Wednesday, January 21, 2009

Why the Council tax is so unfair

If local rates can be so low in other EU countries, why not in Britain? And why is the UK the only country with fortnightly rubbish collections?

New year, new rise in the awful Council tax. The government is trying to sell its 3.5% increase in 2009 with the notion that, until two years ago, Council tax surges would consistently be three or four times the inflation rate - up to a staggering 15% a dollop. For next year, the Local Government Association promised that "councils were doing their best to hold down tax increases at a time of economic hardship".

Yet sticking up for Britain's appalling local taxation system is nigh-on impossible. For a while, in the wake of the 2005 elections, it even looked like the Scrap The Council Tax movement was going to succeed. Arguments like the Council tax rising "by 121% since 1993 against inflation of 36% over the same period" seemed unassailable. The Labour government offered a review, but then, when no-one looked, it decided it wouldn't happen until the next elections.

The Council tax remains one of the greatest scandals of today's Britain. One of the most obvious question is: if it can be so low in other European countries (we'll come back to that), why does it have to be so massive in Britain? This year, average 'Band D' residents in Dudley, in the West Midlands, are forking out £88 a month. When you tell non-Brits about the UK Council tax rates, the general reaction is them thinking that you're being melodramatic or are telling a porkypie. Or perhaps they wonder if British cities get streets paved with gold in return.

However, as we all know, most local authorities don't even do weekly rubbish collections anymore. For most, now it is once a fortnight. The government said it's the best way to encourage recycling. Most would be of the opinion that pests would be encouraged too. The people in charge of Britain denied it, but never explained why.

Since the days of Charles Kennedy, the Liberal Democrats have been consistently the only party calling for an overhaul of the Council tax system. Rightly, they point at:

a) its regressive nature. The Council tax does not reflect a person's ability to pay. You may have a retired steelworker who bought a former council flat in a certain part of town. His rate is likely to be an extortionate one, certainly not in line with his pension. Such a crap system ensures that people on a low/middle income pay a disproportionate amount to their local authorities. The old Axe the Tax campaign pointed out that most people pay more Council tax than the Prime Minister.

b) unlike in most other EU countries (Germany's Nebenkosten an exception), in the UK it is tenants who are burdened with the Council tax. Now, you'd have thought that generally, landowners are wealthier than someone who can't afford to buy a house. Yet if your landlord's loaded and you're simply renting, you are the one who's got to pay for the Council tax on his property. In France, Spain and Italy, the general trend is that landlords are liable for tax on their own property.

One issue, however, is often overlooked. The fact that, on average, local authority tax is significantly lower in most EU countries. I studied the system in Spain (IBI), France (taxe d'habitation and taxe fonciere) and Italy (ICI). Of course rates vary considerably, but overall there is no contest. In each of those countries the local tax is seriously a fraction of the grand and more most people have to fork out in the UK.

This is the most puzzling point. In each of those countries, the local tax goes to finance local police and fire services, public transport subsidies, social housing, street cleaning, various council activities as well as rubbish collection.

But in Spain, for instance, they collect your waste twice a day, and the recycling system is miles ahead of its UK counterpart, with daily collections of recyclable material from wheely bins at, literally, each street corner. In Italy, according to the area, collections vary from daily to twice a week, and that's without including the pick-up of reusable waste.

The questions most expats routinely ask is: along with sky-rocketing utility bills, why is the UK Council tax so high and why do residents get so little in return? Is it to do with greedy councils? Or does inefficiency play a part? Or is there some other magical justification the government or its supporters may be able to come up with?


Anonymous said...

I live in Smethwick and my bill this year is just nuts.
I pay massive council tax rates the highest in all of the West Midlands, WHAT FOR to empty my rubbish bin. The roads a re filthy.

THAT is it, I work pay all my bills, and the council dont even grit my road in winter what a complete joke.

Ceri said...

To be fair to councils, the council tax doesn't make up very much of the typical council's total income (usually around 25%), and councils have lost a lot of autonomy over the last few decades- they are basically told where (and often how) they can spend a lot of their money. Things like libraries, street cleaning, parks and refuse are some of the few areas where they can act independently, hence the most likely to see cut-backs. Councils, like the state in general, have constantly increasing pressure to provide more and better services, but unlike central government, hardly any means of raising the cash themselves.
Having said that, the council tax is a notoriously poor way to raise money, but again, changing it is down to central, not local, government.

