The Guardian view on Britain’s broken council tax

http://www.theguardian.com/commentisfree/2014/dec/19/guardian-view-britain-broken-council-tax

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By factoring out inflation, and then factoring in various things that it didn’t happen to be cutting this week, the government is able to claim that local councils resources are “only” being reduced by 1.8% next year. The councils themselves came up with a more realistic 6.4%, but the precise 2015/16 figure is of less importance than the context. After next year’s slicing, the National Audit Office tots up Whitehall’s hit to town halls since 2010 at 37%. Seeing as schools and aspects of social care are protected, it is no exaggeration to say that much else is being chopped in half. Business cannot go on as usual, and every shuttered library and unrepaired pot-hole confirms that it isn’t.

The debate about Whitehall’s wild axemanship will rage on, but what’s beyond argument is that communities that are willing to pay should be free to shield themselves. The stricken structure of local taxation closes off this alternative. There was a time, not so long ago, when the council tax seemed a quiet success. After the fiscal anarchy of the poll tax, it made the vexed question of town hall finance go away, and raked in a little revenue from the wealth locked up in homes. Slowly but surely, however, it is becoming a disgrace. Where once it pulled off three things – taxing property, protecting the poor and a measure of local control – it now fails on all three fronts.

George Osborne’s national bribes for local freezes renders the very “council” tax label a travesty. If councillors take his bung one year, and then seek to catch up with an inflation-busting rise the next, they run up against a coalition-imposed referendum, narrowly and unwinnably framed on the question of higher bills. Eric Pickles is agitating to tighten this rule, Scotland provides a case study in where such meddling leads. The SNP has used Holyrood funds to interfere in town halls’ funding decisions ever since 2007, to such an extent that in 2014 all 32 authorities plumped for a freeze. National politicians should stop wringing their hands at dismal council election turnout, and reflect that if local votes are barred from bearing on local tax bills, citizens have less reason to cast them.

If the “council” bit is today ringing hollow, the tax base is absurd. The first council tax bills dropped on doormats in 1993, calculated using 1991 house prices. In the intervening 23 years, their value is up by an average 240%. In the year that Thomas Piketty warned us about a society that rewards owning over earning, the taxman really should be taking rich pickings from costly homes. Council tax, however, does not let him, because it is still calculated using those 23-year-old valuations.

Over this time, where London prices have rocketed 414%, those in the north-west have advanced by a less sensational 163%. Discrepancies between dead-end towns and swanky metropolitan boroughs have grown more marked. Councils should be freed to introduce new bands on homes at the top, and claim for the community a share in burgeoning unearned riches. Instead, Westminster has repeatedly ducked the need to revalue at all, so the under-taxation of the priciest homes, which was been baked into the council tax formula from the beginning, gets ever more pronounced.

The great rhetorical complaint about the poll tax was that “the duke and the dustmen” paid the same; the chief practical difficulty was the requirement to pursue the very poor through the courts for small sums. This reflected holes in the means-tested rebate, holes which council tax benefit fixed. With remarkable pig-headedness, the coalition scrapped it, and handed councils inadequate funds to devise their own replacement. It is hard to conceive of a worse social policy. Myriad local safety nets, designed for administrative convenience rather than to reward work, strangle the supposed streamlining logic of universal credit.

Through its assault on the rebates, the coalition has matched its council tax freezes for middle England with sharp increases in bills for the poorest, many of whom are now having to pay for the first time. Up to 40% of what’s due from poor families is not being collected because – surprise, surprise – many are turning out to be too poor to pay.

Centralised, indulgent of the rich and contemptuous of the poor, the way that council tax has been run, reveals a far wider rot in the governance of Britain.