From the BBC:
Councils in England could keep taxes raised from local businesses to make them less dependent on Whitehall funding, under government proposals.
Currently £20bn of business rates are collected by councils but sent to central government, which redistributes them according to need. Communities Secretary Eric Pickles said that was a "disincentive to growth" and is reviewing council resources... He said the current system penalised "economically successful" councils and the government wanted to reduce dependency on Whitehall grants for as many councils as possible.
The government hopes that allowing councils to keep their own business rates will be an incentive to encourage private sector growth and regeneration by giving them a "direct stake in the future of their area".
That's another one straight out of UKIP's 2010 manifesto, of course, but hey.
The gimmick is that councils are given funding from Whitehall largely on a per capita basis (and Labour governments give more to Labour-run councils; Tory governments give relatively more to Tory-run councils) and councils can keep all the Council Tax they collect (about a fifth of their income); but councils have to hand over all the Business Rates they collect.
It doesn't take two minutes to work out that this is why councils have no particular incentive to attract businesses to their area, allow new factories to be built etc (in the face of stiff opposition from the NIMBYs and Greenies) and are happy for commercial premises to be converted to residential - although the total tax take from residential is much lower (it falls by about four-fifths when commercial premises are converted to residential), the council can keep all of it, plus the money that Whitehall dishes out per capita.
And as Business Rates is fairly close to Land Value Tax, it's the best way of collecting tax.
Friday, 18 March 2011
Morbidly Obese One talks sense: shock
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11 comments:
It's also straight out of "what used to happen before the ghastly centralising governments of Heath and Thatch".
BE, Thatch did two things: set the rate nationally (which is a good idea) and make councils hand over all the business rates (which was a bad idea). Dunno about Heath.
Whilst I'm all for this proposal in principal, to work efficiently it would need councils to have a modicum of commercial awareness - something government bodies these days appear to be utterly lacking. Is a council actually able to manage its attractiveness to businesses?
Rab, making money from ground rents is so easy that even councils can do it. All they do is dish out planning permission/allow change of use, make sure there are car parks and/or a good bus service and that's it.
And also, if councils make a hash of it then it is the responsibility of the electors to sack the people who have made a hash of it.
Rab, actually what you say is a red herring.
The total amount of BR collected is dictated to some extent by what councils do, regardless of whether the BR is pooled nationally or retained by the councils. So maybe they do mess up, but they can mess up either way. If retained locally, there is at least an incentive to increase receipts.
This is why the tax rate has to be set nationally, otherwise lazy councils would just increase the local rate, rather than expanding the tax base (as a separate issue, I would increase Council Tax to the same level as Business Rates, that would enable us to scrap most other taxes and simplify things even further).
BE, exactly.
In LVT world, could the central government not lay a tax on the *councils* based on the aggregate value of their land, then leave the councils to collect it however they saw fit?
F, that is sort of part of my plan.
The government decides how much ground rent arises in each council area and tells them to hand over (say) 80% to central government to be spent on core functions and dished out again (as Citizen's Income and a small per capita grant to local councils).
Whether each individual council chooses to collect and spend that last 20%, or whether it gives discounts and exemptions to certain favoured groups is up to each council.
In your scheme, you might tell councils that they can collect income tax instead of LVT, as long as they collect and hand over the 80% demanded.
Fair enough, I suppose, as we'd observe that businesses and people would rapidly relocate to from places with income tax/no LVT to places with LVT/no income tax, so those Home-Owner-Ist councils would soon find themselves in charge of nobody but pensioners, disabled and others unable or unwilling to work.
MW
Wot Rab wrote. I have the privilege of paying my council tax to the London Borough of Haringey: the financially incontinent borough which, for instance, sank £37 million of council tax payers' money in the wreck of SS Icelandic Banking. You are correct in that, given what has to be done, it is "easy". Unfortunately "easy" to you and me (and Rab) is not "easy" for the parasites infecting local government: whatever "it" is, ensuring it gets done will be ponderous and expensive and will have unintended consequences which will also magically result in a demand for more money from yours truly.
To illustrate my point this analysis of Haringey's finances by Andrew Gilligan in the Telegraph demonstrates how incompetent, dishonest and profligate Haringey is. BTW - sorry to rant - an analysis such as Gilligan's (which is as straightforward and comprehensible as the complications of local authority finances allow) has never been undertaken by the LibDem "opposition" on the council. God forbid that someone outside the hallowed portals of Haringey Town Hall should be aware of what's really going on.
U, that comment had to be retrieved from Spam. Dunno why it picks on you.
Yes, I've seen that article, top stuff (confirms what we always assumed). But I stand by my reply to Rab. Further:
a) Do not confuse spending side with tax raising side. There is good spending and bad spending, just as there are good taxes and bad taxes.
b) By and large, councils are far less wasteful than central government. Councils 'only' waste a quarter of their budgets, central government wastes about half of theirs. On top of that central government spends three times as much money as local councils.
"Dunno why it picks on you"
Comment on my comments I fear!
My ISP VirginMedia causes problems from time to time and also, I think, there is - unbelievably - another commenter out there with "Umbongo" in his/her moniker whose postings on rather more outré sites than yours might not be as innocent as mine.
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