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!

25 Reasons Why 'The Scotsman' Is Rubbish, And 1 Reason Why It Isn't

The Scotsman, as part of the stable's protracted girnfest about the Local Income Tax, today gives us 25 reasons why LIT would be a bad idea. Suffice to say, most are complete twaddle, and I'll be rebutting every single one later this evening when I have time.

However, it's difficult to be overly critical when they also have the stout good sense to publish letters such as the first one here.

Sir Kenneth Calman says of his commission of the great and the good: "It is quite wrong to imply we are not interested in engaging with all shades of Scottish opinion" (Letters, 2 September).

The annexe to the commission's first set of minutes, from 28 April, 2008 and available to all on its website, states that "the commission starts from the position that Scotland should remain a distinctive part of the United Kingdom", which rather contradicts the statement in the next bullet-point that "the commission will consider the distribution of powers between the Scottish Parliament and Westminster without preconceptions".

Indeed, it even goes on to suggest that any change to these bounds for deliberation would "be justified only if it serves the people of Scotland better and secures the continuation of the Union".

There you have it. No preconceptions at all, except perhaps for those it already had when it began. Extraordinarily, given the commission's conceit of being "evidence-based", we learn that even if it could be proven beyond all doubt that independence would serve the people of Scotland better, that option would be discounted instantly by the commission because it does not secure "the continuation of the Union".

Since we must assume these minutes represent a true and accurate reflection of proceedings, it is clear that nationalists need not apply, at least not if they want their views to be considered in any meaningful way.

So, is Sir Kenneth being deliberately disingenuous in his claim that he wants to engage with all shades of opinion or does he genuinely not understand the contradiction at the heart of these statements? I must say, none of the possible explanations bodes particularly well for the quality of the final outcome of his deliberations.

RICHARD THOMSON
Western Avenue
Ellon, Aberdeenshire

I really couldn't have put it better myself. Oh, wait a minute...

Mentioned in Dispatches

Crikey - the Google alerts are fair going daft this morning...

Someone called Mark Wadsworth is having a bit of a go here and here. The crux of it is he believes in a Land Value Tax, while I think LIT is the way to go. We've had a disagreement in his comments section about the effects of LIT, but it seems to be getting a wee bit lively. Anyway, go and take a look and let us know where you think one, the other or perhaps even both are going wrong.

Of greater consequence, my good pal Angus MacNeil MP has been busy scribbling away on LIT for 'Comment is Free' over at the Guardian, and he's been kind enough to give me a little mention. I knew all those hours trawling Treasury and HMRC reports would reap a dividend one day... :-)

Why I Want Rid Of Council Tax

SNP plans for a Local Income Tax (LIT) seems to have become the target of choice for the opposition now that the budget and council tax freeze have gone through. As if on cue, out is being wheeled by Labour and others the archetypal hard-working, 2-income family, whom we are being invited to believe will under LIT be left subsidising pensioners in big houses who live off bloated share portfolios.

First things first - comparatively few people are in a position to live off their investments, but presenting a more balanced picture wouldn’t have the desired effect in terms of trying to whip up opposition to LIT. However, as a strong supporter of LIT, I thought I’d throw two very real examples into the mix, which have resulted from my own domestic arrangements over the past few years, which help explain my complete disdain for the council tax, or for that matter any kind of property based tax.

I own a flat in Edinburgh, which when I lived there at first, I shared with my partner of the time. As a band ‘B’ property, our combined water and council tax bill came to about £1,200, or £600 each. However, after we split up, even with a 25% single person’s discount my bill shot up to £900 – or about 5% of my household income at the time. I hadn’t become any wealthier in the intervening period and made no more demands of local services than I had previously. However, purely as a result of a change in my personal circumstances, my Council Tax had increased overnight by 50%.

Fast forward a few years to the present. As work for the moment requires that I have somewhere to live in London, I rent a room in a 4 bedroom semi-detached house in Lewisham, in the south-east of the city. Nice as our bit of town is, Notting Hill or Hampstead or trendy north London it most certainly isn’t (actually, that’s probably a good thing). It’s a very diverse area, with a high proportion of young families and a large number of homes of multiple occupancy.

There are 5 of us living together in the house – myself (parliamentary researcher); an IT consultant; a banker who shares a room with his fiancée (who is also a parliamentary researcher); and another banker. Fortunately, we all get on very well, although this may be helped by our different work start times and the fact we have a big kitchen and 2 bathrooms, so it isn’t quite as cosy as it sounds!

