Thursday, February 12, 2009

The Torchpaper LIT

I was disappointed, but not entirely surprised to learn this evening that the SNP Government has decided to drop, at least for the duration of this Parliament, plans to replace the Council Tax with a Local Income Tax.

My strong support for LIT is something which I've put on the record before and which I'm happy to do so again. The Council tax hits low earners disproportionately and is particularly pernicious for people who live alone. It allows people in HMOs to escape paying what ought to be their fair share. The value of one's house bears no relation to one's ability to contribute towards local services and the sooner it's replaced with something fairer, the better.

So why ditch what remains a popular and fundamentally fair policy? A number of reasons: Firstly, there's the refusal of the present Westminster Government to budge on continuing to make available the monies paid in Council Tax Benefit, currently around £400m each year, to continue relieving the burden of local taxation. Then there's the small matter of the £1bn of budget cuts coming our way over the next 2 years. While neither of these are insurmountable obstacles in themselves, put them together at a time when Government is going to need to be able to offer enhanced central funding support to Local Government, and it risks leaving other areas of importance open to the prospect of funding shortfalls.

Add in the clear reluctance of HMRC to administer the tax, and the prospect of having to find alternative collection methods risks exacerbating these pressures further. With the country firmly in the grip of a recession, it's likely to see a fall in income tax revenues at a crucial time. All things considered, despite the fillip of the small business bonus scheme, it's clear that this is not the time to be placing an additional, if small, burden on small enterprises to aid the collection and administration process.

Then there's the parliamentary arithmetic. Although I suspect that some in the Lib Dems might have been open to the prospect of setting LIT centrally, at least to begin with until it settled down, there seems to have been no guarantee that this would be the case. So even on the best case scenario of having 47 SNP plus 16 Lib Dems on side (63), with 46 Labour and 16 Tories resolutely against (62), this was going to put a lot of power in the hands of the Greens and Margo. Even if Margo was persuadable (and so far as I can see, she's been playing her cards very close to her chest, no doubt with an eye to the tight numbers), if the 2 Greens had decided to vote against rather than abstain in view of their support for a Land Value Tax, that would have made it at 64-64 a repeat of the first budget vote. Result? The bill would fall.

If Jack McConnell had taken up that High Commissionership in Malawi and the SNP had taken his seat at the resulting by-election, that might have given the breathing space necessary to make proceeding worthwhile. However, that's not where we are. As such, the sensible thing to do is to park it and campaign for a stronger mandate next time round.

You'd think that with the policy being shelved, Labour might actually be quite happy. Not a bit of it. On Scotland at Ten this evening, Andy Kerr was barely coherent with rage. Despite being, we are told, an unpopular policy, the SNP had used its popularity to win the last election. Even in his moment of 'triumph' he still couldn't get the story straight – a bit like the earlier claims from his party that while collecting less overall than the Council Tax, LIT would simultaneously increase taxes on the lowest and the highest paid, as well as all the hard working families in the middle. There's nothing like having a coherent position in politics and throughout, theirs has been nothing like a coherent position.

So, with the exception of the benefits arising form the continued Council Tax freeze implemented by the SNP, we're back to where we were pre-2007, with the SNP campaigning in favour of LIT and Labour and the Tories campaigning against. While the Tories at least have a vaguely plausible position of offering enhanced reliefs (which still won't make a fundamentally unfair tax fair), having so far rejected all alternatives proposed, Labour are still in favour of the Council Tax unreformed and increasing.

With their refusal to put an alternative plan in place before 2011, that's not going to be a credible position for them, far less a vote winner next time out. We can all remember the shambles they made before the last election, when they claimed that an extra band at the top of the scale would allow for the creation of an extra band at the bottom, without the need for a property revaluation – something which would rather implausibly have left 11,000 band 'E' households paying out to reduce the bills of nearly 500,000 band 'A' dwellers. In the Orkneys, this back of fag packet policymaking would have left just 2 band 'E' taxpayers paying to implement the policy - I wonder how Peter Maxwell Davies felt about that? :-)

Just as a reminder, here's a summation of Labour's position on local tax, as expounded by Cathy Jamieson on Newsnight back in April 2007:

Anyway, to move from the ridiculous to the sublime, I also recall a bet from the dim and distant past with Richard Havers over this matter which may now have lost me, or perhaps even cost me, a lunch somewhere nice. In any case, I'm sure I'll be reminded of the exact terms of the bet in due course!

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