'GRANNY FLATS' TO GET TAX BREAKS UNDER NEW PROPOSALS

First Published by: The Guardian 

ERIC PICKLES ANNOUNCES PLANS TO SCRAP COUNCIL TAX BILLS FOR LIVE-IN ANNEXES AND MAKE IT EASIER TO CONVERT GARAGES

Eric Pickles says the plans should benefit many families and pensioners. Hundreds of thousands of families could benefit from tax breaks on "granny flats" under plans being considered by the government. The communities secretary, Eric Pickles, said he was keen to scrap Council Tax for live-in annexes, arguing the current rules were "fundamentally unfair". 

It is believed ministers are also considering overhauling planning regulations and fees to make it easier for home-owners to convert garages and other outbuildings. 

Pickles told the Daily Telegraph: "We are keen to remove tax and other regulatory obstacles to families having a live-in annexe for immediate relations. "We should support homeowners who want to improve their properties and standard of living. These reforms should also play a role in increasing the housing supply."

The MP said it was unfair for households to be charged twice by paying Council Tax on their homes and annexes - which are regarded as separate dwellings. It is estimated that as many as 300,000 households in England could benefit from the change. The reforms are expected to form part of a package of policies to increase housing supply and address the shortage of affordable homes over the next two years.

Labour said it was unclear who would benefit from any further relaxation of the tax rules as annexes occupied by dependants aged over 65 are already exempt. Government sources conceded that the timing or detail of any change, which would probably require primary legislation, had not yet been considered. Such a move would also reduce the income of local councils at a time when town halls are already being forced to implement severe spending cuts.

The shadow communities secretary, Hilary Benn, said: "This is a decidedly peculiar claim by Eric Pickles as occupied granny flats have been exempt from Council Tax since 1997. "It is therefore extremely unclear exactly which pensioners the government expects to benefit from these changes, and the granny-tax fiasco doesn't give us confidence that they will get this right.

"This seems to be nothing more than an attempt to deflect attention from their housing crisis. What we need is to get building and get the economy moving again. That's why Labour is proposing to build 25,000 new affordable homes and a temporary cut to the rate of VAT. " Under the 1997 regulations, Council Tax is not paid on annexes occupied by relatives who are over 65, "mentally impaired", or "substantially and permanently disabled".

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UNOCCUPIED, UNLOVED: LONDON MANSIONS LEFT TO CRUMBLE BY ELUSIVE OFFSHORE OWNERS

First published by: The Guardian

COUNCIL OFFICIAL DESPAIRS: 1 MILLION EMPTY HOMES IN LONDON AND ACROSS THE UK

Empty property in Mayfair, London. There are 3,000 empty properties in Westminster, London, an increasing number of which are being squatted. "When I was a boy I used to come up to London and see houses like these and think 'Wow. Who lives there?'" says Paul Palmer, gazing up at a pair of seven-storey mansions in Park Lane across the road from Hyde Park. "Now I know – no one. These are owned by two different companies registered at the same address in the British Virgin Islands. 

They haven't been occupied for at least seven years, apart from when the squatters were there in January." There are an estimated 1m empty homes in the UK, and as empty properties officer for Westminster council, Palmer is responsible for about 3,000 of them. Every day, he visits some of the ritziest addresses in the capital and does his best to get them lived in again. What makes his job unique is the staggering value of the properties on his books: some of his Mayfair mansions are worth as much as £50m, even in their dilapidated state. What makes his job difficult is that many of the biggest and most expensive are owned not by dusty old dowagers down on their luck but by mystery investors hiding their identities behind offshore companies.

"I feel it is a tragedy," says Palmer. Many of these buildings have wonderful histories, and are part of our heritage. For them to be left vacant and unloved for a such a long time, pawns in a real-life game of Monopoly, is disgraceful." The properties usually aren't abandoned for reasons which might prompt sympathy. Palmer believes many elusive owners don't have the slightest intention of bringing them back to life. "So often offshore owners have little or no interest in the property as a building - it is merely an asset to be traded as they see fit," he says, adding that offshore firms are very tricky to track down.

