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Thursday, February 10, 2005

Council Tax blues

Putting aside the Western Mail's obsession with Monty Python, their article today on Council Tax - "So, what has your Council ever done for you?" - threw up some interesting political points. They quote the Assembly's Economic Development Minister as saying that re-banding should not be used as "an excuse" for higher bills. This has been the mantra of a number of Ministers for some months now. However, for various reasons, the statement itself is financially illiterate, deliberately so.

Firstly, the fact of revaluation will lead to higher bills for approximately one third of Welsh Council Taxpayers anyway, regardless of what the local Council does. In Cardiff that figure is even higher, 86,000 households or two thirds of all Council taxpayers, have gone up one band or more as the result of the revaluation. If Cardiff Council were to deliver no increase on the Council Tax at all, those people would still face a ten or twenty per cent increase in their bills. There are no excuses, that fact is out of the Council's control and is directly attributable to the actions of the Welsh Assembly Government.

This is because Council Tax itself is flawed. It does not take into account ability to pay but concentrates on property prices, which can fluctuate out of all proportion to wage inflation. Regular revaluation is a feature of any property tax, that is why we would argue every time that it should be replaced by a fairer local income tax that relates to the ability to pay.

Labour are of course, desperate to avoid the blame for these higher bills, especially in the two marginal seats of Cardiff North and Cardiff Central, which will be the hardest hit by the revaluation. They are seeking to limit Council Tax increases so as not to pile on the agony, and they are seeking to shift the blame through disingenuous statements by Ministers such as that quoted above.

This brings us to the second reason as to why Andrew Davies' statement is financially illiterate. It is because his Government has threatened to cap Councils in an effort to limit the damage. The problem is that while they talk about keeping Council Tax bill rises below 5%, the basis of their capping criteria is the limitation of Council spending increases. As a result, a Council like Swansea is able to deliver a Council Tax uplift of 2.5% whilst raising spending by 4.5%. To achieve this they have had to cut £7 million from spending and put in £5 million from the reserves. The Labour opposition in Swansea want to restore some of those cuts, but if they do so then the Council will be capped by a Labour Minister. It is a no-win situation for them.

In Cardiff the Council are aiming for a 2.93% Council Tax increase but because their spending will rise by more than 5% they are under threat of capping. Capping will effectively deliver an overall reduction in Council Tax and yet Cardiff taxpayers will still face massively increased bills because of the revaluation. In this respect Labour have scored an own goal in the Capital City. When they go on the doorsteps and have to explain the big Council Tax bills to voters they will not be able to blame the Council, after all Cardiff will have cut the amount it levies. People will be very clear that the reason why they are being hit so hard financially is the unfair Council Tax and a Welsh Assembly Government who, instead of abolishing it as the Liberal Democrats argued at the time, decided to run a revaluation exercise instead.

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