COUNCIL TAX – ARE WE ALL IN IT TOGETHER?

First Published by: The Guardian 

With multimillionaires accused of salting cash in off-shore havens and generally not paying their way, Miles Brignall looks at the huge anomalies in Council Taxes

Fancy a six-bedroom, six-bathroom, house in one of London's smartest streets, a stone's throw from Buckingham Palace in the heart of Westminster? It might only have two reception rooms, but it is newly restored, comes with a fine roof terrace, and can be yours assuming you can stump up the £7.45m asking price.

Or maybe you live in the real world. The three-bed semi pictured above in Newark, Nottinghamshire has two reception rooms, like the house in Westminster. It has been extended and, according to the estate agent marketing it, it's in immaculate condition. The owners are hoping to get close to the asking price of £154,950.

But despite inhabiting two very different worlds, the owners of these two homes pay almost exactly the same in Council Tax – a little over £1,300 a year.

Over the next few weeks millions of householders across the UK will receive their Council Tax demands for the coming year and, amid spending cuts and tax rises, more and more people will be asking why the rich pay so little on their multimillion pound properties.

This week the Lib Dem business minister Vince Cable indicated his party was ready to scrap the 50p top rate of tax in exchange for a new mansion tax. "Basically, you get people with multimillion-pound properties paying exactly the same Council Tax as somebody in a three-bedroom semi," he said. "So the system doesn't work."

His party has proposed a higher levy on homes worth £2m and more. However, conservative MPs in London are already lining up to oppose such a tax.

Malcolm Rifkind, MP for Kensington and Chelsea, said 81% of properties affected would be in London, half of which are in his constituency. In an article this week he suggested the levy would be "arbitrary, disproportionate and unfair" and declared himself "resolutely opposed to such a tax".

But his arguments may fall on deaf ears in other parts of the country, which have suffered Council Tax rises at a time of flat or falling wages, and where the disparity between London and the rest of Britain looks less and less sustainable.

Westminster, with some of the world's most expensive real estate, imposes some of the UK's lowest Council Tax bills. No home in the borough is charged more than the band H charge of £1,375 a year. All properties that were worth more than £320,000 when the calculations were last made in 1990 are placed in the top band – irrespective of whether they are now worth £10m or more.

The residents of Newark, by contrast, pay some of the UK's highest Council Tax charges. The band B house above is charged at £1,311 a year. Someone living in a top band H house in the town pays £3,373 a year – almost two and a half times as much as in Westminster. Yet Nottinghamshire is an area with below national average incomes.

But this is by no means a problem limited to Nottinghamshire. Across Britain, many families who live in distinctly average homes are paying a month's income to their local authority in Council Tax.

Stevenage in Hertfordshire, 30 miles north of London, charges a family living in a mid-range band E house £1,778 a year. Compare that with those living in a band E home in Putney or Wimbledon in leafy (and very expensive) south-west London who are paying less than half that amount: £863 a year.

Those lucky enough to be living in one of the area's multimillion pound homes – around Wimbledon Common pay the top rate of Council Tax of just £1,413 a year.

And it is not just the flagship Tory boroughs in London that are imposing relatively modest bills. Someone with a band E home in Southwark, a Labour-controlled borough in south London, pays £1,493 a year. In Newark a home in the same band attracts an annual £2,436.

A home in Dulwich village in Southwark, on sale for £4.35m has a Council Tax bill of £2,443. But a band F house in Bicester, near Oxford, which would sell for around £425,000, attracts a bill of £2,222.

A four-bed detached house in Newcastle-under-Lyme, a smart area near Stoke-on-Trent, is on the market for just under £400,000. It is in band F, and its owners will pay an annual Council Tax bill of £2,095 – slightly less than the tax the £4.4m Dulwich home attracts.

Council Tax rates are set by local councils with local accountability, but the furore over low rates for millionaires – plus growing evidence that the rich also avoid paying stamp duty by registering assets offshore – has turned it into an issue that increasingly divides the coalition government.

Last week the Chartered Institute of Public Finance and Accountancy said 85% of local authorities will freeze Council Tax for this financial year. But because the authorities that are increasing their charges also tend to be the bigger districts with more households, it warns that 43% of homes will see some increase for 2012-13. 

The Department for Communities and Local Government has urged councils to freeze Council Tax this year and offered them funding to do so. Of those authorities increasing tax, none are increasing by more than 4%, it says.

Meanwhile, this year's Council Tax bills are about to start going out to homes across the country. When yours arrives will it be closer to Westminster or Newark?

