The state and local government
After 650 of 650 seats declared. Source: BBC News 29 May 2010, http://news.bbc.co.uk/1/shared/election2010/results/
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- 985 Figure 12.1: Composition of Local Tax Revenues in advanced capitalist countries (2001) 986
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After 650 of 650 seats declared. Source: BBC News 29 May 2010, http://news.bbc.co.uk/1/shared/election2010/results/Table 11.12: General Election 6 May 2010 - share of votes cast and share of electorate
[a]Electorate: 45,610,369. Source: Table 11.11, House of Commons Library, 2010c, p. 7 Respect standing in nine seats received 33,251 votes and their average vote was 3,694. Salma Yaqoob, Birmingham Hall Green got 12,240 votes (25.1 per cent of the votes cast) and was second behind Labour by 3,799 votes. George Galloway, Poplar and Limehouse got 8,160 votes (17.5 per cent) and was third. Abjol Miah, Bethnal Green and Bow got 8,532 votes (16.8 per cent) and also came third. The Scottish Socialist Party contested 10 seats and their total vote was 3,157; and their average vote was 316. Their best result was in Glasgow East where Francis Curran got 454 votes (1.41 percent) and came sixth. TUSC England and Wales – a coalition involving the Socialist Party, Socialist Workers Party and trade union activists contested 32 constituencies. Their total vote was 11,317; and their average vote was 354. Dave Nellist got their best result in Coventry North East with 1,592 votes (3.7 per cent) and came sixth. Scottish TUSC stood in 10 constituencies and received a total of 3,523 votes. Their average vote was 352 and Tommy Sheridan in Glasgow South West got 931 votes (2.9 per cent) and came fifth. The Communist Party of Britain contested six constituencies against new Labourites – Glasgow NW, Sheffield SE, Newcastle East, Croydon North, Devon North and Cardiff South. Their total vote was 947 and their average vote was 158. Robert Griffiths in Cardiff South and Penarth received the CPB’s highest vote of 196 (0.4 per cent) and came ninth. Avtar Sadiq, the Unity for Peace and Socialism candidate in Leicester East, got 494 votes (one per cent) and came seventh. And John Metcalfe standing for the Carlisle Socialists in Carlisle got 376 votes (0.9 per cent) and came seventh.931 These disappointing results demonstrate that the existing First-Past-the-Post (FPTP) electoral system – under which it took 33,370 votes to elect a Labour MP, 34,940 for a Tory, 119,944 for a Liberal Democrat and 285,616 for a Green – will always remain a barrier for non-mainstream left candidates: who now that George Galloway has been defeated have no MP. This is why the Single Transferable Vote (STV) system for all elections, as in all Scottish local elections and parts of New Zealand, is proposed in this study: because not only is it more reflective of the electorate's views but every elector's vote counts rather than the tiny number of "swing voters" in marginal constituencies identified by the big parties at present. As ever, moreover, increasing working class influence in Parliament and local councils depends on extending and improving democracy in society. For, as Dr. Ken Ritchie, Chief Executive of the Electoral Reform Society (ERS), said on 7 May 2010: Neither Labour nor Conservatives can pretend to be a national party. Thanks to a voting system that has silenced millions of voters across the country the Tories remain practically invisible across Scotland and the North East, while Labour faces extinction in the South. A General Election should deliver a parliament that represents the public. But what we have is a lottery where Labour can be only 5 per cent ahead of the Lib Dems but walk away with five times as many seats.932 Gordon Brown’s sudden espousal of electoral reform only three months before the general election, when he proposed a referendum on the Alternative Vote (AV) was clearly too little and too late: since, if he had really been serious about electoral reform, then he would have brought in an emergency bill before the general election. Then we might have believed that this was not just an election stunt. The Conservative-Liberal Democrat coalition government agreement now includes a referendum on AV. Yet, as the ERS has shown, AV would have had little effect on the results of the 2010 general election: since the Tories would have received 281 seats (instead of 306), Labour 262 (instead of 258), the Liberal Democrats 79 (instead of 57) and others 28. Conversely, under STV the Tories would have received 246 seats (60 less), Labour 207 (51 less), the Liberal Democrats 163 (106 more) and others 35 (7 more).933 Moreover, as the ERS also points out, AV is ‘not a proportional system’ – which is why Liberal Democrat activists at their special conference on the coalition agreement agreed to push for ‘a fully proportional’ system of voting.934 Finally, as in the local elections, there were very different general election results in the four nations. In England the Conservatives got 39.6 per cent, Labour 28.1 per cent and the Liberal Democrats 24.2 per cent of the vote – a Tory lead of 11.5 per cent. The Conservatives won 298 seats, Labour 191 and the Liberal Democrats 43 – an overall majority of 63 seats.935 In the English regions there were wide variations – in London there was the smallest swing to the Conservatives anywhere apart from Scotland (and Northern Ireland). Labour’s vote (36.6 per cent) fell by only 2.3 per cent and the Conservative vote (34.5 per cent) only rose by 2.6 per cent – their worst anywhere apart from Scotland (and Northern Ireland). The South East showed the highest Tory vote (49.9 per cent) and the highest increase (4.9 per cent). The highest Liberal Democrat vote was in the South West (34.7 per cent). The Eastern region saw the Labour vote fall by its highest anywhere (10.2 per cent), whereas its vote in the North East (43.2 per