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A New Deal for local government

John Medhurst reports on a campaign for radical council tax reform to resist the cuts

October 1, 2014
4 min read

In 1933 President Roosevelt began to implement the New Deal in Depression struck America. This combination of sustained government activism, investment and progressive taxation began to drag the U.S out of mass unemployment, social despair and economic austerity.

The UK desperately needs a similar New Deal, not only nationally but locally, and an exciting new campaign in Brighton and Hove is arguing that local councils can deliver one on their own. In 2014-15 Brighton must make £25 million cuts in addition to £60 million already made since 2010. In response local campaigners have devised a way to fund local services based on a radical reform of council tax.

It proposes that councils raise council tax by as much as 200 per cent – and then redistribute the money collected to 80-90 per cent of residents in rebates. The precise formula can change depending on local circumstances.

In Brighton and Hove about 2,500 homes are worth over £1 million but the vast majority of these are not even in the top council tax band. So homes worth billions contribute about £7.5 million a year to local services, a fraction of their value, which has risen by a further 12 per cent in the past year. The latest calculations for Brighton show that an increase in council tax on homes worth over £1 million would affect no more than 1-2.5% of households. If an increase was charged to all houses in Band E+, about 15 per cent of households would be affected.

Only the wealthiest households would pay the full increase under this kind of progressive council tax. Because of the rebate a large majority would pay less and councils would still have an increased funding stream to protect local services and invest for the future.

Campaigners argue that councils could adopt this strategy now under existing legislation. They already have the power to increase council tax by more than 2 per cent overall if agreed in a referendum and to establish ‘free standing benefits’ to reduce household council tax bills.

An agreed sum can be awarded to the majority of households based on a council’s benefit policies. The New Deal campaign recommends this be an automatic benefit paid direct to households’ council tax accounts to minimise administration costs. For the great majority, the amount awarded in benefit would be larger than any council tax increase. Ensuring a fair application of the tax and the rebate is not an insuperable challenge, if the administrative will is there.

The biggest obstacle would be the referendum. Any proposal to raise tax by 200 per cent would face frenzied opposition from mainstream politicians and the media. But there is no reason why there could not be a successful campaign to win voters’ backing for a radical redistributive benefit policy designed to ensure the rich pay more and most people pay less.

The campaign, because of its origin in the radical wing of the local Green Party, has focused in the first instance on Brighton’s Green council. A party meeting in 2013 agreed that Green councillors should instruct council officers to explore the idea of a ‘progressive council tax’, but a mixture of bureaucratic objections and political timidity left it in the long grass. The idea, though, has refused to die and it is being raise again at a crucial council meeting on 23 October.

But it is not an idea just for Brighton. Any progressive local council could adopt it, refine it and use it to resist central government cuts to local services. The New Deal offers a way to fight back.

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