Inflation and Council Tax
An analysis of the Government's response to
Isitfair following our Brown Envelope Campaign. Fact or
fiction? Truth or duplicity?
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Fairness and Localism - By :
Michael Boon
Presentation made to Eric Pickles MP on 2 August 2007 that shows how reforming
the distribution of the central Government Grant based on average incomes would
help to alleviate some of the unfairness that exists in the current system.
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Mending Local Democracy - A Market Driven Approach - By :
Michael Boon
Isitfair is an organisation campaigning for the abolition of the
Council Tax. Isitfair’s preferred solution is therefore to abolish
the Council Tax altogether replacing it with increases to national
income tax and VAT. However, Isitfair recognises that this is just
one of the possible alternative approaches to relieving the hardship
being caused by the Council Tax in its current form.
This document
represents a somewhat different approach based on the retention of a
reformed property based tax which would be more compatible with real
local democracy and local accountability.
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A Fairer Tax Raising
System - Isitfair
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Isitfair's Proposal for a Fairer Tax Raising System
Flat Taxes - (an essay) By : Michael Boon
A flat tax
is simply a tax where there is one tax rate and everyone pays it.
For example, if we were to have a pure flat tax on our income we
would all pay, say, 20 percent on everything we earned: £2k if you
earn £10k; £20k if you earn £100k and so on.
The
idea of a flat tax has been around for a long time. However, it is
only since 1994 that any European country has actually implemented a
flat rate of income tax. This was when Estonia started to tax
personal and corporate income at the same rate of 26% - with no
schedule of rates and no deductions. Latvia and Lithuania, Estonia’s
Baltic neighbours were the first to follow Estonia’s lead. Later,
in 2001, Russia too moved to a flat 13% tax rate on personal, (but
not corporate), incomes. Three years later, Slovakia introduced a
single rate of 19% on personal incomes, corporate incomes and VAT as
well.
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The Relationship Between
Central Government Grants And Council Tax Bills - Michael
Boon - 2007
1.
INTRODUCTION
The “headline” rate of Band D Council Tax
varies quite widely from one Local Authority to another. For
example, in the financial year 2007/08, the highest Band D Council
Tax is £1,565.86p, (in Sedgefield), while the lowest is £681.13p,
(in Wandsworth). Part of the purpose of this paper is to attempt to
answer the question of what actually causes this variation. Is it
the relative extravagance or frugality of different Local
Authorities - or is it related more to under / over funding as a
result of “inappropriate” Central Government grants?
The amount that any Local Authority has to
raise through Council Tax is nothing more than the difference
between what it plans to spend and the amount that it receives from
Central Government by way of grants. An apparently extravagant
Local Authority might therefore be one that is simply under-funded.
Equally an apparently frugal Local Authority might be one that
receives an unduly generous Central Government grant.
The present Government is on record as stating
that it is Local Authorities, and not Central Government, that
determine the rates of Council Tax. Their justification for this
claim is that the grants from Central Government to Local
Authorities are calculated in such a way as to ensure that if every
Local Authority were to spend more or less what Central Government
thinks that they “ought” to spend, then, to a first approximation,
the rates of Council Tax for any particular property Band would be
more or less uniform across the country. This is because, in
principle, Central Government Grants to Local Authorities are simply
the difference between what the government thinks that any Local
Authority “ought” to spend and what it thinks it “should” collect by
way of Council Tax - and the latter is largely determined by how
much tax would be collected in each Local Authority by a uniform
Band D rate. Indeed , in their submission to the Lyons Inquiry,
Leicester City Council stated that:
“ . . . if all local authorities spent at
the level of their FSS, the Band D council tax would be the same
throughout the country.”
In this context the FSS, (or Formula Spending
Share), was simply the way that, in the fiscal year 2005/2006,
Central Government determined what it thought each Local Authority
“ought” to spend, (and on which particular “Spending Blocks”). For
the fiscal year 2007/08, the FSS has been replaced by the RNF, (or
Relative Needs Formula), which is much the same thing - but under a
different name and expressed somewhat differently as well.
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Making Local
Income Tax Work - Michael Boon - 2007
1. INTRODUCTION
Local Authorities in England are funded by a
combination of charges for services, Council Tax and Grants from
Central Government. However, the Council Tax is widely seen to be
“unfair”. There are a number of reasons for this perception,
(discussed in section 3). These are mainly linked to issues
relating to perceived “ability to pay”, (discussed in section 2).
It is widely felt that a “fairer” system would involve taxes being
more directly related to people’s incomes and / or their spending.
Clearly, the easiest way to achieve this would to replace Council
Tax altogether by some combination of income and / or sales taxes.
