How to pay for services provided by local councils has been a bone of contention for years. We used to have Rates, which were a payment based on the annual rental value of each property. They were unpopular because they are the only tax that is paid for directly out of pocket, so people noticed them, unlike Income Tax which is paid by employers, or VAT which comes wrapped up in the bill when you buy things.
Rates were replaced by the poll tax, officially called the Community Charge - which was a fixed charge per individual, but many exemptions had to be made and it proved unworkable. After the poll tax we got Council Tax, which is based roughly on the selling price of the house or flat. It was a quick fix and worked as long as it was low. But inflation and changes in the amount that councils get from the goverment have meant that it is being used to raise more revenue than the system can sustain, with the result that people on low fixed incomes are having to pay more than some of them can afford.
So the government set up a new Committee of Inquiry under Sir Michael Lyons, Professor of Local Government at the University of Birmingham, to study the whole business and receive submissions from interested parties. This took place in 2004 and 2005, but then the government decided to extend the terms of reference to include the actual functions and organisation of local government.
Meanwhile, it appointed three more committees - the Leitch review of skills, the Barker Review of Land Use Planning and the Eddington Transport Study, which have now produced their reports.
The Barker review was originally meant to propose way of making more land available for housing, but it has gone on to cover planning in general. An interim report advocated the introduction of development charges - payment for planning consent to capture the resulting increase in land value. This is much the same policy as failed in 1947, 1967 and 1976, when owners just kept their land off the market pending a change in government and repeal. Presumably this is why it was dropped from the final report.
The Eddington transport study is a weighty document which I ought to study but do not have the time.
And now that the three committees have done their work, the Lyons Inquiry has gone out to another round of consultation in the hope of pulling things together. Unfortuntely, there is a short deadline - presumably under pressure from the government - for submissions by 21 January. It does not give much time considering that decisions made will have to be lived with for the next few decades.
The key issue here is the is the potential role of land value taxation in solving all three of these problems. Transport infrastructure is a key factor in creating and sustaining land values. Planning decisions can result in fortunes being made from the release of latent land value when development is allowed to go ahead. And existing taxes which bear on labour - effectively, payroll taxes, have been a major reason why opportunities for on-the-job training through apprenticeships and the like have almost vanished.
However, the chances that Lyons will recommend land value taxation are slim, and he did, the report would be shelved. There are powerful vested interests who make sure they have got the ear of the civil service. Judging from the replies one receives from government departments on the subject, the vested interests appear to operate on the FUD principle, spreading fear, uncertainty and doubt.
About the Lyons Inquiry
About Land Value Taxation
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