Take the Park Lane townhouses, which Palmer estimates are worth £10m apiece. The key leaseholds on each are held by Konzeo Ltd and Weleta Ltd, two companies incorporated in the British Virgin Islands (BVI), a tax haven in the Caribbean. Both firms ignored multiple letters from Palmer asking them to explain why the buildings were unoccupied and threatening to issue a compulsory purchase order – until a gang of squatters, plus their dogs, moved in and were pictured on the front page of the Sun in January.

Builders appeared after the squatters were evicted, but Palmer says they were on site for only a few days and have never returned. "It's just the same situation as before," he says, peering through the letterbox nine months on, "only now they've left the lights on." Within a five-minute walk of Park Lane are 21 of the grandest properties on Palmer's list, worth between £6m and £50m each by his estimation. Of these, seven are registered to BVI companies, with others owned by firms incorporated in Jersey, Guernsey and Switzerland. 

Many are registered at the same address in Road Town in the BVI's capital of Tortola, just under different post office box numbers, says Palmer, who confesses he has often gazed at the satellite picture of Road Town on Google Maps and wondered what secrets lie beyond the satellite's range. John Samson, a property law expert at Taylor Wessing, says offshore-registered firms buy expensive London property as an investment, just like art or any other commodity. "One of the reasons that people buy property in London, and in particular Mayfair, is that there is almost always a demand for it," says Samson. "Investors believe the value will not only be maintained but will go up, regardless of whether it is lived in or not." Amanda Royce, a property solicitor, says Mayfair is a particularly attractive investment location for foreigners now because of the weak pound. 

"The owners leave them empty sometimes because they lose track of their properties. Often they have a place in New York, a place in Monte Carlo, one in the south of France and so on."In some cases where property is owned by offshore companies, UK capital gains tax will not be payable, says Samson. "If an investor with a British-registered firm bought a property for £1m one year and sold it the next for £2m, he would be liable for 18% capital gains tax on the £1m profit."

Upper Grosvenor Street in Mayfair ought to be one of the most desirable addresses in London. The heavily fortified American embassy occupies a square halfway down. Le Gavroche, with its two Michelin stars and Michel Roux Jr in the kitchen, is just around the corner and Hyde Park is at the end of the road. Yet four grand properties on the street have remained empty for up to eight years, abandoned and left to ruin by their offshore owners.

No 21, registered to Boss Holdings in Jersey and worth around £15m, has been vacant for at least eight years. So has No 18, which is believed to be owned by an Abu Dhabi prince who bought the property in June 2006 via a company registered in the British Virgin Islands. He has never lived there, but others have: the 30-plus rooms of the grade II-listed residence were squatted last November by a raggle-taggle of artists calling themselves the Da! Collective.

No 18 is registered to a firm called Deltaland Resources, which, according to property developer Mo Ghadami, is owned by Sheikh Sultan Bin Khalifa al Nahyan. When the Guardian contacted Deltaland's lawyer, Costa Keliris, at Maxwell Winward in London, asking whether the sheikh was the true owner, he did not respond. Whoever owns No 18 looks to have been shamed into actually developing the property. Last week, builders were on site, tut-tutting at the graffiti left by the squatters and sprucing up the building's crumbling exterior.

Down the street, the handsome twin townhouses at Nos 41 and 42 have both been empty for around five years. The leaseholds on both belong to BVI firms. One, Merix International, paid £25.85m for No 41 in 2007. Around the corner in Park Street are three more empty mansions, which Palmer says have not been occupied for up to eight years but are worth a total of £40m, even in their current sorry state. "Look at this one – it's massive!" he says, pointing to a monolithic red brick mansion opposite the Grosvenor House hotel. It has Sellotape across the top of the front door. "Aha," says Palmer. "The squatters have been scoping this one out. They do it to see if anyone is coming in or out."

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BILLIONS NECESSARY TO FUND NICK CLEGG'S PROPOSAL

First published by: The Guardian

LIB DEMS EXAMINE OPTIONS TO FAST-TRACK £10,000 TAX THRESHOLD PLANS

Clegg has called on the government to go faster to lift allowances, claiming lower income groups were in a state of emergency due to a squeeze on living standards. The Liberal Democrats have started examining ways to raise billions in higher taxes on the rich to fund Nick Clegg's call for the government to go faster in lifting the personal income tax threshold to £10,000. 