Indeed Isitfair has proposed that Council Tax should be abolished
and that Local Authorities should be funded by increases to
national Income Tax and national VAT. The
details of this proposal are described in the document: “Local
Authority Funding - A Fairer Tax Raising System”, (written for
Isitfair by the author of the current document).
However, many of the published submissions to
the Lyons Inquiry have proposed that Council Tax should either be
replaced by, or supplemented by, Local Income
Taxes, (LIT), and Local Sales Taxes, (LST). I
discuss what I mean by “local” taxes in section 4. Most of the
objections to these proposals, (discussed in section 5), that have
been raised concern economic or administrative issues. None, so far
as I am aware, have been raised on the grounds that such taxes would
be “unfair”.
This document describes, (in section 6), how
the most awkward of the administrative problems associated with LIT
could be overcome.
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Report On The
Funding And Structure Of Local Government -
Michael Boon, 2007
“The Alternative Lyons Report”
This report represents the outcome of an
independent study conducted for Isitfair into the “proper” role of
Local Government and how it might best be financed. Given its
subject matter and timing, this report will almost inevitably be
dubbed “The Alternative Lyons Report”. In fact I have deliberately
chosen my terms of reference so as to be very similar to those given
to Sir Michael Lyons for his own “official” report.
The report itself is subdivided into six main
parts. The first part of this report deals with the terms of
reference that I have defined for myself, (section 2), and a summary
of my findings, (section 3).
The second part of my report addresses various
philosophical issues. These relate to the proper roles of Local and
Central Government, as well as the principles that should underlie
any taxation designed to fund them.
The third part of my report examines how well
the current systems of Local and Central Government activities,
responsibilities and finance meet the criteria established in the
first, more philosophical part of this report.
The fourth part of my report examines some of
the supposed “solutions” to the problem that have been proposed,
either to the Lyons Inquiry or to Isitfair, which I believe are
unlikely to work. In all cases I describe my reasons for rejecting
these alleged “solutions”.
The fifth part of my report examines some of
the options which, I believe, ought to lead to a better match than
we currently have to the somewhat idealised criteria for taxation
and the roles of Local and Central Government as discussed in the
second part of this report.
The final part of my report contains a number
of very detailed statistical appendices.
Click Here to Read or Download Part One
Click here to Read or Download Part Two
Click Here to Read or Download Part Three
Click Here to Read or Download Part Four
Click Here to Read or Download Part Five
Is The Council
Tax System Broken And Can It Be Mended?
This paper represents an interim
report into whether or not the existing Council Tax system is in
some way “unfair” and, if so, whether or not the system can be
made significantly less “unfair” by making changes to either the
system used by Central Government for allocating grants to Local
Authorities and / or changing the banding structure within
individual Local Authorities.
“Fairness” is a very subjective
concept lying mainly in the mind of the contemplator. However,
we believe that the vast majority of the voting public would
subscribe to the following two statements of principle:
1. People on higher incomes should
not, on average, be required to pay less tax in total than the
tax that those people on lower incomes are required to pay.
2. Local taxes raised to finance
local expenditure should, in general, be higher in those areas
where local council expenditure is higher, (and therefore where,
presumably, services are better), than in those areas where the
local councils are more frugal.
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Reforming
Council Tax - A Summary of the Options - Michael Boon, 2007
Council tax represents a
growing burden for many people on limited incomes. This is because,
over recent years, the percentage rises in the tax have exceeded
the percentage rises in both average earnings and retail prices, (to
which some, but not all, pensions are linked). It is obvious
therefore that council tax must be taking a growing proportion of
most people’s incomes. Anybody who was already on a tight budget a
few years ago must be finding things even harder today.
The fundamental reason for the excessive rises in
council tax is that central government has loaded more
responsibilities onto local government - but has not provided the
full funds necessary for discharging those responsibilities.
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The Band D
Delusion - How It Creates An Unfair Tax - By Michael Boon, 2007
In their submission, dated 10/01/05,
to the Lyons Inquiry, Leicester City Council stated:
“ . . . if all local authorities
spent at the level of their FSS, the Band D council tax would be
the same throughout the country.”
Why the emphasis on band D? If this
statement is correct, then it would apply to all other council
tax bands just as well. This is because there is a fixed
relationship between the council tax bills for any two property
bands within one and the same local authority. If we know the
band A bill in any local authority we automatically know the
bill for band D or indeed any other band as well. The same
applies to bands B, C, D, E, F, G and H - any of which can be
used to predict the bill for every other band.
This paper argues that the band of a
house is essentially a bureaucratic construct and that, as such,
it is a delusion, with many undesirable practical consequences
arising from treating it as something real and meaningful.
Read Michael Boons full document
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