TREASURY LOOKS AT 'SUPER COUNCIL TAX' TO FORCE MULTI-MILLIONAIRES PAY MORE FOR THEIR PROPERTIES

FIRST PUBLISHED BY: THIS IS MONEY  

THE CHANCELLOR COULD IMPOSE SUPER COUNCIL TAX BANDS ABOVE BAND H TO FORCE THE WEALTHIEST TO PAY MORE FOR THEIR PROPERTIES.

The Chancellor could impose super Council Tax bands

The Chancellor is considering slapping taxes on expensive houses in a deal with Lib Dems that would also relax employment laws for small business. George Osborne is examining proposals to impose super Council Tax bands above the current band H in order to force the wealthiest to pay more for their properties. The plans, which are being discussed by the Quad of ministers drawing up the Budget, would be a victory for the Liberal Democrats, who have campaigned for a mansion tax on properties worth more than £2million.

But in return, Nick Clegg and his party have indicated they are prepared to sanction Tory plans to tear up some employment rights in order to encourage firms to hire staff. Senior Lib Dem sources say the Deputy Prime Minister will back proposals in the Beecroft Report on regulation which would give greater freedoms to micro-firms employing fewer than ten people. Under the plans, small companies employing people under the age of 25 would not have to give them full employment rights for a fixed period of time.

Tories, including Local Government Secretary Eric Pickles, have opposed any change in Council Tax bands because they feared it would lead to an expensive and controversial revaluation of all homes in Britain. But some Conservatives now believe that would not be necessary and that bands I and J – designed to hit multi-millionaires in London – could be imposed on homes based on the last valuation in April 1991.

Mr Clegg argued last month that it is wrong that someone with a house in Band H – which kicks in at properties worth £320,000 in 1991 – pays the same as someone with a home worth several million pounds. A Government source said: ‘Treasury orthodoxy favours taxing assets that cannot be hidden or moved. Even the best accountant in the world cannot hide a house from the tax man.’

Deputy Prime Minister Nick Clegg has argued that new tax bands I and J would hit multi-millionaires in London. The Beecroft Report, drawn up by venture capitalist Adrian Beecroft last autumn, has never been published after the Lib Dems condemned its call for ‘fire at will’ legislation that would have allowed bosses to sack staff without an industrial tribunal. Mr Clegg’s party is prepared to help get its way on property taxes after Mr Osborne came under pressure from backbenchers to back supply side reforms to boost business and jobs.

Former Cabinet minister Liam Fox yesterday stepped up that campaign, saying: ‘Political objections must be put aside. ‘It is too difficult to hire and fire and too expensive to take on new employees.’ Asked if the Lib Dems would support plans to suspend some workplace rights for under 25s – to encourage the hiring young unemployed people – a source said: ‘The devil is in the detail but it’s not something where the starting point of view is hostile.’

Lib Dems point out Business Secretary Vince Cable has doubled to two years the length of time someone must work before they are entitled to basic rights. A Treasury spokesman said the issue of mansion tax ‘comes up every year and it is speculation’.

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GOVERNMENT RULES OUT ENGLISH COUNCIL TAX REVALUATION

FIRST PUBLISHED BY: BBC

COUNCIL TAX BANDS IN ENGLAND HAVE NOT BEEN REVALUED FOR 17 YEARS

There will be no revaluation of Council Tax bands in England during this Parliament, the government has pledged. It means there will be no rise in local taxes for householders based solely on the increased value of their homes. Every property in England is in one of eight Council Tax bands, depending on value, and these were last set in 1993. The government said Labour had been "actively planning" to carry out a revaluation but Labour said its election manifesto had promised not to.

'Financial worries'

A revaluation was long overdue, but would prove highly unpopular with householders who found themselves in a higher band and therefore paying more in Council Tax, said the BBC's Greg Wood. A revaluation in Wales in 2005 placed about a third of all homes there in a higher band. The government says that a rise from Band D - the benchmark for Council Tax - to Band E would cost an extra £320-a-year. The former Labour government had planned to revalue Council Tax bands in England in 2007, but announced in 2005 that it would postpone the decision until after the next general election.

It said the delay was to allow the issue to be considered as part of a wider inquiry into local authority funding, but some commentators said at the time that the decision was also a reaction to the anger sparked by the Welsh revaluation. Local Government Secretary Eric Pickles said the key thing was the relationship between the upper and lower bands of the tax, and they were roughly the same as when the tax was introduced.