Based on salary alone, the five of us probably have a combined annual income of between £250,000 - £300,000 (I should make clear that myself and the other researcher lag quite some distance behind the rest). However, as a band ‘E’ property, the bill for us all comes to just over £1,500 – or £300 a skull if we split it 5 ways – just 0.5% of the total household income. It’s quite a difference from the £900 I used to get stung with for living on my own in Edinburgh, and an obscenity when you consider the couple with two pre-school kids over the road who have to pay an identical bill out of just one income.

And that in the end is my beef. Council tax hits households with low incomes disproportionately. Since it is based on the value of the house, there is little correlation between this and one’s ability to pay. Worst of all, the eventual bill you end up paying hits those who live on their own the hardest.

While being young, professional and childless means we don’t make huge demands of the services of Lewisham Council, on balance, we’re happy that we’re making a contribution towards policing, parks, adult education, libraries, schools, trading standards, refuse collection, the fire brigade, social services etc in the area. Splitting the bill 5 ways makes us better off financially, but I don’t think any of us would object seriously to being asked to make a bigger contribution given that we’d all be more than capable of so doing.

There will be winners and there will be losers in any change to a tax system – something which those calling for council tax revaluations and extra bandings and additional rebates would be wise to remember. Instead of conjuring up grotesque, false spectres of families being downtrodden by the supposedly idle rich, Labour and the Conservatives should be honest enough to explain why they believe that the rich man in his castle should pay a lower marginal rate of tax than the poor man at his gate.

Block-Headed

A couple of posts ago, I took umbrage at James Purnell MP, Secretary of State for Work and Pensions, for his assertions that Scotland would forfeit some £400m of Council Tax Benefit if we were to replace the Council Tax with a local income tax.

His argument, you may remember, was the rather trite 'if there's no Council Tax there's no Council Tax benefit'. You can therefore imagine my delight this weekend to read in the Sunday Herald the revelation that, as this Treasury 'Statement of Funding Policy' document from 1997 makes clear (point 7, page 39), Council Tax benefit is post-devolution to be regarded as part of the Scottish Block grant.


So, was Purnell misleading us earlier, was he poorly informed, or was he simply trying to throw his weight about and scaremonger? It scarecely matters now - with the release of this Treasury document, we have what I believe is often called called a 'slam dunk'.

The LIT Hits The Fan

Imagine, for a moment, that rather than reheating the school dinners prepared in a distant central kitchen each lunchtime, your local authority decided instead to invite some local food shop owners to operate out of their school dinner halls. The idea behind this would be to sell a healthy choice of meals and sandwiches prepared locally, which would be of a higher standard than the usual canteen fare.

In order that no-one loses out, the council decides to put all the money spent funding free school meals into a new voucher system, so that all previous beneficiaries of free meals may continue to buy food of equivalent value. Despite some initial concerns, the idea turns out to be very popular with pupils and parents alike.

Whatever you think of the idea itself, it would at least swap one system for another, while making sure that all monies in the previous free school meals scheme continue to benefit those they were intended to. However, imagine then that in a fit of ideological pique, the Government decides that since this renegade local authority won’t be offering ‘school meals’ any more, it won’t if it goes ahead be getting the money it used to for the provision of free school meals. Seems a bit rough, doesn’t it?

OK, let’s do another one. Imagine every police force in the country receives an additional grant from central government to enforce a nightime curfew on the under-18s. The initiative is supported with great gusto by the senior officers in some forces. However, other forces are less keen, and are reluctant to be seen to be ‘victimising’ the law abiding young.

Together with their police boards, these forces decide instead that the grants they receive for the curfew would have a much better impact on youth disorder if they were spent instead on school visits and mounting extra patrols at weekends. Miffed at the rejection of their pet project, government then decides to punish these forces by withholding the additional funding.

Both of the situations I’ve described are, of course, entirely fictitious. However, they do resemble very closely the situation faced by the Scottish Government in its dealings with Westminster over the withdrawal of attendance allowance following the introduction of free personal care. More recently, they resemble the weekend’s sabre-rattling from James Purnell over the threatened forfeiture of council tax benefit if Scotland proceeds with the introduction of a Local Income Tax (LIT)

"When there is no council tax then there is no council tax benefit," Purnell told Scotland on Sunday (As an aside, does this mean that if the LIT were simply renamed as the Council Tax, the DWP would continue to cough up?). However, council tax benefit comes via the Department of Work and Pensions and is paid for through general taxation, which, judging by the last glance I took at a payslip, people in Scotland are expected to contribute towards as well. It is designed to cover the Council Tax liabilities of those on the lowest incomes, and as such, is part and parcel of the local government financial settlement.

