Is it fair that a little old lady, in her family home, impoverished and using few council services, pays far more council tax than a family of large wage earners in social housing and using most of the services? Council tax is based on an out-of-date assessment of the value of one’s home. It is based on the daft assumption that the wealthy live in expensive properties and the deprived in cheap accommodation. Moving to local income tax, as has been long discussed, would be a start. The Institute for Fiscal Studies concluded that it would help accountability and should be a flat rate. The bureaucracy should not be a problem as it could be based on the same assessments as the HMRC uses for national income tax. That would save the need for periodic property valuations. Other countries use
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Is it fair that a little old lady, in her family home, impoverished and using few council services, pays far more council tax than a family of large wage earners in social housing and using most of the services? Council tax is based on an out-of-date assessment of the value of one’s home. It is based on the daft assumption that the wealthy live in expensive properties and the deprived in cheap accommodation. Moving to local income tax, as has been long discussed, would be a start.
The Institute for Fiscal Studies concluded that it would help accountability and should be a flat rate. The bureaucracy should not be a problem as it could be based on the same assessments as the HMRC uses for national income tax. That would save the need for periodic property valuations. Other countries use sales tax (USA) or VAT (Canada) to provide local government revenue.
Another daft feature of the UK system is the reliance by local government on Whitehall handouts. The Ministry of Housing, Communities and Local Government (MHCLG) employs about half of its 4,609 people devising myriad arcane ways of using national tax revenue to induce local government to do what it wants. Nanny knows best. Perish the thought that local governments should do what their locals want. The simple truth is that the taxpayers’ money could go straight to local government in the form of local income tax, or VAT receipts or whatever, and the MHCLG should be abolished. If Robert Jenrick pulled the plug on his department, greater things would await him.
Councils have not been helped by the government’s financial pressures since 2008. When choosing between restraining one’s own spending or someone else’s, it is no surprise Whitehall has preferred the latter. In 2009/10 MHCLG provided two thirds of local government expenditure. By 2018/19 it was less than half. The squeeze on local government spending partly accounts for the increasingly poor provision of adult social care which is mostly funded by MHCLG.
What MHCLG wants to achieve, in its redistribution of our money to local authorities, is far from clear. It could be seeking equality in the sense of funding all councils at levels they can provide equivalent services or rewarding those that provide the best taxpayer value or gerrymandering or giving preference to particular services such as social care. This is a difficult area: in an ideal world, all councils would be equally efficient and provide equivalent services, bearing in mind the different needs of affluent and deprived areas and costs, e.g. the annual costs of carers. But this is not an ideal world: Wandsworth’s Band D council tax is £845 compared with £1,959 in their neighbouring Richmond and £2,057 in the only slightly further Kingston. The services are not that different and the rates of council tax are after MHCLG have done whatever harmonisation they may do.
Devolving expenditure to units closer to the taxpayer is supposed to improve accountability and taxpayer value, and ensure that expenditure is more closely aligned with what the locals want. In practice, Wandsworth aside, MHCLG does not do any of those things. And there are other ministries that should also be devolved, notably Education and Digital, Culture, Media and Sport. Why should a Whitehall committee decide that a Bradford theatre was more worthy of support than one in Leeds, or vice versa. We have much to learn from how the Swiss central government and cantons exercise their roles.
There are two main explanations for the variation in councils’ competence: governance and voter apathy. With two levels of local councils, e.g. County and District, there are not enough high grade councillors to go round. A start could be made by creating more Unitaries. Norfolk voted against that purely because turkeys don’t vote for Christmas. London is a special case. The central bureaucracy has grown by 33% under Sadiq Khan up to 2018. Whilst a few things need London-wide policies, the lion’s share of London government should be undertaken by the boroughs – perhaps with some mergers. After all, London managed quite well over the 14 years from Margaret Thatcher’s abolition of the Greater London Council in 1986 to Tony Blair’s reinstatement as the Greater London Authority in 2000.
The other reason for poor council performance is public indifference. The media fully covers national politics but gives scant attention to local government. The demise of local media is partly to blame. Apart from sideshows, like toppling statues and councillors awarding themselves higher than inflation rises in expense allowances, there is little of interest to report. Accountability needs news to be created.
The Audit Commission was created in 1983 to keep local council books in order but by 2015 the government decided it had become “wasteful, ineffective and undemocratic” and closing it would save £1.2bn over 10 years. Auditing was put out to the private sector. The trouble is that auditors (and I used to be one) are nice to their clients on account of wanting to keep the business. They are professional but prefer to rectify problems discreetly. The National Audit Office (NAO) operates far more openly. It has two branches, audit and taxpayer value, and its reports to the Public Accounts Committee pull no punches. We need a Local Audit Office (LAO) that operates in much the same way, reporting to audit committees that are wholly independent of their councils. The LAO reports need to be publicised locally.
The Local Government and Social Care Ombudsman claims to provide statistics on councils’ performance that are only about how complaints were dealt with. IMPOWER collects data enabling councils to compare their performance with similar local authorities. Unfortunately, confidentiality is part of the deal (to acquire the data) so the councils’ electorates are none the wiser.
Some issues do get local media attention. In some seaside areas and in Wales, second homes is one such issue. Second homes in these areas are alleged to deprive the less affluent locals, farm workers for example, from buying starter homes and to raise house prices in general. Second homes are often rarely visited so village schools, post offices, shops, and pubs close. In short, villages die. Worse still, the owners can claim they are making the second homes available as holiday rentals (they do not actually have to rent them out) and thus avoid council tax and also the income is below the business rates threshold. This minor scandal has been drawn to the attention of MHCLG but apparently they do not have enough staff to deal with it. It would take them 10 minutes to draw up a regulation making local councils responsible for sorting it out.
Two final caveats: if local income tax becomes the main revenue for local authorities it should be progressive, like national income tax, and not a flat rate. Local authorities should not be allowed to beat their budgets by borrowing. Managing inflation and protecting our currency are matters for the Bank of England and HM Treasury.
The second homes case history illustrates the need to devolve local matters to local councils and make local taxation both rational and fair.
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