Clegg's officials admitted that the rate at which the threshold could be increased would depend on what schemes can be developed before the budget to fund the proposal. Tax avoidance, aviation taxes and wealth taxes will all be examined by the Treasury. In a speech on Thursday Clegg called on the government to go faster in lifting allowances, saying lower income groups were in a state of emergency owing to a squeeze on living standards. Alex Henderson, tax partner at PricewaterhouseCoopers, suggested each £100 increase in the personal allowance cost the government at least £500m, and raising the threshold from £8,105 to £10,000 would cost £11bn. 

No 10 reacted calmly to Clegg's call, pointing out that the goal of a £10,000 personal allowance threshold is existing coalition policy. But Tory MPs were divided, with some warning the chancellor, George Osborne, not to let the Liberal Democrats grab credit for the policy and others warning the idea was expensive and unlikely to boost business confidence.

David Ruffley, a Conservative Treasury select committee member, warned: "There are no free lunches here and I think many of us believe the best way now to boost business confidence is not pushing it up to £10,000 to put some more money in the household pockets, but to actually go for payroll taxes." On the left, many analysts argue lifting the threshold is not as progressive as it seems since it is not aimed at household income.

Clegg will be delighted that he has highlighted what is a relatively simple tax policy, saying in his speech: "Cutting income tax is one of the most direct tools we have to ease the burden on low and middle earners." The income tax threshold was raised by £1,000 to £7,475 in the 2010 budget, and the government plans to increase it further to £8,105 this year.

In his speech Clegg continued to insist he was interested in a mansion tax, even if some of his officials doubt that such a radical policy can be pushed through the Treasury by the time of the spring budget.

Lord Oakeshott, the Liberal Democrat peer, urged Clegg to stick to his guns on the mansion tax, saying: "If we really want to tax the wealth of the super-rich, mansion tax is the game changer – the only tax the nondoms and City sharks cannot dodge."

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VINCE CABLE: LIB DEMS ARE READY TO CUT A DEAL ON 50P TAX RATE

First published by: The Guardian

LIB-DEMS ARE WILLING TO BACK TORIES

Vince Cable said Lib Dems were also working on raising the lowest earners out of the tax system altogether. Vince Cable has confirmed that the Liberal Democrats are ready to scrap the 50p top rate of tax in exchange for a new tax on multimillion-pound properties. His party leader, Nick Clegg, has opposed calls for the abolition of the top rate of tax, but Cable indicated there was a deal to be done in the run-up to the budget amid pressure on the chancellor, George Osborne, from the business lobby and fellow Conservatives to scrap the measure. 


The business secretary stepped up the pressure on Osborne as he became the first cabinet minister to confirm there was a "very broad understanding" in the coalition of a reciprocal deal that would see the tax shift from income to wealth. The Lib Dem minister also signalled that new higher rates of Council Tax bands could be the levy of choice. He said a possible trade-off for ditching the top rate of tax was just one part of a "complex set of negotiations which my colleagues are conducting".

The Lib Dems have campaigned for a "mansion tax" on properties worth more than £2m, to pay for the poorest workers to be lifted out of the tax system. Cable told BBC Radio 4's Today programme: "If the 50p rate were to go – and I and my colleagues are not ideologically wedded to the 50p tax rate – if that were to go, it should be replaced by taxation of wealth, because the wealthy people of the country have got to pay their share, particularly at a time of economic difficulty.

"How exactly that is configured is a detailed matter for negotiation, but that principle must be upheld, and the mansion tax is actually a very economically sensible way of doing it. But there are different ways of approaching it." Cable did not rule out new, higher Council Tax bands on multimillion-pound properties. "There are vast numbers of extraordinarily valuable properties now around the south of England netting very large gains for their owners – many of whom come from abroad, incidentally – and it's not taxed at all," he said. "Basically, you get people with multimillion-pound properties paying exactly the same Council Tax as somebody in a three-bedroom semi. So the system doesn't work."