If Westminster was to bring in an alternative to the unfair Council Tax in England, the benefit money currently available would surely remain so as part of the overall local funding arrangements. For that reason, it would be no skin off anyone’s nose in Whitehall to allow this money to continue to come to Scotland to help finance a different system of local taxation, since we’ve already paid our share towards it.

Together with the ubiquitous ‘source close to’ describing the Scottish Government of acting like ‘big babies’ over the whole thing (seriously!), I think we can safely put this little skirmish down to Gordon Brown taking the huff and trying to show us all who’s still boss in Scotland. The irony is that having died in the last ditch defending the hated council tax at the last election, Labour in London is basically forcing its Scottish comrades to fight on exactly the same ground next time round as well!

I always expected Labour to go around picking fights with the Edinburgh administration while trying to blame the SNP – I just thought they’d be smart enough to choose their ground a little more carefully. I’ve no doubt there’ll be disagreements in the future where the respective jurisdictions of Holyrood and Westminster overlap, when the public will decide that the SNP is chancing it. This, however, I don’t think is going to be one of those occasions.

Lies, Damn Lies and Labour Party Leaflets

I was the recipient this morning of no fewer than three leaflets from the Labour Party. Sadly, two of the three are glossy (or should that be Panglossy?), so they have few alternative uses around the home. However, the one which really stuck out was the party’s official Election Communication for the Lothians.

It’s printed on a piece of very flimsy 1/3 A4 card, and says not a word about what Labour has achieved in office or what they plan to do if returned. Instead, they give an example of an ‘average family’ (Question - why does their ‘average family’ always seem to consist of a firefighter and a nurse cohabiting? Does their publicity guru have a thing for uniforms or something?), whom they contend would be £913 per year worse off if the SNP were to win power.

That seems an unusually precise figure, although sadly no-one in the Labour team has seen fit to explain how they have arrived at this amount. It’s also significantly at variance with the £5,000 per family figure they have on their billboards and party political broadcasts currently. To make things even clearer, there is considerable confusion amongst Labour spokespeople as to whether this £5,000 figure relates to alleged SNP spending commitments; or to the supposed ‘borrowing requirement’ identified by the now discredited GERS report, divided by the number of households in Scotland.

So far in this campaign, they’ve tried to terrify us with ‘deficits’ of £6bn (Labour’s North-East Scotland leaflet), £7bn (their analysis of supposed SNP spending commitments), £11.9bn (GERS), and £13bn (Labour press conference). Quite clearly, they are just making it up as they go along. Perhaps more to the point, though, if I were to speak to their economic team (assuming it even exists), would I even get an attempt at an explanation for all these competing figures, or would they all be too busy sitting around on what they think are their elbows to give me a proper answer?

Taxing Times for Labour

The Labour Party has been scathing in recent weeks about the SNP’s proposals to scrap the Council Tax and replace it with an income based alternative. It’s been described variously by Labour spokespeople as a tax rise for low earners (Not so - 90% would pay the same or less); and as a tax against small businesses (Again, not so - businesses pay separate business rates, not council tax or the SNP’s proposed replacement).

The argument for a local income tax is a simple one. Essentially, the value of your property bears little or no relation to your ability to contribute towards meeting the costs of the local services we all use. And if you are on a low income or live on your own, despite the various ‘reliefs’ which exist, the tax can still represent a very large proportion of your overall income.

Labour knows this, which is why wee Jack is waffling at the moment about including ‘extra bands’ for the Council Tax, in order to make it fairer. The trouble is, including more bands would do no such thing, since the general rise in house prices since the last revaluation would move only a small number of homes up or down a band relative to where they sit currently. It would do nothing to counter the ability to pay argument which is currently driving the debate forward. And the killer for Labour is that as history shows, property tax revaluations are about as popular with the voters as a fart in a space-suit.

Labour’s arguments don’t seem to be cutting much ice just now, since according to SNP polling, 71% of voters want to see the Council Tax gone. This is most likely why the Edinburgh Labour Party has made a very welcome concession in its local manifesto, where with commendable candour, it states that:

“The other big expense for everyone is Council Tax… …we know that Council Tax, as it is organised at the moment, isn’t always fair, with poor people paying a larger proportion of their income than rich people.

Sounds like an argument for a local income tax to me. Trouble is, notwithstanding this display of local disquiet, Edinburgh Labour is running on the same commitment to keep the Council Tax as wee Jack and the rest of the Labour Party. Despite this plaintive plea for mercy from Labour’s Embra Cooncillors, the fact remains that the only way to get rid of the Council Tax is to get rid of Labour. Period.