"I've always argued against a revaluation because we know from what happened in Wales that it tends to hit poorer families. Given that the bands are roughly in the same position as when Council Tax was first introduced then it seems to me to be a matter of fairness that we don't impose an additional level of taxation, £1,600 during this Parliament, on ordinary families."

But a Labour spokesman said: "The Labour Party made an unequivocal commitment that there would be no Council Tax revaluation in this Parliament.  "This is a cynical and misleading manipulation of facts based on what was ultimately a routine updating of the Valuation Office Agency's records." The Taxpayers' Alliance, which campaigns for lower taxes, said families would be relieved there was to be no revaluation. "Council Tax has doubled in the last 10 years while many services have been scaled back, executive pay has spiralled out of control and charges have increased; it's time Council Tax was cut," spokesman Emma Boon said.

"What's been happening is that where local councils have looked at trying to find other ways of charging people, it's just simply meant other taxes... charging people for throwing away more rubbish or fining people and things like that." Colin Barrow, leader of Westminster City Council, said councils would welcome the move as a "positive step" that would "end uncertainty" for many Council Tax payers and local authorities.

"It allows the government to concentrate on creating a fairer and more responsive financial system, reflecting the differing needs of each area.  "We, for instance, would refer to the special problems of poverty in Westminster alongside the responsibility we have to keep the city clean for millions of visitors every day," he said. What band a house falls into is determined by inspectors from the government's Valuation Office Agency (VOA). There has been criticism in the past from some quarters over what data about people's homes is collected and kept by the VOA.

Mr Pickles said the government was moving to address this issue, and that an independent data audit of the VOA would protect privacy and civil liberties as part of dismantling the "database state". The Scottish Parliament has no plans to revalue homes in the foreseeable future. In Northern Ireland, which has a different system of local taxes, property values were reassessed in 2005.

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WAS IT COINCIDENCE THAT I GOT A MESSAGE FROM A FIRM I OWE MONEY SOON AFTER I MISSED MY COUNCIL TAX PAYMENT?

FIRST PUBLISHED BY:   THIS IS MONEY

TIMELY TEXT: WAS IT A COINCIDENCE THAT I GOT A TEXT MESSAGE FROM A CREDITOR URGING ME TO GET IN TOUCH A WEEK AFTER I MISSED A COUNCIL PAYMENT?

I had a text on my mobile phone out of the blue from a creditor urging me to get in touch if I was experiencing financially difficulties just a week after missing a Council Tax payment. Do banks/mortgage lenders or even the councils send out advisories as to who might be struggling financially? If so isn't this a breach of confidentially? It doesn't feel like a coincidence as I have never missed a payment and the creditor has a secured loan i.e a second charge on my property.  

Linda Mckay of This is Money replies: Struggling borrowers such as yourself who are juggling many different debts including a mortgage, second charge or credit cards may have trouble in meeting all the demands of creditors. Can creditors spot financial difficulty and if so how? I asked experts in the field for you. Joanna Elson OBE, chief executive of the Money Advice Trust replies: The crucial issue here is whether or not this is a creditor through which you pay your Council Tax. If they are not, then something may be amiss and a breach of confidentiality under the Data Protection Act is worth exploring. 

In this case the first thing to do is to write to the creditor and ask what information they used to identify your supposed financial difficulty. A missed Council Tax payment may show on your credit file, and so a creditor could possibly spot this while carrying out a genuine check on your file. However, if this is the case you should ask the creditor to justify why they were looking at your file, as creditors can’t simply do so on a whim. Alternatively it may have been a phishing text with coincidental timing.

However, if this is a creditor through which you pay your Council Tax, then there has been no breach. Indeed we encourage creditors to proactively contact customers they identify as being at risk of financial difficulty.  Of course much of our support for such practices depends on the nature of how the creditor contacts such an individual and what advice they provide. 

For example if a creditor notices an individual frequently incurring charges for dipping into an unauthorised overdraft and they then contact that person to signpost them to relevant sources of free debt advice, such as National Debtline, My Money Steps or Citizens Advice, the person may be able to resolve their financial situation more quickly and less painfully than might have been the case had the creditor simply ignored the issue and continued collecting overdraft fees and charges.

We conducted research into the merits of proactive contact with struggling borrowers last year, and found that the results of these practices were overwhelmingly positive, with people resolving their financial problems before they became particularly serious. Anyone who is struggling with their finances is likely to find a far better outcome the earlier they start to deal with their problem, and the first step is to seek free, independent advice.

