Speaking at a function held by Whitchurch Conservatives, Sir George talked about a possible replacement for the Council Tax and described the Council Tax as a bridge with a weight restriction on it.
“The Council Tax was invented about 12 years ago, when the average amount paid was around £500. It could bear that amount of traffic without any damage to the structure. Now, in North West Hampshire, more and more people are paying a four figure sum instead of a three figure sum. I warned the Government a year ago that, if they went on driving up the average level of Council Tax, people would ask whether it was the right way to raise a local tax. That is now happening.”
“What is worrying for the Government is that when the pensioners from Cornwall decided to march in protest about rising Council Tax levels, they didn’t march on the local town hall – they marched on Westminster. They had rightly worked out that responsibility for the increases lay with central not local Government.”
“The same is true in Hampshire; responsibility for this year’s increase of 15% rests with Central Government who have directed local councils to spend more without any corresponding increase in grant – and, at the same time, have switched grant away from Hampshire to the North.”
“One response has been to call for a Local Income Tax. I would offer some words of caution. At the moment, a local authority can raise what it needs from a property based tax because it knows what its tax base is. £800 on a Band D property raises x million pounds. With a local income tax, the Town Hall won’t know what its tax base is for the current year because they won’t know what people’s incomes will be.”
“It is suggested that 3p in the pound will be raised off everybody through PAYE , and there is then a settling up at the end of the year with the local council. So, for example, a married couple, with the husband earning £40,000 and the wife £20,000 will pay £1800 pa – probably a lot more than they pay at the moment. But what about all the people who are not on PAYE – the self-employed and small traders - how will their local tax be collected? And the people who have two houses, but whom the Revenue deal with at one address; and what about the very well-off who, for whatever reason, may pay no tax at all; and those who live here but pay tax in another country?”
"And how "visible" will the new tax be? At the moment, I have a standing order every month for ten months, to pay Test Valley Borough Council. I see it on my statement, and I know how much has gone where. If it is going to be deducted each month from my pay, along with National Income Tax, National Insurance and Pension Contributions, then it will be less visible, reducing the accountability of local government."
"The Council Tax is a tax on property, and to some extent, its existence exerts downward pressure on house prices. When you buy a house, you buy into the tax that goes with it. If you abolish the council tax, there will be upward pressure on house prices - to the disadvantage of those trying to get on to the housing ladder. And, if you add 3p in the pound to the basic rate of income tax, you help to make this country less competitive internationally and add to the incentive to take tax avoidance measures."
“And there is one more relevant consideration. A rate of 3p in the pound is a buoyant tax – you can raise more money each year by leaving the rate alone. With the council tax, the local authority has to increase the amount each year to raise more money – an important deterrent to extravagance.”
“I believe we should be very cautious about a local income tax; a better approach would be for Central Government to fund local government adequately and avoid the need for these big increases.”