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COUNCIL TAX 'REBELS'

First Published by: Local Government Chronicle

KEEP TRACK OF WHICH COUNCILS HAVE REJECTED THE GOVERNMENT’S FINANCIAL INCENTIVE TO FREEZE COUNCIL TAX NEXT YEAR

Brighton & Hove City Council, the country’s first council to be run by the Green party, were the first to announce they would reject the governments’ funding for a Council Tax freeze and instead ask residents for 3.5% more next year.

Ever since the chancellor announced last Autumn that there would be funding for a second Council Tax freeze there have been mutterings about the financial pitfalls of the deal.

Instead of the four years of funding offered in 2011, and which was snapped up by every council in the land, this year’s offer is for one year only, leaving councils quickly facing a financial cliff edge which will have to be smoothed by spending cuts/savings or an even largerCouncil Tax increase in 2013-14.

Sensing this disquiet, LGC surveyed councils and found that as many as one in five were seriously considering turning down the financial incentive. Soon after our survey, it emerged that Teeside leaders had been discussing the issue and in a united front, bar Hartlepool BC, four of them announced they would increase Council Tax by 3.5%

Nottingham and Leicester City Councils weren’t far behind, and since then we’ve also heard from Gedling BC and Stoke-on-Trent City Council.  So far, all likely suspects as councils run by national opposition parties, but would any Conservative and Liberal Democrat councils take a stand and turn down their government’s not very enticing one-year offer?

Interestingly all the Tory councils declared so far have kept their increase below 3% while the Labour and Green councils have opted for as large an increase as they can get without triggering a referendum.

More councils - of all colours - are expected to announce increases in the weeks before budgets must be set, so it will be interesting to see whether any Tory council breaches the 3% mark. 

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COUNCIL TAX TO SOAR BY 30 TIMES INFLATION

Published by: This is Money

Council Tax is to rise by 30 times the rate of inflation, despite a pledge by town hall chiefs to help struggling families. 

On the rise: People could soon be paying more for Council Tax. They promised 'enormous' efforts to keep bills down yesterday, saying: 'Councils understand that people are suffering' – before warning the tax would rise 3%, even though inflation stands at 0.1%. 

The increase will mean an average bill in England will go up by £34 from £1,145 to £1,179.35. The tax for a benchmark Band D house will rise by £41 from £1,373 to £1,414. The figures from the Local Government Association are based on information provided by 52 local authorities. 

Councils are under pressure from ministers to keep increases down when the bills land on our doormats next month. Those who impose unreasonable increases will have their spending capped. 

The 3% increase compares with inflation of 0.1% as measured by the Retail Prices Index, which is regarded as the most reliable measure because it takes mortgage and housing costs into account. 

The government favours the Consumer Prices Index, which does not include mortgages. This was at 3% last month, but is expected to fall below 2%. Matthew Elliott, of the TaxPayers Alliance, said: 'Council Tax rises are totally unacceptable when people are struggling to put food on the table.' 

Local authority chiefs said income from charges had fallen because of the fall-off in construction and the housing market, and because fewer people were using car parks and swimming pools. 

However, Council Tax bills have more than doubled since 1999. The LGA said: 'Town halls are making enormous efforts to keep bills down.' But a quarter of the tax pays for town hall pensions. 

Councils also lost nearly £1bn in October's Icelandic banks collapse. Local Government Minister John Healey said: 'There is no excuse for excessive tax rises or service cuts. We will take capping action where necessary to protect taxpayers.'

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COUNCIL TAX KEEPS ON CREEPING UP

Published by: This is Devon

CAMPAIGNERS have made fresh calls for a radical overhaul of the Council Tax system as the average annual household bill in Devon creeps towards £1,500.

Residents in Cornwall will pay just over £1,200 this financial year, after the rate was unified under the new county-wide local authority. But for those living in the former district areas where Council Tax was previously lowest, it represents a rise of just below 5 per cent.

The economic downturn has seen some Devon district councils freeze their precept to try to ease the burden on residents. But, as the inflation figure used to determine wages turned negative for the first time last month, and the credit crunch continues to bite, many will struggle to make the payments.

Elderly people and those on fixed incomes can be particularly hard-hit by the tax, which is calculated according to the value of property. Many believe a system based on income would be fairer.

Albert Venison, chairman of the Devon Pensioners Action Forum, which has long campaigned on Council Tax, said those who had been prudent savers throughout their lives were now finding they could not afford simple luxuries because their of the tax burden, coupled with the plummeting value of their assets.

He said: "The average rise across the board is about 3 per cent this year, but you have to remember that that's on top of all the other increases that we have seen in the past. It means people who have been careful savers are suffering."

