Council tax and local government finance reform

The agreement struck by the partners in the new coalition government makes a bold commitment to promote devolution of power and financial autonomy to local government. This includes a ‘full review of local government finance’. The LGiU will make a full submission to this review. In the meantime I have an efficiency saving idea for Eric Pickles: why not blow the dust of the Lyons review and have a read, instead of starting another full review. The sticking points remain. The Conservatives will not support revaluation, their manifesto specifically says so, and they fear, as did the previous government, the political repercussions. What of the alternatives to council tax? It is very difficult to see how the Liberal Democrats will win support for a Local Income Tax, as proposed in their manifesto. The Conservatives are more likely to favour a local sales tax, but is this a ‘progressive’ or ‘fair’ tax, as promised by the new government. One bright spot is that there are likely to be positive changes on the Business Rate, with councils being able to keep above average increases. In the near term council tax will remain and will be subject to the Conservative policy that referendums must be held on significant rises. Will some councils hold referendums? You bet. Will the public vote for tax rises? Not likely.

    1. There needs to be clearer links between economic activity and revenue for local authorities. One way of doing this without the need to identify new revenue streams is provided in Colin Buchanan’s blog http://colinbuchanan.wordpress.com/2010/06/07/whither-localism-%E2%80%93-nowhere-without-new-funding-arrangements/

    2. Remember that the Lib Dems suggestion for local income tax would have Land Value Tax added. I am told that LIT would not bring in enough revenue. Their latest policy papers mention Land Value Tax and this would again be a discrimnatory tax.
      Lyons was very keen to raise the savings limit for pensioners to £50,000 and eventually do away with it altogether. Thus basing CTB purely on income.

    3. Crispin Moor says:

      Re-read and refresh the Lyons review/report is good advice. Weren’t the Conservatives also promising ‘fairer’ (that word again) resource allocation and giving some responsbility to the Audit Commission for assurance that a fair resource alloaction system is in place? Will this proposal be in scope of the review I wonder?

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