Council Tax Reform

By Norman Harris

INTRODUCTION

In the recent Local Elections, the percentage turnout was in general in the 40s. Apathy is the worst enemy of a democracy. Also, there was considerable clamour from many quarters for more devolution. This essay explores these two issues.

The clamour for regional devolution, which may be a good thing. But those who wish for it should recognise that it would suit this Government, which is a low tax party by nature, and faced with a massive deficit to devolve more revenue generation for local services. Central government would fund the glamourous, large, infrastructure projects. The route to more local funding should be the reform of Council Tax to be levied on the area of the land controlled by its owner and the use to which it is put.

I favour the principle that more of what is spent locally should be decided and raised by local taxation. This has the advantage of stimulating the interest in local governance. Demands for more or different services can be put directly by local authorities to voters (or the reverse) and agreed or otherwise by the voters and local Council. Essential spending on Education, Health and Social Care would be under-pinned, as now, by Legislation.

It is time to explore this, as the trend of central government policy, for reasons of ideology and to reduce their deficit, is to reduce the amount of financial support that they provide to local government. With the budget deficit as high as it is the cuts in local government support could be increasingly painful. This paper covers the replacement of Council Tax and Business Rates.

I favour a tax based on the area of land controlled by the owner, rather Local Income Taxes. Local Sales Taxes would be counterproductive, as it would drive buyers and potentially business over a border to a lower tax regime. As was seen on the island of Ireland.

This land area basis is fairer, as there is no subjective judgement of land value, just the area owned, which will leave little room for debate. The change should produce more local voter interest in the policies and decisions of their local councils. It will also release land for home building or other uses and make lease holding less attractive.

Regrettably at this time of pandemic and the recovery from it, potential savings of Income and other Central Government taxes will go to reducing the large buildup of UK Government debt. So, the populace will not be paying less income tax, when called upon, in many instances, to pay more local tax. But in time this should reverse.

THE ADVANTAGES

The advantages of the reform are:

• It frees up underutilised land for housing or other desired uses.

• It forces badly used land back into line with local community wishes. • It encourages community living. • It encourages high rise living. • It allows Councils to encourage/discourage types of land use.

• It makes it more likely that local communities will engage more with their Councils.

• Councils and their voters can, over time, shape their area.

THE PROPOSITION

The reform of local Council Tax suggested is based upon LAND AREA. People or corporate entities controlling the use of a specific area of land should pay for that privilege. It is important that there is little room to for argument about the area of land controlled by the owner of the land.

All local authorities have jurisdiction over an area of land. One of the characteristics that they have in common. The first step is to calculate the area of land in their control. No exclusions for say Defence Estates or Crown Lands should be made, as an objective of this reform is to free up all underutilised or badly used land. You see below that this multiplicand is open allowing the local authority to attract or deter Central Government and any other facilities that do not fit in with their long-term goals.

The next step is to determine the desired revenue budget. The simple division of desired budget and area of land provides the Basic Rate of Tax per square metre. The person (or persons when in community living) or corporate entity controlling the use of the land would be liable for this rate.

There are refinements that should be made. A scale of multipliers could be applied. The suggested scale of multipliers is as follows, although local authorities would be free to vary it.

A more penal category is suggested. Where land is underutilised, dilapidated or the land use is out of character with its surrounding area would have a multiplicand of 5.0 or even more applied. This would drive controllers of land to bring the land up to the required standard or into release to new owners or allow it to revert back to nature. It would also remove the need for Compulsory Purchase Orders, as the multiplicand is progressively increased from 5.

In an earlier draft I considered a parameter based on the distance from a local development centre. This was rejected as it brings in a judgement call of the value of distance form a centre. Poor use of land in a City/Town Centre can be dealt with by a penal multiplicand.

The reform would also encourage building higher. There is nothing wrong with this is the designs are to the highest standards. One can see that flats would pay less as multiple owners share in the control of the land on which their building stands on. But that is not nearly as important as the ability to drive out land usage which is not in line with the needs of the locality. Say a scrapyard or waste dump in the middle of a residential area. Cases of which have figured in the news. Leaving empty or letting the house of garden fall into disrepair would also increase the multiplier factor on a temporary basis until the property was put back into use and good order.

Central Government should decide and define the Classes of Usage. But local governments would be free to apply the multiplicand that they think suits their area, but in a totally transparent way..

LAND USER CLASS MULTIPLICAND Transport Corridors + Footpaths 0 Nature Reserves 0,1 Agriculture & Horticulture 0.2 Amenity & Parks 0,2 Health & Care Homes 0,2 Retail Business 0.3 Indoor & Outdoor Sport 0.5 Domestic Housing 1,0 Central Government/Defence ?? Non-Retail Business 1.5 Warehouse 2.0 Transport Hubs & Airports 2.0 Non-Polluting Industry 3.0 Polluting Industry 4.0 APPEALS PROCESSES

Appeals about the land classification would be handled by national governments and thus refine the classifications. For example, rail stations on the rail corridor would be at zero, but major hubs would be considered a Business. Shops or cafes sited on say, a National Trust parkland would still be classed as an amenity, the basis of this being that 90% of the classification area is the governing class. On a similar 90% basis, parking lots intended for the use of an office block or a factory would be classed as Business and Industry, respectively.

Greater refinement of suggested definitions will be required in many cases.

Appeals against the assessment of property area will handled by locally based Chartered Surveyors. In the case of all appeals, the settlement would be back dated to the original date of the appeal.

AND SAFEGUARDS

There has to be safeguards in such a reform. This would be that no person or entity pays more twice the rate of inflation of their latest annual Council/Local Tax Demand. This could be time limited to say, 5 years in order that the benefit of improved land use could start to be realised.

Similarly, Central Government must be constrained not to reduce their grants to any local authority by more than the rate of inflation in any year compared to the previous year. Government must also ensure that the Statutory requirements required of local authorities continue to be covered and if not they risk being put into “special measures”.

Homeowners with large gardens will be able to release the land for development subject to Planning Approval. Small gardens are not likely to have any development value, so owners will not be able to avoid the tax if the land cannot be sold.

MORE ON TRANSPORT

Land dedicated to transport is fully covered in this pass at the policy. But rail marshalling yards and large areas of parking will need further consideration. These functions probably control some underutilised land. There is a potential issue with this land could be narrow, possible tapering strips that may only have utility in reverting back to nature.