The Brighton and Hove Green Party is reported to have voted for the adoption of a Progressive Council Tax scheme, under which a substantial increase in Council Tax would be put to the city’s electors in a referendum, to be offset by a system of substantial rebates, The aim of this proposal would be to increase substantially the revenue raised from the tax, while ensuring that only the 20% highest-earning households actually paid more. It is estimated that such a scheme could raise as much as £30m in annual council tax income for Brighton and Hove. A motion to adopt the Progressive Council Tax as national policy is to be presented to the Green Party Conference in Brighton next month.
To read some of the comments from Green activists – Cllr Ben Duncan’s blog is typical – you would be forgiven for thinking that the Green Party had stumbled on the biggest thing since Keynes’ General Theory:
As well as ensuring the council has the cash to keep funding the education, health, transport, leisure and waste services on which we all (especially the least well off) rely, a PCT will directly promote equality by redistributing wealth from the richest to the poorest in the city.
And it should help with our housing crisis too by driving prices down and making owner-occupancy a reality for many lower-paid workers.
Of course a PCT has never been tried before, and we’ll certainly face a few pitfalls, curve-balls and unintended consequences along the way. Nervousness about the unknown even caused one councillor at the meeting to threaten to resign if the meeting adopted the policy (a bully-boy tactic I’m glad to say didn’t work) and one former councillor to lament afterwards: “I fear we’ve just made ourselves unelectable”.
I think exactly the opposite: that we’ve just agreed to a radical idea that serves to explain to people up and down the country what we’re all about: finding creative ways to fight cuts, redistributing wealth from the rich to the poor, protecting jobs and services, refusing to implement the Tories’ agenda – and massively reducing the tax burden on those least able to afford it.
I disagree. I think this is proposal is internally inconsistent and completely unworkable. Moreover, I think it would be politically disastrous for the Green Party in Brighton and Hove to take it forward, and for the Green Party nationally to adopt it as policy.
The first problem – as I understand it – is that the proposal is desperately short on numbers. To illustrate the issues we are going to have to make some assumptions, based on what the scheme’s proponents have said so far. The most striking commitment is that under such a policy 80% of households would pay the same as now or less, with the cost falling entirely on the top 20% earning households; and that such a proposal could raise between £20m and £30m a year in Brighton and Hove, to cover the effect of next year’s cuts. What we have not been told yet is the order of magnitude of the headline Council Tax figure that would be put to a referendum, but I understand a figure of 200% is not inconsistent with the working assumptions -such as they are – behind the proposal.
There are around 100,000 households in Brighton and Hove, who pay a total of a little over £100m in Council Tax. So the proposal is that an extra £30m – to cover both the increase in revenue and the administrative costs – should be raised from 20,000 households – an average of £1500 per household before any rebates are made to the 80%. In other words, reductions in the council tax of the many can only be bought at the price of really swingeing increases for the better-off. Now I am not going to dispute that there is a strong case for some redistribution – Council Tax is not an especially fair or progressive tax, and redistribution in favour of the worse-off does bring economic benefits – but this inevitably begs questions about whether this proposal is workable. There just isn’t enough cash to go around: the idea that this could bring “massive” reductions in the tax burden for the poorest is frankly just innumerate.
But at the heart of this proposal lies a fundamental intellectual error – the conflation of council tax, which is a property tax, with income – which is not at any point measured in the council tax process. Council tax is based on bandings – based on a valuation made when the tax was introduced – and on exemptions and discounts which are not income dependent. Introducing income into the calculation of council tax introduces enormous problems. Tax – in principle – has to be simple, transparent, easy to understand. I am also assuming the PCT supporters want it to be demonstrably fair. The sheer potential complexity of this system is a nightmare, and I see (as yet) no evidence that the details of the income and tax bandings have been worked out.