James Jones, of leading credit agency Experian replies: Councils do not share data about Council Tax payments with lenders through the credit reference agencies (CRAs), so the text from your mobile phone provider will not be because you missed a Council Tax payment. Many lenders that do share credit data through the CRAs do get your permission to consult it on a regular basis. If, while doing this, they spot a missed payment elsewhere or simply that your overall financial situation is deteriorating, they may take action such as getting in touch to offer help.

If you’re concerned about the information on your credit report, it’s easy to get hold of a copy. If you do this and find a mistake you can make sure it is corrected. You can also use a ‘notice of correction’ to explain the reasons for any correct missed payments or other adverse information in the past.

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70,000 HOMES 'FACING COUNCIL TAX HIKE'

FIRST PUBLISHED BY: THIS IS MONEY

MORE THAN 70,000 HOUSEHOLDS ARE PAYING HUNDREDS OF POUNDS EXTRA IN COUNCIL TAX AFTER THE GOVERNMENT REVALUED THEIR HOMES 'BY STEALTH', IT WAS CLAIMED YESTERDAY.

Stealth rise?  
More than 70,000 households are paying extra Council Tax after revaluations those who bought homes that had been improved by the previous occupants have seen their bills rise by an average of£195 a year, said the Liberal Democrats.

Council Tax 'snoopers' have placed the properties in a higher band because of changes such as new conservatories, porches, extra bedrooms and parking spaces. Inspectors from the Government's Valuation Office Agency have moved 70,010 homes into a higher band since 1997 when the opposition came to power.

Statistics published by the Department for Communities and Local Government showed that nearly 391,000 properties had been revalued in the past decade. Of these, about one in five was moved to a higher band after being studied by officials - forcing residents to pay out more. Ministers insist that a Council Tax revaluation has been put off at least until after the next general election. They fear millions would rebel if their bills increased because they were moved into higher bands.

But last night, the LibDems, who uncovered the figures, accused them of carrying out the exercise by stealth. Local government spokesman Julia Goldsworthy said: 'With almost 400,000 homes being revalued, Labour's lie of putting off Council Tax revaluation is clearly exposed. Tens of thousands of families are being hit in the pocket.

'It's time that the Government came clean and either admitted that this stealth revaluation is taking place or recognised that Council Tax is not fit for purpose. Until they ditch this unfair and unpopular tax, families will continue to face unaffordable Council Tax bills based not on ability to pay but simply on the value of their home.'

Under regulations introduced in 1993, the VOA logs every structural improvement that takes place to a property. If the home is then sold, the agency is notified and can decide to carry out an inspection to determine whether it should be in a new Council Tax band. According to the LibDems, the average Council Tax bill is £1,146 and the average difference between bands is 17%. It means that under revaluation the average bill would rise to £1,341 - up £195.

At present, Council Tax bills are based on assessments of properties made in 1991. A spokesman for the Department for Communities and Local Government said yesterday: 'An increase in the value of a property would not lead to an increase in a Council Tax banding until the property is sold, and maybe not even then, as the value may stay within the range of the existing band.

'As we have said on many occasions, there is no revaluation of Council Tax taking place. Any claim to the contrary is absolute nonsense, nothing more than scaremongering, and only serves to make people, particularly the elderly and vulnerable, needlessly frightened.' Last week, official figures showed that VOA inspectors have already stored digital images of 1.6m properties and are collecting details of millions more. They are logging the number of bedrooms, bathrooms and conservatories as well as noting down details of attics, porches and outbuildings.

Critics claimed it was evidence that every home-owner was facing an invasion of privacy as the Government carried out the revaluation in secret. A 'training manual' for VOA inspectors says they must carry a 20-metre tape measure or laser measuring device, camera, clipboard, survey sheets, pens and pencils, eraser - and a personal alarm.

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COUNCIL TAX COULD RISE TO EASE BENEFITS CUTS

FIRST PUBLISHED BY: THE TELEGRAPH 

WORKING FAMILIES FACE INCREASES IN THEIR COUNCIL TAX BILLS TO PROTECT BENEFITS CLAIMANTS FROM CUTS IN WELFARE SPENDING, ECONOMISTS AND COUNCIL LEADERS HAVE WARNED.

Coalition plans to make local authorities set their own rules for Council Tax benefit could also undermine the Government’s plans for welfare reform, it was suggested yesterday. The Institute for Fiscal Studies analysed Coalition plans to reform the rules for Council Tax benefit and identified a number of potentially serious problems. 

