Tuesday, 28 September 2010

Postponing Council Tax Revaluations

The coalition government’s decision to defer any council tax revaluation for the duration of this parliament comes as no surprise. Politicians meddle with existing taxation arrangements at their peril. The fiasco, in the 1980s and 1990s over the implementation of poll tax (or community charge) is an indicator of what can happen. The shift from the rating system to the poll tax inevitably resulted in large scale winners and losers. As is life, the winners pocketed their gains while the losers protested vigorously. Add the tax losers to those who were against the poll tax in principle and very quickly you have a mass protest which rocked the government.

A revaluation of property values could have had a similar effect with some streets or individual properties going up a band with others coming down a band as a consequence of changes in the relative values of properties. Once again those who go down will probably keep quiet while those who go up will protest. The government is going to have enough on its plate over the next few years what with the state of the economy and the cutbacks in public spending. Why shoot itself in the foot by creating yet more hostility and protest by initiating a council tax revaluation.

Some may argue that postponing such revaluations is unfair because it means that a person’s council tax is based on property valuations which are well out of date. This may be true but one could also argue that property valuations are not a fair or progressive basis on which to raise tax revenue given that they have no link whatsoever to ability to pay – one of Adam Smith’s cannons of a good tax system.

Others argue that avoiding a revaluation will bear hardest on the poor. However, Wales had a revaluation in 2005 and it is claimed that the hardest hit were those on the lowest bands, A to C with something like two-thirds of the increases occurring in those bands. This might be thought to have hit poorer people harder than richer people but then, as I have already said, value of property is not necessarily an indicator of income, wealth or ability to pay.

Presumably we can’t go for ever without a property revaluation but, clearly, we aren’t going to get one for five years or so. Who knows – maybe by that time the government will have developed the vision to completely refashion local government finance in such a way as to have greater local discretion and accountability. Somehow I doubt it.

2 comments:

  1. I wouldn't have such a problem with any of this if they were honest about why they've decided to keep this well-overdue revaluation on the back burner. But instead, what gets me is Eric Pickles trying to spin it that he's doing us all a favour. That he's worried about the poor.

    Anyone who actually knows how the council tax system works knows that's just pure FUD! Sadly though, the voting public only really knows what the popular press tells them, and they don't really know any better either.

    As you rightly say, its a political hot potato they don't want to handle right now, plus it would cost money to do, which is contrary to the pending public sector spending cuts. I might have more respect for politicians if they could just tell it like it really is, no matter how inconvenient. But then I guess that's not the way things are done in politics, is it?

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  2. Yes. I think you have got it one.

    As Plato said "Beware of those who seek power"

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