Cable said the Lib Dems were also emphasising in negotiations the importance of lifting low earners out of tax altogether – one of the party's key themes. "We are making progress with that," he said. "That's certainly an important part of the mix as well." Jeremy Browne, the Lib Dem foreign spokesman, signalled over the weekend that the Lib Dems were not "ideologically wedded" to the 50p rate of income tax.

But Boris Johnson, the Conservative London mayor, who has repeatedly called for the 50p rate to be scrapped, balked at the idea of a mansion tax. He said he was under the impression that there was "no agreement in the coalition". Johnson said on Sunday: "Obviously, in a city like London … you're going to find many more people who might be hit by such a tax. I'd much rather that we stop focusing so much on bashing people and started thinking what we can do to help people into work."

A London Tory MP echoed Johnson's concerns, claiming that the tax would hit London the hardest and hurt middle-class families. Malcolm Rifkind, Conservative MP for Kensington and Chelsea, said 81% of properties affected would be in London, half of which are in his constituency backyard. He said the levy would be "arbitrary, disproportionate and unfair" and declared himself "resolutely opposed to such a tax".

Many homes costing more than £2m are "fairly ordinary townhouses", he wrote. "Such a wealth tax would target not mansions but desirable locations," he said, adding that it would affect people with "comfortable but not wealthy middle-class incomes", many of whom had bought their homes prior to the "explosion in house prices".

It would be "extraordinary" if a Conservative-led government incorporated such a levy into the tax structure, he said. "If we are to target the super rich for taxation, the least we can do is ensure that carelessness doesn't leave middle-class families in the crossfire. Failure to do so could force hard-working Londoners out of homes they have lived in for decades."

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TORY COUNCIL TO CHARGE CHILDREN £2.50 FOR USING PLAYGROUND

First published by: The Guardian 

PLAN WILL TURN PLAYGROUND INTO A NO-GO AREA FOR THE POOR

Wandsworth council said its playground in Battersea Park was 'more than just swings and roundabouts'. For the children of Wandsworth, the age of innocence ends this autumn when their council puts a price tag on playtime. 

To help fund £55m worth of budget cuts, councillors in the south London borough have decided to charge children £2.50 to use the local playground. The Tory-run council will pilot the charge at weekends from October at an adventure playground in Battersea Park. 

Labour politicians have described the charges as "unbelievably mean-spirited" and an attempt to turn play areas into no-go areas for the poor. An e-petition lodged on the council's website had gathered 154 signatories by Thursday. The council said the park was "more than just swings and roundabouts" and that because the adventure area contained zip wires and 40ft structures, there were added health and safety staffing costs that needed to be recouped in difficult economic circumstances. The council also said the charge was being introduced to provide the "best value for money" for local taxpayers.

A survey carried out at the playground by the council revealed that half of the children came from neighbouring boroughs. "Why should Wandsworth taxpayers subsidise children from other boroughs?" a council spokesperson said. The borough admits it is not expecting to make much money from the scheme and has no income target in mind but says the playground would have to close if it did not introduce the charge. "The difficult economic situation we face means we have to consider every aspect of the work we do and the services we provide. The adventure playground is a very popular but also very expensive facility to run.

"Introducing a pilot charging scheme at weekends will allow us to carry on investing in the playground, recoup some of those costs and allow us to continue providing the best value for money we can for our Council Taxpayers. At around half the price of a child's cinema ticket we do not believe the fee is excessive." In Wandsworth, band D Council Tax bills are £687 a year, about half the London average. Sadiq Khan, the shadow justice minister and Labour MP for Tooting, which is part of Wandsworth, said: "This is unbelievably mean-spirited, even for Wandsworth council. It will be children from the poorest families who lose out. "As families are squeezed by the Tory-led government's cuts, Wandsworth should be promoting low cost healthy activities, like those on offer at Battersea Park, not driving poorer children and families away."

Ken Livingstone, the Labour candidate for London mayor, said that parks and playgrounds should always remain free. "Only the Conservative party could consider charging kids to play. I believe London's parks and playgrounds should be free for London's families and I am deeply concerned at this attempt to turn publicly funded playgrounds into areas which only the rich and privileged can enjoy." The council says it will review the charges in the summer of 2012.

