The end of local government?
To end the fiasco of the poll tax Norman Lamont in 1991 raised VAT to 17.5% in order to cut the average bill. It worked, but one consequence was the proportion of local government funding coming from central government leapt.Michael Howard yesterday announced a plan that will have a similar impact. He intends to cut public spending by £12bn, spending £8bn of the savings on cutting the budget deficit and £4bn on tax cuts. Of the tax cuts he intends to cut £1.3bn from pensioners' council tax bills, presumably making up the deficit to council spending by increased central government spending. The discount will average around £250 per pension, with a a maximum of £500.
Some of the details aren't so clear. What for instance does this bit mean?
The tax cut will benefit households where one or more occupants is over 65, but where no adult is under 65.
The other policy it reminds one of is the Governmen't free TV licences and Winter fuel allowance. The money will be given to all pensioners, regardless of income.
So is it a good idea? It's a very expensive one in that a lot of the money will go to very rich pensioners, though the £500 cut-off will have an impact. For example, the Queen presumably will get at least £500 from the government. It's also not very comprehensive -- there are 11m pensioners in Britain, but only 5m appear to benefit. It also further removes any link between council spending and local taxation.
On the other hand Howard is right that means-testing does not work very well and the policy is clearly electorally attractive.
The real problem of course is the one that no Conservative can answer. On their own figures they will need to raise taxes by £11bn, not cut them by £4bn. So on their own figures this is an empty and thus cynical policy.
posted by Matthew @ 2/22/2005 11:55:00 AM
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