Newspaper column

Evening Post - September 2003

Axe the Council Tax!

Just over a decade ago, a popular revolt resulted in the scrapping of an unfair local tax - the poll tax. I am increasingly hopeful that the current pensioner revolt will result in the scrapping of another - the Council Tax.

The main objection to the poll tax was that it was unrelated to ability to pay. Increasingly, the same is becoming true of Council Tax. If you are a pensioner (or a low paid worker) just above benefit levels, you can pay the same amount of tax as a millionaire living in the same house. Taxing people on the basis of the value of their homes at the start of the 1990s does not sound to me like a sensible way of assessing someone's ability to pay.

The problem has been made worse because successive Governments have held down national taxes and put more and more weight on the council tax because someone else gets the blame. It was no accident that Mrs. Thatcher insisted that the new tax should be called the "council" tax.

Even the Government is admitting that council tax is now reaching the "limits of political acceptability". But there is no sign that they have any clear idea what to do about it. One option that has been mentioned is capping council tax increases. This is superficially attractive and would at least ease the pain in the short term. But if councils do not get the money from somewhere else they will have to make major cuts in services that will also hit vulnerable people. In addition, if councils are all capped on their spending levels, what remains of the ability of local people to decide for themselves what combination of tax and spending levels they want in their own community?

So if council tax were to go, what should replace it? Over a quarter of a century ago an independent committee was set up to look in great detail at the various different options of paying for local services, and they recommended a local income tax. The arguments in favour are as valid now as they were in the 1970s.

The fairest way of taxing people is according to their ability to pay. Income tax is therefore the fairest tax in the overall tax system. Under a reformed system you would scrap the council tax and instead allow local authorities to set an income tax rate that would be added to the national rate for people living in their area. Under such a system pensioners as a group would pay significantly less local tax, and people on higher earnings would pay more.

Among local tax systems, first domestic rates, then poll tax and now council tax have fallen into disrepute because they were not seen as fair. Only a local income tax would be seen to be fair and would therefore stand the test of time.