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COUNCIL TAX COVER-UP - THE TRUTH IS OUT

FIRST PUBLISHED BY: HARROW EAST 

NEW EVIDENCE OF SERIOUS ERRORS IN COUNCIL TAX BILLS - LABOUR'S COUNCIL TAX COVER-UP

The last Government and the Ministers are responsible for deliberately covering up serious problems over the banding of homes for Council Tax, Bob Blackman, Conservative Parliamentary Candidate for Harrow East, warned. New figures have revealed that Whitehall's Council Tax snoopers have been forced to redo the Council Tax bands of thousands of homes after appeals by householders across Harrow and the country.

Official papers from the Government Council Tax inspectors, the Valuation Office Agency, have admitted that many homes are in the wrong band for Council Tax and families have been paying over the odds for years. Accidentally leaked minutes have confessed that if the tax errors became known, the Government would lose money and would have to pay tax refunds. This was also ruled out since it would generate "adverse press coverage… in the current climate".

The combination of a campaign by 'Money Saving Expert' Martin Lewis, the publication of these leaked minutes and the ITV Tonight documentary, has produced a surge in Council Tax appeals. Now Parliamentary Questions have forced the Government to publish detailed figures on the changes to Council Tax bands. In the last five years, 500,000 existing homes have had their Council Tax band changed: 133,985 homes have moved down a band. In Harrow alone, 321 homes have moved down a Council Tax band as a result of appeals. This proves there are serious and systematic errors in the banding of homes, which Ministers have been covering up to save money.

Wales has been used as a test-bed for a Council Tax revaluation. Three times as many homes moved up a band as down. Yet since that 2005 revaluation, a succession of errors has also been uncovered with the Valuation Office Agency's work. To date, 1 in 20 homes in Wales have had their post-revaluation banding corrected. A wholesale Council Tax revaluation has thus caused more problems than it solved.

Bob Blackman said:

"We now have clear evidence of a Council Tax cover-up. The Labour Government has been caught red-handed fiddling Council Tax to make families in Harrow and across the country pay more. Whitehall bureaucrats know that many homes across the country are wrongly banded, but have refused to correct the tax inspectors' errors to save the Government money and save face. "The whole basis of our tax system is undermined if the state conspires to over-charge the public. Labour Ministers only want to reform the Council Tax system if it rakes in extra cash for the Government coffers."

Council Tax bills vary according to the banding of a property; for example, a Band E house pays 22% a year more than a Band D house (or £315 a year more for a typical home in England). Last year, Labour Ministers were forced to publish the minutes of the Valuation Office Agency's Council Tax Revaluation Programme Board. The Valuation Office Agency are England's Council Tax inspectors, and are an arm of HM Revenue & Customs. The minutes show the fallout after the controversial plans for an English Council Tax revaluation in May 2007 were postponed in October 2005. The Revaluation Board minutes include a series of comments which are blacked out, since they relate to "an ongoing policy issue".

The secret comments show that the revaluation exercise identified certain homes in certain streets were currently wrongly banded, and are paying over the odds (so-called 'consequential'). Yet Ministers covered up this information due to the implications: having to pay refunds and lose money and the subsequent bad press coverage. The secret minutes stated: "What action should be taken by Groups on consequential identified following data enhancement. Concern was expressed about the possible knock on implications for billing authorities and adverse press coverage this could generate in the current climate. Action Point to establish potential numbers involved with GVOs. Action will then be agreed with ODPM and Ministers".

SURGE IN APPEALS REVEALED WIDESPREAD ERRORS

Financial guru, Martin Lewis ('Money Saving Expert'), has run a big campaign on errors in Council Tax banding, highlighting errors by the Valuation Office Agency. Combined with the cover-up exposed by Conservatives, this has lead to a surge in the number of Council Tax appeals.

The BBC said: http://news.bbc.co.uk/1/hi/business/6296849.stm BBC News Online, "Homeowners must check tax band", 25 January 2007. When a home is placed in too high a Council Tax band, any subsequent refund can date back for years, incurring considerable cost to the Exchequer. New Parliamentary Questions by Conservatives have forced Ministers to publish new details exposing the scale of errors to existing Council Tax banding of homes across England, following that the surge in appeals.