For a start, how do you calculate household income? As I understand the proposal, the council would have to collect income data from every household in the city – presumably when they apply for their rebates. How do you check this information? The only way to do this would be against tax returns, but there are – to the best of my knowledge – no legal powers for HMRC to provide tax data for individuals to councils for the purposes of revenue (why should there be?). In other words, the rebate system is in principle unenforceable – there is no way in which the council would be able to check the returns, without a change in the law. People could lie on their application and there is absolutely no way in which the Council could check. Moreover, as everyone who has ever filled a self-assessment form knows, tax information is invariably a year out of date
Moreover, every time you receive a pay rise – or, more likely in coalition Britain, a pay cut – you’d need to tell the council. What if you are self-employed, and your income is difficult to predict? And can the authors of the plan reassure us that they have dealt with threshold problems, where a small increase in household income could result in a much larger council tax hit by removing eligibility for some of the rebate?
The bureaucratic nightmare, though, is even worse than that. What happens to people who fail to fill in forms, or find such things difficult – who are often among the most vulnerable in society? How do you encourage mass compliance, or do you just accept that these people take the hit of a huge council tax hike? The council would need to put in place ways of dealing with this kind of problem – but the cost would be huge.
And there is a problem of homes in multi-occupancy. I understand that the original proposal was based on individual income rather than household income – but even based on household income it presents huge problems. People in multi-occupancies would need to reveal their incomes to their housemates to fill in the form – is that acceptable? And when tenancies change, or flat-mates move in or out, they’d have to tell the council. It’s a bureaucratic nightmare.
And we are apparently to be asked to vote on this before the details are worked out. As I understand it, the Green proposal is to hold a referendum on the principle of a big Council Tax increase, before the details of a rebate scheme are in place. In other words, the electorate would be asked to vote to give a blank cheque to an administration which, remember, is completely dependent on one or other of the parties to get its policy adopted. The rebate scheme could in theory be changed in every council budget. Do the proponents of this scheme really believe they could win a referendum on the basis of “vote for a massive council tax hike now, and we’ll fill in the details of the rebate later”?
The political naivety is jaw-dropping. Even a new and popular administration surely couldn’t deliver that – but an administration that is more than half-way through its period of office, is increasingly unpopular and gives every sign of descending into dysfunctional chaos? Green commentators like Cllr Duncan seem to believe that their proposal would pose Labour a dilemma, but I’d say that it plays straight into Warren Morgan’s narrative that the Greens simply don’t have the competence to run the city. This looks like the proposal of a Council that has simply lost touch with political reality.
And, finally, there is one simple question I have yet to see any of the supporters of PCT consider. Assuming all this could be done – a referendum won and a scheme that works put in place – what is to stop central Government simply congratulating the Council on finding the extra cash – localism in action – and then cutting the Council’s grant to offset the increased revenue? After all, that’s an extra £30m that Pickles could hand to Tory councils in the run-up to an election.
What we appear to have here is not a revolution in local taxation, but a policy-making process that is a total stranger to intellectual discipline. I may be unfair – there may be detailed policy papers considering, among other things, the revenue projections, the legal issues, enforceability and administration costs, with worked examples, risk assessments and sensitivity analyses. After all, we’re being told that this could be put to a referendum in 2013, if it is to have any impact on funding cuts already in the pipeline. If there are, then the Green Party – which claims to stand for a more open and inclusive politics – is, I should have thought, obliged to publish them. If there are not, then this stands as just another piece of desperately unconvincing back-of-a-mango-wrapper policy making. From my own point of view, having worked on tax policy in the Whitehall, I’ve seen more immediately credible tax proposals submitted anonymously in green ink. But I’m prepared to be proved wrong – once I’ve seen the detail.
In conclusion, there is a desperate sadness to all this. In 2011, the Green administration was elected on an optimistic promise to resist cuts as far as possible. Now, in the run-up to the 2015 Council Elections, the only response that the Green Party appears to have is a half-baked, impossibly complex and apparently unworkable and unenforceable tax wheeze, at a time when its ability to pass any policy at all is dependent on the goodwill of Brighton’s other political parties. Doing policy is about detail, about process, about rigour – and I see none of these in the PCT proposal. And there’s nothing radical about not thinking through your policy. As a former member of the Green Party in Brighton it gives me no pleasure to say that this looks less like a radical initiative than the desperate last fling of an administration that has run out of ideas and is steadily descending into paralysis and dysfunction.