Council Tax Reform: A Mansion Tax Wouldn't Go Far Enough

In recent years, the idea of having a 'Mansion' tax has gained considerable traction with both the Lib Dems and then the Labour Party picking it up. This has been criticised by some because it won't raise very much money and because it will have to be paid by elderly, impoverished ladies living in modest houses who have the great misfortune to live in the more expensive parts of London. Nine years ago, The Public Accounts Committee of Lewisham Council proposed reforming Council Tax in ways that would make it much more progressive and potentially raise more money than would the introduction of a simple 'Mansion' tax. It produced a report that formed the basis of its submission to the Lyons Inquiry into Local Government Funding. The report makes interesting reading, given the pressures on Local Government finances we are experiencing today. Below is a section from its submission which summarises its main recommendations:

The Committee supports the New Policy Institute (NPI) version reforming the council tax which includes changing the number of multipliers of the bands particularly splitting bands A and H, which are currently very wide, and sub dividing band G so that the progressivity of the tax could be improved. We believe that this system will be fairer for low income families as well as pensioners as they are, on average, more likely to pay a greater proportion of their income in council tax than average and high income families. 

We also support the NPI’s proposal for sub national variation (regional banding) so as to take into account the house price divergence throughout the country. Also this would prevent a redistribution of central government resources from areas with relatively high house prices to regions with low house prices. Regional banding would work well in this system, however, we are concerned about the ‘cliff edges’ debate which was discussed at the Balance of Funding Review where taxpayers in a neighbouring region are paying different council tax levels for houses of the same value. This problem could arise if the neighbouring borough to Lewisham, Bromley, which is an outer London borough compared to our status being an inner London one could potentially pay different levels of taxation despite having similar house prices. We also believe that revaluation should be more frequent (10 yearly) as to give integrity to the system. 

An important aspect that the Committee urge the enquiry to look at is the whole scale reform of the council tax benefit system. The stigma of take up must be removed. This can be done by turning it into a credit, as to appeal to pensioners. The complexity of filling the application is another reason why people are put off it.

It’s a shame that the debate on the whole issue of the iniquitous regressiveness of the current system of the Council Tax has been driven up the cul de sac of a Mansion Tax proposal. The calls for a Mansion Tax, although well intentioned, have framed the current debate in terms of those who want to protect vulnerable old people in expensive houses paying more tax and those who want to pursue the class war by bashing millionaires. We need to broaden out the discussion to explore ways of making the Council Tax more progressive and fairer. Creating more bands at both the top and bottom would seem to be an easy way of doing this, as it would not necessitate a wholesale national revaluation of properties. It is disappointing that in the nine years or so since this report was published, the issue of root and branch reform of Council Tax has disappeared into the long grass. Sadly, I wonder whether it will ever re-emerge.

Immigration. A Free Market Response At Last.

It is well known that those on the right argue that markets should be allowed to work as freely as possible, because free markets solutions maximise profits and production, minimise prices and therefore generate the most benefit to society. What I don’t understand is why those who advocate most vociferously for the free movement of capital across national boundaries can also be those who are most against the free movement of people across national borders, or immigration, as it is more pejoratively described. Surely, if you believe markets work, then they work. What is sauce for the goose must be sauce for the gander. So three cheers for the free market think tank, the Adam Smith Institute, which put up two pro-immigration posts last week entitled, Almost Everything You Need To Know About How Immigrants Affect Britain’s Public Finances and 9 Reasons To Want A Lot More Immigration. They point out some inconvenient truths for the anti-immigration lobby, some of which have been picked up in the mainstream press. Chief amongst them is that immigrants pay more in taxes than they cost in benefits, unlike UK nationals and that if we did not have them the Government deficit would be much higher. They also point out that they do not steal native jobs, they create them, countering this idea that the economy is a ring-fenced pie where there is only a fixed number of jobs to go around and some can only have more if someone else has less. Emphasising this point, immigrants tend to be much more entrepreneurial than the natives. Immigration is also much more effective than overseas state aid, as foreign workers send three times as much money home to their families as the developed world gives in aid, and this money is going straight into the pockets of the people that really need it. The most challenging reason given for wanting more immigration is that if we had a free market for labour, allowing everyone to go where ever they wanted for work, then global GDP would probably more than double.

Although all of this may come as a surprise to the general public, this will not be the case for many business people. In my small business we employ two immigrants, both of whom are brilliant and have been crucial to us being able to expand and develop over the last few years. One is American, has a Masters Degree and sadly has to leave the UK because her Visa is running out. Replacing her is going to be extremely difficult. The other is Ukrainian. She speaks three languages and, as one of my colleagues said to her the other day, ‘you are the most qualified of all of us in this office’. She can stay in the UK because her husband is Romanian and, funnily enough, he is not a beggar, Big Issue seller or criminal, but a Ph.D. student and lecturer at a prestigious London university. This employee has helped transform our business by managing our website redesign and engagement with social media. We would be lost without her and she has a crucial role in our future plans for taking the business forward. In short, immigrants have helped us generate more revenue which means earning more money for our artists, and paying more tax to the government.

I imagine that the parents of my two immigrant colleagues are delighted that their children have been able to go to another country, to pursue their life adventure and that they have found jobs in places where they are welcomed and appreciated for who they are and what they can do. As the parent of two teenage boys, I find myself feeling a great affinity with these strangers. If I am honest, I want my sons to have the opportunity to go anywhere they want in the world to study, work and make a life for them and their families. This is doubly so now that getting a university degree in the UK means taking on a vast debt and the chance of buying a home of their own can only be a slightly more likely than the odds of winning the lottery. Those of us who want sauce for our little goslings have a moral duty to argue that others get it too. Thanks to the Adam Smith Institute, and an increasing number of other researchers and informed commentators it has to be said, this should be a much easier task, as we are shown the truth that open markets for people deliver benefits just like open markets for goods and services.