LGA warns MPs about problems with Council Tax

11.06.00am BST (GMT +0100) Sat 26th Jun 2004

The Local Government Association, giving evidence to the Office of the Deputy Prime Minister (ODPM) select committee on local government revenue, said that above-inflation council tax rises were inevitable under the Chancellor's current spending projections. They said that the continued reliance on a fixed property tax did not allow for a fair source of funding local services.

The LGA Chairman, Sir Jeremy Beecham, used the meeting on 23 June to press home the point that neither central nor local government could afford another round of large council tax rises. This would happen unless there was a fundamental shift in the balance of funding between central and local government, or the system was propped up with injections of more Treasury cash. This backs up the complaint made at the end of last year by the Audit Commission that Council Tax was "fundamentally flawed".

Liberal Democrats have long pressed for a fairer system, but the Conservatives seem determined to stay with Michael Howard's own creation, which replaced the equally unfair Poll Tax introduced by Margaret Thatcher. Labour are reviewing the situation, but may favour a hybrid system that would be complex and expensive to collect.

The only fair way is to relate contributions to people's ability to pay, and the cheapest and most efficient way to achieve this is through a Local Income Tax, which would be of particular value to pensioners and those on low incomes. Liberal Democrats have worked out the cost of their proposals, and had them assessed by experts in public finance, while the Conservatives keep making promises with no financial calculations to say where their money is coming from!