Next year, the Government is planning to scrap the national system of Council Tax benefit, which gives discounts on the tax for low-income households including the unemployed. 

Under the new system, local authorities will be given control of money for Council Tax benefit. The sum available for the benefit will also be cut by 10 per cent. Because Council Tax benefit for pensioners is protected, that cut could mean much larger reductions in areas with large numbers of retired residents.

In parts of Dorset and Yorkshire, for example, working-age claimants would face a 33 per cent cut in Council Tax benefit. The IFS said the 10 per cent cut would leave councils facing a choice between making significant cuts in benefit for working-age households and finding the money elsewhere, either by cutting services or increasing tax. Scotland’s devolved administration has taken the choice to find the money elsewhere, to avoid major cuts in benefit payments.

The IFS calculated that the average English local authority choosing to do the same would either have to cut spending on other services by 0.4 per cent, or increase Council Tax by 1.9 per cent. Sir Merrick Cockell, chairman of the Local Government Association, said that councils are being put in an impossible position and may have to increase taxes.

"Councils are extremely worried about how they're going to protect deserving and vulnerable people from the £500 million cut to Council Tax benefit next year,” he said. “They can either cease helping the working poor, or continue to support them by taking money from other services or putting up Council Tax.” In a report on the Council Tax benefit reform, the IFS suggested that a localised benefit regime could “undermine” the Coalition’s flagship Universal Credit welfare reform.

Universal Credit, due to begin next year, is meant to integrate all benefits into a single system, and ensure that people claimants are always better off if they take paid work. However, Council Tax benefit has been left out of the new system, and the IFS warned that trying to co-ordinate the local and national benefits system would be complex and possibly damaging.

Depending on how councils design their welfare rules, the effect could be to “reintroduce some of the extremely weak work incentives that Universal Credit was supposed to eliminate.” Overall, the IFS concluded, the localisation of Council Tax benefit “has the potential to undermine many of the positive impacts of Universal Credit.”

Bob Neill, the local government minister, said that the Government's reforms were right. He said: "It is right that local authorities, who collect Council Tax, have a strong incentive to put in place a fairer local Council Tax support scheme that helps their residents get back into employment based on local priorities."

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COUNCIL TAX BILLS COULD LEAP TO FUND £54BN PENSION DEFICIT 'TICKING TIME-BOMB'

FIRST PUBLISHED BY: THIS IS MONEY

EXPERTS WARN COUNCIL BILLS WILL HAVE TO RISE SHARPLY IN THE FUTURE TO PAY FOR PENSIONS PAID TO COUNCIL WORKERS, FROM BIN MEN TO TOWN HALL STAFF. 

Britain is sitting on ‘a ticking time bomb’ created by the generous pensions enjoyed by council workers, the report warns today. The shocking analysis reveals councils across the UK have a pensions deficit of £54billion – amid warnings it could get even bigger. Warning: Council Tax bills will have to rise sharply to pay for council workers' pensions, experts believe. The equivalent of around £1 in every £5 of Council Tax is already spent on local authorities’ contributions to their workers’ pension scheme, according to the report by campaign group the TaxPayers’ Alliance.

The average pension paid to a council worker is around £4,200 a year, which covers all council workers, many of whom are on very low pay. But more than 2,700 scoop pensions worth at least £37,000 a year and more than 35,000 get at least £17,000 a year, according to official figures. By comparison, most private sector workers do not have a pension – and it is worth only £1,400 a year to those who do.

More...

IMF warns Britain may need to raise retirement age faster to avoid a debt spiral. Pensioners who saved diligently for years to see payout income slashed by up to 60% Matthew Sinclair, a director of the TaxPayers’ Alliance, said: ‘The deficit remains a ticking time bomb that is being left for future generations of taxpayers to deal with. ‘With an ageing population and a crisis in public finance, generous final salary schemes, like the Local Government Pension Scheme, are inflexible and too expensive and need urgent reform.’ The report, based on official council figures, says the local government pension scheme has assets of £132billion. But the scheme has made pension promises, known as liabilities, of £186billion to its members – leaving the £54billion deficit, according to the 2010/11 figures.

