Flexible taxation

A report in Monday’s Times examines the way in which local councils are trying to avoid increases in council tax bills over the next year.

Focusing on London councils, it is expected that on average council tax bills will be frozen, with a number of councils actually reducing local tax bills for residents. This is due in part to low inflation, but also to the local elections in London which will take place next May acting as an incentive for councillors to reduce the burden on their electors.

Council tax bills rose by an average of 100% between 1997 and 2009, due at least in part to reductions in the amount of fiscal support provided by central government to local governments who have needed to replace that reduced income by raising the amount they charge as council tax, thus shifting the burden from income tax to local tax.

However, the Conservative-led council of Hammersmith and Fulham is being seen as a model for the fiscal policies which a new Conservative government might adopt, has successfully cut council tax for the last three years and plan to do so again now. They have done so by making radical changes, selling off local council assets of office space for £1.3million, cutting 1,000 jobs and outsourcing a number of services.

The Audit Commission approves the council’s strategy and judges Hammersmith and Fulham as one of the country’s top performers – the council leader claims that streets are now cleaner, there are extra police and improved park services.

But this comes at a cost, which the opposition Labour group on the council call new or increased stealth taxes, as home help for the elderly is now charged at £10.50 per hour for those with higher incomes and residents are charged £20 for collection of bulky waste. Tony Travers, an expert on local government from the LSE, calls this model ‘easy council’ where people can opt to pay for add-ons to the basic local council services for which they pay a reduced basic council tax , and suggests that Hammersmith and Fulham is the shape of things to come.