Anonymous said...

Agree with Ceri.
The issue is entirely with Westminster. Howerever, councils do have a say in their annual increase.
In any case, both Labour and Conservative are not willing to solve this issue. Not in the slightest. The regressive nature of the Council tax is a shame on this country.

claude said...

More bits I omitted from the article.
Rubbish in France is collected TWICE a week.
In France, the tax is calculated according to:

"the value of your house": if you have a big phat castle, it will higher than a poor flat in a crap surbub. Where: country side, city...
*Your abitlity to pay that tax is also taken into account ->It is possible not to pay the tax if: (most conditions must be met)
-the whole "house" revenue a certain income
-over 60
-have got a disability

Thanks Vinz ;-)

M said...

Regarding your comment on tenants not landlords paying council tax; they don’t make a lot of sense if it is people (not inanimate objects) paying for the local services that they receive (like rubbish collections and street lighting). A building itself does not produce rubbish, it’s the people inside who produce it and require its disposal. Besides if you were to make council tax the responsibility of the landlord you would simply increase the costs that all landlords face which in turn would push up rents. As it’s a factor that would apply across the whole rental market it’s unlikely that a landlord would be forced to absorb this higher cost on competition grounds.

claude said...

I know the argument. You believe that switching the burden of COuncil tax from tenant to landlord will simply make rents more expensive.

And yet, try and live in France, Italy, and Spain. You'll find that rents are cheaper than the UK. Seriously.

Obviously we're on about average (in the sense that Madrid or Paris or Milan are obviously pricier than Walsall or Corby). But if you take British cities and place them against their 'equivalents', so to speak, UK rents are unrivalled.

Is it a cultural thing? Are local taxes automatically assumed to be on the landlord in other countries? I don't know. But that's the way it works.

Also, MJW, this is where you need to decide where you stand and what the COuncil tax is.

Is the Council tax a tax on the rubbish (in which case it should be a flat one - and lower).

Or is it a tax on the building?
(in which case your argument about 'a building not producing rubbish' is irrelevant).
I think it's based on 'the building' which is why you have 'Bands'.

I personally find it amazing that in theory a landlord can own 4 properties, make money from it (revenue from rents isn't taxed in the UK) and overall pay less Council tax than one of his tenants.

Anonymous said...

Good job, Claude
Axe the Council tax

neil harding said...

it is the regressive nature of that makes it so unfair. I think you are barking up the wrong tree in whether it is paid by tenants or landlords. What is more interesting is your comparison of services with EU countries. I hear most revenue is raised locally abroad but is only 25% of expenditure here. I wonder whether local taxes cover health and education like they do here. If they do and they are lower like you say, then what are their national governments spending money on? As overall taxes per gdp are higher abroad. As ken livingstone said the other day, even stalin didn't collect and control tax centrally as much as we have done since thatcher effectively abolished meaningful local government in the 80s and made local tax much more regressive. We need to give power back to local government. But first we have to introduce proportional representation. Currently too many councils are one party hegemonies that breed ineptness and corruption. When one party can be in power for 70 years with less than 35% of the vote on an appalling turnout which means they have less than 10% support of eligible voters it is not surprising we have crap governance. Same is true for westminster of course. Which is why we have such regressive and centralised govt in the first place.

Stephen Booth said...

I've thought for some time that landlords should be responsible for the council tax on their properties, whether the property is occupied or not. Maybe not the full whack but certainly 50%+. This would provide an incentive to landlords towards having the property occupied at any rent (better to have some income coming in rather than it just costing money) they can get rather than holding out for a higher rent. It may even encourage them to sell off hard to rent properties so getting some movement at the cheaper end of the housing market.

I'm not sure that totally scrapping council tax would be the best solution. Maybe keep the same basic model of a tax based on the size/value of the property but make it much more progressive, give more of a discount to low occupancy housing and exemptions/discounts to those on low incomes, pensioners &c. Also, remove the 'second home' exemptions. This would address the key issue, the highly regressive nature of the tax. Why should someone living alone in a bottom end terrace in a poorly maintained area pay nearly as much as a family of 6 living in a large house in a very well maintained area with 3 'second homes'?