The biggest culprit is Birmingham City Council, with a deficit of £1.33billion – equal to nearly £1,300 for every resident. Overall, the report says there are 165 local authorities with a deficit of more than £100million. Dr Ros Altmann, director general of Saga and a leading pension expert, said: ‘Taxpayers underwrite the deficit. If it does not come down, they will foot the bill. Future taxpayers – our children and our grandchildren – will be on the hook.’ Tom McPhail, head of pensions research at financial advisers Hargreaves Lansdown, said: ‘Local authorities are going to come under pressure to raise Council Tax to fund these pensions. ‘They are going to have to go to taxpayers, who do not have good pensions of their own, to meet their very generous pension promises. That is not going to go down well with people.’

The average Band D Council Tax bill in England is currently £1,444, one of the biggest monthly costs facing most families after their mortgage or rent and food bill. Bob Neill, the minister for local government, said: ‘These pension bills are costing over £300 a year to every family and pensioner paying Council Tax, diverting funds from emptying bins, cleaning the streets and keeping Council Tax down. ‘Hard-pressed taxpayers simply cannot afford to foot an ever-growing bill.’

Local government workers currently get a final salary scheme, retire at 65 and contribute only between 5.5 per cent and 7.5 per cent of their salary. The Government is currently negotiating changes with unions, including a switch to a career average pension and to link retirement age to the rising State pension age. Sir Steve Bullock, chairman of the Local Government Association’s workforce board, said: ‘Presenting a one-day snapshot is a spurious way of gauging the viability of a pension scheme and this year-old figure has no relevance to the actual cost of local government pensions. ‘Councils have taken steps to ensure the schemes, which are significantly funded by contributions from employees, are affordable for taxpayers, fair to workers and viable in the long-term.’

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COALITION UNDER FIRE FOR COUNCIL TAX BENEFIT CHANGES

FIRST PUBLISHED BY: LABOUR MATTERS.

10% CUT IN EACH COUNCIL’S COUNCIL TAX BENEFIT

Coalition Minister Andrew Stunnell came under fire from MPs of all parties about the Government’s proposals for a 10% cut in each council’s Council Tax benefit budget in a Westminster Hall debate this week. Clive Betts, Labour MP for Sheffield South East and Chair of the All-Party Communities and Local Government Select Committee, said: “It appears that Eric Pickles, the Conservative Secretary of State, doesn’t care about the concerns, and that his Liberal Democrat Under-Secretary of State doesn’t understand them.”

Under the Government’s proposals, the Council Tax benefit budget of each council is to be cut by 10% from 2013 and each council is meant to design a local scheme to achieve that reduction. As the Government is exempting pensioners and the single-person discount from any reduction, the cuts will inevitably fall hardest on low-income working families. Thus, the biggest cuts in Council Tax benefit will be felt by low-income working families in those areas which have the highest proportion of pensioners.

MPs from all parties challenged the Minister about the Government’s proposals:

The biggest cuts will hit working-families in the poorest economic areas harder than in wealthier areas. In areas with a high proportion of pensioners and single-person households, low-income working-families could face a 30%+ cut in Council Tax benefit. The IT software providers to local authorities have consistently said that it will not be possible to have new schemes in place to meet an April 2013 start, because the Government itself is unable to provide the detailed regulations.

Because the Government is centralising housing benefit (under the Universal Credit) but localising different council-tax benefit schemes. This means that for any income changes, people will now have to notify – and provide the necessary evidence to – the council and the Job Centre (or on-line) separately. Big cuts to council-tax benefit will create work dis-incentives at the very time when Government says it wants to make work pay. 

Clive Betts said: “As each day passes, it is becoming clearer to MPs from all parties that the Government simply hasn’t thought things through. “Eric Pickles is relying on local councils taking the blame for cuts and administrative shambles, which are entirely of his making.

“Ministers can’t even answer these three simple but crucial questions: Will universal credit be counted as income in the means test for Council Tax benefit? Will local authorities have access to universal credit data when calculating people’s Council Tax benefit? Do you accept that councils will not be in a position to implement any new system in time for April next year, because the Government is unable to specify the regulations in time?”

Clive Betts continued: “I am really concerned about the way the Government is just moving on and failing to listen. “I just think back to 1999 when Sheffield City Council (then Liberal Democrat controlled) privatised the housing benefit service and transferred it to Capita in a rushed and botched way. “I remember my constituents, often elderly, coming to my surgeries in tears; not because they had done anything wrong, but because the administration of their benefits was in chaos and, as a result, the arrears on their Council Tax and rent had risen. They were distraught because they had never been in arrears in their lives. 

“I am really worried that we will end up in a similar situation next year.”

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