"Mr. Stewart Jackson: To ask the Secretary of State for Communities and Local Government with reference to the supplementary memorandum from the Valuation Office Agency presented to the Treasury Select Committee, dated 29 October 2008, which amendments to the Council Tax valuation lists involving movements to a lower band were made in each billing authority in each of the years to March (a) 2006, (b) 2007 and (c) 2008.

John Healey: This information is currently being assembled for publication. I will place a copy in the Library of the House as soon as possible."

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THE POLITICS OF PENSIONS SCHEMES

FIRST PUBLISHED BY: LOCAL GOVERNMENT

IF COUNCIL TAXPAYERS FIND OUT HOW MUCH OF THEIR MONEY GOES ON COUNCIL PENSION SCHEMES THEIR COULD BE A BACKLASH

The TaxPayers’ Alliance has found a £54 billion deficit in UK local authority pension funds. Defenders of council pensions say these schemes are fully funded. Both are correct. You, the Council Taxpayer, are required to honour promises made to pension scheme members. If Local Government Pension Scheme (LGPS) funds deliver insufficient returns to meet promises to LGPS members’ councils have to make up the difference. 

The £54 billion deficit means that pension fund returns are not matching promises made to scheme members. Eliminating this deficit will mean higher Council Tax bills or bigger cuts to local public services. 

Merton Council explain the situation very well in their annual pension fund disclosure 2010/11. “The LGPS provides defined pension benefits determined by national regulations. The benefits are mandatory, and not subject to local amendment or Pension Fund performance and they are adjusted for inflation. 

The liability to pay these benefits, both currently and in future years is financed by employee and employer contributions and income from investment of the Pension Fund. The scheme has to be fully funded (i.e. employer contributions must be set to meet 100% of existing and prospective pension liabilities including pension increases) or have a plan to become so.

"Employee contribution rates are set by statutory regulations. They are fixed. Employer’s contribution is determined by an actuarial review that takes into account both the amount of employee contribution and the value and investment return of the Pension Fund. Thus the amount and performance of Pension Fund investment is significant to the level of the employer’s contribution, and determines the need for effective management of the Fund.” 

The LGPS scheme does not allow for councils to increase employee contributions if the performance of pension fund investments does not meet the promises to current and future retirees. Consequently councils are making up the difference by increasing employer contributions.

Council Taxpayers in areas with significant pension fund deficits could face substantial tax increases or cuts in public services over time. The TPA has produced a calculator which allows private sector workers to see what they need to earn to match the total compensation package provided to public sector workers. UNISON has produced two calculators showing how current government proposals will reduce benefits and increase member contributions. These tools show how council pension schemes could become a significant issue in local campaigns.

How long before Council Taxpayers can see how much of their individual tax bills go to fund council pension funds? Eric Pickles could require councils to put this information on Council Tax bills. Local authorities with significant pension deficits might then lobby government to reduce members future benefit levels or allow councils to increase employee contributions. 

DCLG could allow councils to increase employee contributions further where pension deficits are excessive. The local taxpayer should not have to meet the whole cost of these deficits.

Trade unions would fiercely resist these changes but they would serve to moderate trade union demands over time. Trade unions could change from defending the unsustainable current pension fund schemes to policing pension scheme affordability. Councils seeking to take a payment holiday and contribute less to pension schemes (as some were encouraged to in the nineties) would face the wrath of their local trade union representatives. Few trade unions would seek unaffordable pensions if they knew their members would have to pay higher contributions to meet the additional costs. The LGPS might become more sustainable and fair.

The average employer contribution to local government public sector pensions has reached eighteen per cent of salary. The TPA reveals that £1 for every £5 raised in Council Tax is going to fund council pension funds. Employers contributed just over £5 billion in 2010-11 and Council Tax raised £25.7 billion that year. This will increase over time. Council pension scheme deficits vary significantly. 

This issue could play out differently depending on the size of the local deficit and the local taxpayer contribution. Chichester is 100 per cent funded with assets exactly matching obligations to current members and future retirees. Brent is 42 per cent funded; pension liabilities massively outweigh the schemes assets. The politics of council pensions could be very different in Brent and Chichester.

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