Tuesday, February 13, 2007

Tax cuts

One of the many arguments used against council tax is that it is regressive, and hits those least able to pay. Councillors round the country will be making this point as they struggle at this time of year to keep increases as low as possible.

I think that one big reason why council tax is so unpopular is that people get to see exactly how much it is that they are paying, unlike, say, sales taxes (if you know how much you paid in VAT in the past year, then I am slightly in awe but also pretty scared of you). Another is that local councils tend not to be very good at explaining how the money gets spent. One of my favourite facts is that satisfaction rates with local councils tends not to be related to independent assessments of their value for money or effectiveness, but according to how much they spend on publicity.

Whatever the means that councils have of raising money, the way that they spend it tends inherently to be progressive. Many of the main services are universal, thus in theory, though not always in practice, you don't get a better rubbish collection service if you happen to be richer - it is the same for everyone. Some services are targeted, providing grants to groups which work with asylum seekers or lone parents. And some services are theroretically of benefit to all, but benefit some more than others. A good example of this are parks and play areas. Anyone can go for a walk in the park, or take their children to the local play area. But it is most beneficial for people who can't afford a gym membership, or take their children on expensive holidays, or buy them the latest games. It is useful to remember how few services in Britain are provided on the basis of people getting at least as much if they don't have much money, without the option to buy the 'luxury' service or the 'premium' subscription and get a better deal as a result.

What's more, the effect of failure in providing services affects people differently. If the grant to support a local community group working with disadvantaged people gets cut, most people may be unaffected, but some will lose their lifeline. If the street cleaning services aren't doing their job, you'll notice the difference first in more deprived areas. And if parks and play areas are not looked after, and become havens for drug dealers, and local kids have nowhere safe to go and play, then the knock on effects hit everyone, but act disproportionately on the least well off.

Here's an example of how council spending can make a big difference at a low cost - spending some money on new play equipment and on sprucing up the park means that more children use it and the drug dealers no longer gather there. Here's another - Wandsworth Council were planning to shut Battersea Arts Centre, used by thousands of people all over the country including people from all over the borough, to save hard pressed taxpayers 43p per year. Contrary to widespread myth, councils provide services like this effectively and cheaply, and it costs people far more if their local park is dangerous and a haven for drug dealers, so that crime goes up and they have to drive for miles to let their kids play or if their local community facility shuts and they have to find a commercial alternative.

Council tax rises do cause hardship, particularly when they go up by more than benefits or wage rises for people on low incomes. But when people claim that they are keeping down council tax to help the poor, have a look at how how they are planning to do it. It may be a result of genuine efficiency savings, by not wasting money and by working with the private and voluntary sector where each of those can provide the service more efficiently. But what's much more common is for people to boast that they are giving back what often amounts to no more than a couple of pounds a year in tax cuts, while in fact burdening people with much higher costs through these cuts.

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