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. 

CouncilTax 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: THETAXPAYERS ALLIANCE

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

Councilors voted through the decision to increase its portion of the CouncilTax 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 councilors 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 Councilor 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 CouncilTax 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 in1993, 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 re-valuation 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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END OF REFORMS

FIRST PUBLISHED BY: THE GUARDIAN

ONE BY ONE THE OPPORTUNITIES THAT LABOUR COULD HAVE SEIZED TO ENSURE HISTORIC SOCIAL REFORMS ARE BEING DROPPED.

First, just before the last election, Tomlinson's comprehensive reform of 14 to 19 education was wrongly dropped. Just after the election, the government made it clear pension reform would have to wait for a fourth term. Yesterday, a long-delayed Council Tax revaluation, on which work had belatedly just begun, was called off and will not come back before a fourth term. 

What was already a regressive tax, which Labour pledged to reform in 1998, now looks set to be still in operation in 2010.

Each year of delay will make it more regressive. The eight bands into which the country's 22 million homes are currently divided are headed by a top-rate band valued at £320,000 or over. But in a country with ever-growing numbers of £1m homes, this has merely provided the wealthy with an unacceptable escape hole.

Although the top band pays three times as much as the bottom, researchers have shown that the 10% of poorest Council Tax payers are spending proportionately four times as much of their income in Council Tax as the richest 10%. So much for the state of Labour's commitment to social justice.

What caused the postponement? Ministers claimed it was the new wider remit they had given to Michael Lyons' inquiry into local government funding. This was a threadbare excuse, which will fool no one. Whatever Sir Michael finally concludes, some form of domestic property tax will be included in the package. There is hardly a developed state that does not have one. 

A government that has rightly noted the role that assets play in widening inequalities, could not contemplate dropping such a tax. Sir Michael was ready to have a one-year delay, but not five. The last valuation was carried out in 1991. As Sir Michael noted, the credibility of the tax depends on regular revaluations.

The real cause of the postponement was fear of a voter backlash. In Wales, where revaluation has taken place, 60% remained in the same tax bracket but a third ascended into a higher one. In London and the south-east this proportion would have been even higher. Ironically, postponement will make the inevitable change more difficult. 

What should have happened, which Labour committed itself to doing in 1998, was a revaluation of all homes plus a restructuring of the eight bands. Ideally, there should be two further ones at the top, and one more at the bottom to help the less well-off.

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TEESSIDERS WARNED OF COUNCIL TAX BENEFIT CUTS

FIRST PUBLISHED BY: GAZETTE LIVE

NEARLY 37,000 TEESSIDERS COULD HAVE THEIR COUNCIL TAX BENEFITS SLASHED FOLLOWING THE AXING OF A GOVERNMENT-RUN SYSTEM.

Today, the manager of Middlesbrough Citizens’ Advice Bureau said he was “concerned” that the change to the system could lead Teessiders turning to “exploitative” high interest loan companies. Some 62,097 people in our area claim Council Tax benefit, according to figures released by the three local authorities.

Although pensioners are protected from the benefit reductions, 36,898 claimants could face cuts when the local Council Tax support scheme is implemented. The three local authorities spend £55.15m per year on Council Tax benefit. Under the new scheme, each Teesside council would have around £2m less.

But Teesside councils are facing a number of cost-saving measures as more than £100m needs to be slashed between them in the next four years due to Government cuts. Council Tax benefit is income-related and can be claimed by anyone who is liable to pay Council Tax in respect to their main residence. 

It is a national benefit with rules set by central Government and administered by local councils. But from next April the system will be scrapped and local councils will introduce their own local schemes. In scrapping the scheme the Government is also making 10% less cash available to councils for the benefit. As pensioners are protected, this means 20% less cash for the remaining claimants. Councils have until the end of January to notify the Government of their local schemes. If they refuse to implement a scheme then the Government will impose a scheme on a local authority.

John Daniels, manager of Middlesbrough Citizens’ Advice Bureau said the replacement of Council Tax benefit will happen at the same time as a number of other changes to the benefits system. He said: “The overall effect will be that many people already on low incomes will be even worse off.

“We are particularly concerned that people will resort to exploitative high interest loan companies, and as a result their financial position will become even worse.”

He urged people struggling with their money to seek advice as soon as possible.

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