The warning came as the Government hailed the lowest rise in Council Tax for several years. Local government minister John Healey said: "Most councils across the country are tightening their belts, which is exactly what the public wants to see."

Teignbridge District Council has prided itself in keeping Council Tax low, and managed to freeze its precept in 2005. But this year's rise of 3.5 per cent is one of the highest of any Devon district. Leader Alan Connett said the recession would leave the authority around £300,000 worse off this year, but said councillors had frozen parking and leisure charges to boost business and tourism.

He said his own view was that the current system was a "disaster". "In areas where the average salary is quite low, you can't have a uniform system of property tax," he said. "It should be based on a much fairer system of people's ability to pay. "It's a rubbish system and it should be scrapped."

Earlier this month, the WMN revealed that 40 per cent of local government funding now comes from Council Tax, compared to 30 per cent when Labour came to power. Any drop in Whitehall's funding to local authorities means councils are forced to make up the difference by raising their precept of the levy.

Devon County Council has imposed an increase of 2.89 per cent, an increase of just under £30 to the new rate of £1094.67. In the unitary areas of Torbay and Plymouth, residents do not pay the county council. Instead, this year they will pay £1,227.40 to Torbay Council, an increase of just under 4 per cent. Plymouth residents will pay £1,209.71 – 3.5 per cent up on last year.

The police precept has risen by 4.94 per cent – just below the level at which it could be capped by the Government, forcing a costly recalculation process. It means the average home will pay £149.22, £7.02 more than last year. In Devon, residents will also pay £69.18 towards the fire service, up £2.60 on last year – a rise of 3.9 per cent. In Cornwall, the service is provided by the county council, and included in its tax income.

This year, an average band D property in Cornwall will pay £30.64 more than last year under the new unitary authority. But for areas such as Penwith, which previously enjoyed low Council Tax payments, it represents a rise of 4.9 per cent.

Penwith District Council leader Roger Harding said he had fought for the increase to be phased in, adding that people are "almost at breaking point".

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BUDGET: OSBORNE IS WARNED AGAINST 'SENSELESS' CUTS

First Published by: BBC

THE BUDGET IS LIKELY TO PROVE A CRUCIAL MOMENT FOR THE GOVERNMENT

The coalition government has been warned against making "senseless" cuts in spending ahead of Tuesday's Budget. Unions said harsh action was not needed, while Labour accused the Tories of cutting for ideological reasons and using the Lib Dem partners as "cover".  

But Deputy Prime Minister Nick Clegg said cuts were needed as the economic situation in Europe had got a lot worse in recent months. These would be "difficult" but done "with care", he insisted. In an e-mail to party members, the Lib Dem leader acknowledged that the Budget - expected to be dominated by announcements of spending cuts and tax rises - was likely to be "controversial".

But he said the "mountain of debt" that the coalition had inherited from Labour needed to be dealt with. "Without action on the deficit, we will carry on racking up unaffordable debts our children will have to pay off," he said. "And we will undermine the economic growth needed to create jobs and opportunities for all of us. There is nothing fair, liberal or progressive about any of that." 

The problem facing George Osborne is that he knows where we're spending all our money - public sector pay, pensions and benefits - but getting much of it back any time soon is going to be incredibly difficult. Take welfare. Yes, there are potentially huge savings but welfare reform is a long, slow slog. 

All the evidence from the United States, where they've already gone down this road, is that in the short term welfare reform actually costs money. Why? Because you have to provide more support, advice, training, childcare and so on to move people off benefits and back into work. Similarly with pension reform - Yes, you can reform the system for the future, but there's not much you can do about those already receiving what Nick Clegg called "gold-plated pension pots."

So while the coalition is keen to press ahead with pension and welfare reform, it isn't going to solve our immediate budget crisis. The bad news is that can only mean - in the short term - steeper cuts and tax rises elsewhere. Chancellor Mr Osborne has said the Budget will lay out "tough" but necessary plans to bring down borrowing - set to total £155bn this year - over the next four years. 

The opposition, unions and employer groups have all expressed their concerns ahead of the chancellor's statement at 1230 BST (1130 GMT), as speculation continues that it could contain a rise in VAT and a public sector pay freeze beyond the one year already proposed. Other measures expected to be included in the Budget are a levy on banks and an increase in non-business capital gains tax.

Mr Osborne has refused to say whether there will be a multi-year freeze on public sector pay, or confirm newspaper reports that welfare payments may be frozen although he has ordered a review of public sector pensions.

Prime Minister David Cameron has already suggested public sector pay and pensions will be hit, saying the deficit could not be dealt with by "just hitting either the rich or the welfare scrounger". Updating MPs on Monday on the outcome of last week's EU summit, Mr Cameron said there was "unanimity" among European leaders about the need for prompt action on cutting national deficits, saying any delay would entail "major risks" to economic recovery.

