.

Take second homes for instance. You …

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What Liberal Democrat members think of different tax policies

Lib Dem Voice has polled our members-only forum to discover what Lib Dem members think of various political issues, the Coalition, and the performance of key party figures. Some 550 party members responded, and we’re currently publishing the full results.

Cut income tax and VAT but raise taxes on property: that’s the message from Liberal Democrat party members in our latest survey. Some answers to our tax questions are unsurprising, such as the North Korean style (or, for older readers, the Albanian style) majority in favour of raising the personal allowance threshold for income tax to £12,500, approximately equivalent to what a …

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Paul Scriven writes: we cannot let Labour off the hook on Council cuts

Just like all local authorities up and down the land, Sheffield is facing the biggest reduction in our budget for many years as a direct result of the reckless spending carried out by the previous Labour Government. Not quite the ‘post Soviet meltdown’ predicted by Sheffield’s Labour MPs, but a reduction none the less.

Setting the budget has not been an easy process. Colleagues and I have been agonising over what to de-prioritise and what to protect, listening to what local people tell us they value the most whilst ensuring that the vulnerable in our community are protected.

I know that …

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Opinion: what Ed Miliband should put on his blank sheet of paper – part 1

Ed Miliband has invited Lib Dems to make suggestions for his 2015 manifesto. In doing so, he is treading a well-worn path: from Tony Blair, who borrowed Alan Beith’s proposal for an independent Bank of England and a chunk of our policy on constitutional reform, to David Cameron, who borrowed a lot of our policy on civil liberties.

Imitation is a form of flattery, but it isn’t always sincere. I believe Ed Miliband spoke from the heart in his campaign for the Labour leadership, when he said that he would like to make us extinct. I’ve no doubt he would like …

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What do the academics say? Tax and public support

Welcome to the latest in our occasional series highlighting interesting findings from academic research. This time it is a paper from David Brockington (University of Plymouth) and Todd Donovan (Western Washington University) looking at the political impact of increasing taxes.

After reviewing the work of others in this area, they focus in on council tax levels and election results in English local councils, comparing the performance of Labour and Conservative against changes in council tax levels:

We have tested if governments that presided over marginal increases in existing taxes lost vote share and seat share in the subsequent election. We find that

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“Lib Dems plotting council tax hike for second homes”

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

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Opinion: prove you’re in the library or face a bill, students told

Officialdom seems to have opened a new front in its battle against those who commit the terrible sin of studying while black.

One of my students has been sent a summons to appear in court for not paying full Council Tax. The problem arises because non-EU students come in on a visa that specifies they must be recorded as being actively taught in college for at least 15 hours per week in college premises.

However, to be exempt from Council Tax a “full-time” student must study for 21 hours per week. Hands up anyone who got a degree …

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Our correspondents in Scotland

This is the first in a regular series of articles by Scottish-based bloggers giving their thoughts about developments in Scottish politics. Bernard Salmon is a Lib Dem activist based in Inverness and blogs at thesoundofgunfire.blogspot.com.

Scottish First Minister Alex Salmond proved himself to be a wee sleekit cowerin’ tim’rous beastie last week.

His betrayal of the SNP pledge to abolish the council tax and replace with a so-called ‘local’ income tax (in reality a nationally-set tax of 3p in the pound) was supposedly motivated by the fact that the parliamentary arithmetic was against him. Although the Scottish Lib Dems supported …

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