All EU countries were having to take "painful action" to cut borrowing but it was the "right thing to do" for future confidence and prosperity. And Mr Clegg insisted that while "cuts must come", they were born out of economic necessity not driven by political dogma. He said the economic situation in Europe had deteriorated significantly in recent months and accused Labour of both making unfunded spending promises and "covering" up details of post-election cuts they were planning.

"We have taken the difficult decisions with care and with fairness at their heart," he said. "But nonetheless, it will be controversial. This is one of the hardest things we will every have to do." One Liberal Democrat MP, Bob Russell, has already said he will vote against any package of measures which risks leaving children worse off.

The BBC's political editor, Nick Robinson, said Mr Clegg's attempts at reassurance reflected the fact that this Budget would be a "bigger test" for his party than the Conservatives. It is very, very important indeed that voices are raised against... unfair cuts that endanger not just our society but our economy as well” Shadow chancellor Alistair Darling said the Conservatives were "using the current circumstances" as an excuse to make "ideologically driven" cuts they had planned anyway and said they were "using" the Lib Dems "as cover". And Mr Miliband, one of the contenders to be Labour leader, said the coalition cuts risked turning Britain into a "slow-growth economy". 

"It is very, very important indeed that voices are raised against senseless cuts, unfair cuts that endanger not just our society but our economy as well." General secretary of the TUC, Brendan Barber, said the chancellor's approach was "based on a series of myths". "Deep urgent cuts are not needed, and run the risk of the double dip [recession] - especially now much of Europe has signed up to the same deficit fetishism," he said. The TUC also warned against a VAT rise, saying such a move would be "deeply regressive" and those on low incomes would "barely be able to absorb" the cost. 

Council Tax freeze:

Local authorities said they would face "very, very difficult decisions" in the future as central funding was reduced. "It makes things very difficult in terms of how we prioritise our services," Sir Steve Bullock, chairman of Local Government Employers, said. In a move intended to partly soften the anticipated blow of cuts and tax rises, it is understood the government will press ahead with plans to encourage a Council Tax freeze in England next year.

The Conservative manifesto proposed a two-year Council Tax freeze paid for "by reducing spending on government consultants and advertising". That plan involved providing extra funding to councils who proposed only small Council Taxincreases, so they could then freeze them. It is not entirely clear yet how the coalition government's plans would work, or how much it will cost. 

But as well as the Council Tax freeze - and the decision to axe Labour's plan to raise more money from a National Insurance increase - the Budget will also provide a partial National Insurance exemption for new firms based outside the south-east of England.

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TAXPAYERS' ALLIANCE ATTACKS SURREY COUNTY COUNCIL'S TAX DECISION

First Published by: The Taxpayers Alliance

THE TAXPAYERS’ ALLIANCE HAS CRITICISED SURREY COUNTY COUNCIL FOR PLOUGHING AHEAD WITH A COUNCIL TAX INCREASE.

Councillors voted through the decision to increase its portion of the Council Tax by 2.99 per cent at a meeting on Tuesday. All the Conservatives present voted for the increase, while all the Liberal Democrats voted against. 

Resident Association members and independent councillors voted no to a rise or abstained. The Taxpayers’ Alliance hit back at the authority after the vote and suggested areas where savings could be made in order to keep Council Tax down, which has increased by 72 per cent over the past 10 years. 

They included looking at pay based on the fact Surrey’s chief executive received a total remuneration of £253,133 in 2010/11 – more than the Prime Minister – and councillor allowances for the same time period cost taxpayers £1,582,000.

Matthew Sinclair, director of the TaxPayers’ Alliance, said: “The council have let people in Surrey down by imposing a big hike in Council Tax on residents, so many of who already struggle to pay. “Over the past 10 years there has already been a drastic increase in Council Tax bills and, with so many other pressures on their finances, this is the last thing families in the county need.  

“Surrey needs to follow the example of other local authorities who have shown it is possible to combine quality services with lower bills, and deliver much better value for money.”

The Government offered all councils a one-off grant of 2.5 per cent for 2012/13 if they froze Council Tax for another year. But Surrey declined the grant on the grounds it was a short-term gain for long-term pain and accepting it would lead to a financial black hole – a £70m shortfall over five years Leader of the council Councillor David Hodge said: “For many other councils in the country, the Government offer is a good one. 

“But after exhaustive analysis, my cabinet and I believe that this one-off Council Tax grant is not in the medium to long-term interest of Surrey residents. “We must do what is right for the residents of Surrey over the long-term and not accept short-term assistance that will imperil our financial stability in years to come. 

“While the rest of the country may suffer hard times in the coming years if the economy continues to stagnate, I can assure everyone that the whole team at Surrey County Council is working to achieve the best of times for the residents of Surrey.”

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COUNCIL TAX BLOW FOR SECOND-HOME OWNERS

Published by: The Telegraph

Owners of second homes are to lose Council Tax discounts in a major shake-up to be announced by ministers. 

The package of measures, to be unveiled by Eric Pickles, the Communities Secretary, would be the first major changes to the tax since it was introduced in 1993, in the wake of the failed poll tax.

Local authorities will be told they can abolish the rebate, which can mean Council Tax on second homes is as much as 50 per cent lower than for main residences. Ministers say the proposal will benefit hard-pressed middle-income families - but it will be unpopular with second-home owners. It will form the centrepiece of a series reforms which ministers say if adopted, would allow a cut in Council Tax bills for most people.

The bill for a Band D property, whose average this year is £1,196, could be reduced by around £20 according to coalition sources. Council Tax bills have already been frozen this year and will be again from next April. The package of measures, to be unveiled by Eric Pickles, the Communities Secretary, would be the first major changes to the tax since it was introduced in 1993, in the wake of the failed poll tax.

It includes an end to discounts on empty properties, which can be up to 100 per cent, in an attempt to increase the available housing stock. Mr Pickles will also pledge to review the current system which sees tax inspectors treating "granny flats" as distinct properties, meaning families who house a relative in an annex face two separate Council Tax bills. Councils will, furthermore, be encouraged to offer discounts to householders who pay bills via the internet while ministers propose letting Council Tax payers pay their bills over 12 months, rather than over 10 months as at present.

They will also cancel a complex and unpopular planned tax increase on homes with "rent a roof" solar panels, which had faced the same levels of tax as businesses which install the panels. Mr Pickles's statement is expected to confirm that there are no plans for an expensive total revaulation of all 21million homes in England - with sources saying this effectively rules out attempts by Liberal Democrat ministers to impose a "mansion tax" on owners of the highest-value properties.

Labour had worked on a revaluation but never implemented it. One which was implemented in Wales in 2005 was hugely unpopular as a third of homes were placed in a higher band.

Lib Dems are likely, however, to welcome the main thrust of Mr Pickles's proposals, which will give local authorities the "flexibility" to reduce or remove entirely the current system of tax relief on second homes, many of which are kept as holiday lets. Discounts can be worth hundreds of pounds a year. 

Such a move was called for earlier this year by Shelter, the homeless charity, which claimed it would save £42million a year. It was also proposed by Tim Farron, the Lib Dem president whose Westmorland and Lonsdale constituency has more than 3,200 second homes, last year. Four out five councils are understood currently to offer the minimum 10 per cent discount - suggesting they would welcome the chance to abolish the relief entirely - while one on five offer more, up to a maximum of 50 per cent. 

In the last 20 years, second-home ownership has grown dramatically, particularly in coastal areas such as Cornwall, Cumbria and Norfolk, where some claim it pushes up property prices and makes it harder for local people to get on the property ladder. In 2009, there were a total of 245,384 second homes in Britain, according to a survey by Knight Frank, the estate agents.

Mr Pickles is also targeting the up-to-100 per cent discounts on empty properties. Sources emphasise, however, there are no plans to change the rules on relief for "exceptional circumstances" such as homes left empty because someone has died, been moved to hospital or a care home or has moved in with someone else to be a carer.

Instead, ministers are seeking new powers to tax banks and other lenders who repossess homes, forcing occupiers to leave, and then keep the properties empty. They are also encouraging councils to do more to get Council Tax payers to pay bills online rather than by post in other "hard copy" formats. Mr Pickles said last night: "Under Labour, Council Tax went through the roof. This Government has scrapped Labour's Council Tax revaluation and is helping freeze Council Tax for two years.

"I want to do more to help everyday families with their cost of living, and protect family homes from tax increases. "By removing the subsidised tax breaks for empty homes and second homes, we can cut £20 a year off families' Council Tax bills by treating everyone equally and fairly. "Councils should make it easier to pay bills, and offer the same discounts for electronic billing that other companies offer as standard – this will cut paperwork and help reduce tax bills."

The current Council Tax "freeze", which came in this year, will be extended to cover next year at least, after an announcement by George Osborne, the Chancellor, at this month's Conservative Party Conference in Manchester. Mr Osborne said he would use an £805 million "dividend" from a Whitehall under-spend to pay for the freeze, saving an average family £72 a year.

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