cent) was the highest vote anywhere – even higher than in Scotland – although in the North East Labour wins its vote in a three party system, while its 1.2 per cent lower Scottish vote is achieved in a four party system. Scotland’s Labour’s vote (42 per cent) rose by 2.5 per cent - the only part of the UK where it did so. And Scotland – where the Tories only have one MP - had the lowest Conservative vote (16.7 per cent) except for the special case of Northern Ireland. The SNP’s 19.9 per cent share was less than half Labour’s share; the Liberal Democrats share of 18.9 per cent was their worst result in any of the nations and regions.936 Welsh Labour’s share of the vote (36.2 per cent) was the party’s lowest since 1918. The Welsh Tory vote rose 4.7 per cent – its second highest anywhere in the UK – to 26.1 per cent and the party won five seats – increasing its seats from three to eight.937 In Northern Ireland Sinn Fein increased their vote if not their representation and with 25.5 per cent of the vote became Northern Ireland’s leading party compared to the Democratic Unionists with 25 per cent. The SDLP achieved 16.5 per cent and the Ulster Conservatives and Unionists: New Force won 15.2 per cent – losing 2.6 per cent support compared to the Ulster Unionists and their one seat.938 New Labour’s crisis of policy and purpose, falling membership and debt In Europe right wing, centre, social democratic, socialist and communist parties sustained huge memberships over many decades until a generation ago. However, Britain now has one of the lowest rates of political party membership in advanced capitalist countries, which have also seen a general decline in membership.939 A study of Burnley and Harrogate in 2006, moreover, found that the political party system was kept going by as few as 100 people in each town.940 Orthodox liberal democratic political scientists such as Patrick Seyd and Paul Whiteley argue that incentive-based models of participation work better than structural-based models….the single most powerful explanation for the decline is that party leaders now have less need for individual members. With the emergence of mass electorates in the late-nineteenth and early-twentieth centuries, parties needed to organise and mobilise new voters. At this time, members provided the resources, both human and financial, for the political mobilisation of voters. However, the development of mass communications and marketing has enabled parties to reach voters directly, particularly at times of elections, and so a major impetus for membership recruitment has now largely disappeared. Furthermore, as parties have succeeded in attracting large donations from corporate organisations and wealthy individuals, they have become less reliant upon the relatively small subscriptions and donations from individual members.941 Similarly, Russell Dalton argues that the transformation from a manufacturing-oriented to a service and technological-oriented economy has changed how people perceive politics in that they are being detached from political parties and partisanship, and they individualise their voting decision.942 Such non-structural individualistic explanations, however, do not explain why – although the electoral system discriminates against small parties – the last decades have seen a steady growth in independent parties and independent representatives: Respect (until the split in 2007), the Scottish Socialist Party (also until the split in 2007), the Green Party, UKIP, Veritas, the Senior Citizens Party, the Legalise Cannabis Alliance, the Protest Vote Party, the Anti-Party and the fascist BNP, are all signals that people do not feel adequately represented by the existing main parties. In 1964, 44 per cent of electors identified “very strongly” with a political party: but this had dropped to 14 per cent by 2001; and the chance of someone feeling "strongly attached" to a political party has declined even more steeply than their likelihood of voting.943 Nor do non-structural individualistic explanations explain the rise in membership of non-political organisations.944 For instance, Home Office research in 2005 found that 50 per cent of British adults volunteer either formally or informally.945 Across Europe, the 2003 anti-war marches mobilised significantly higher numbers than parties could claim as members.946 The 2001 British general election produced the lowest turnout since 1918, at 59.4 per cent. In 2005 it had risen slightly to 61.3 per cent, helped by more widespread postal voting: but Labour’s third election victory in 2005 was secured with the lowest share of the vote ever by a winning party in a modern British election. According to MORI, in 2006 a quarter of the population (27 per cent) did not think “any of the three main parties have anything for them” – considerably higher than the 19 per cent who thought this in 2001.947 Research also shows that interest in politics has remained constant at around 60 per cent of the population over the last 30 years.948 That is, people are not more apathetic now than they used to be, but they are disillusioned with the formal political apparatus of parties and elections and as such are finding new ways to express and act upon their interests – from ‘Make Poverty History’ to ‘We Are What We Do’. People can see that personal actions and boycotts have an impact, and feel rewarded and righteous when they take part in them. Moreover, parties’ relationships with the public remain impersonal and insincere; mass emails purporting to come personally from a party leader exemplify the problem rather than the solution. Spin doctors have become the most visible employees of parties and are routinely portrayed on television or in print as shameless cynics devoid of values, beliefs or virtues. Two thirds of the British public (64 per cent) in 2006 believed that it was fair to say that Tony Blair was "all spin, but no substance" according to a MORI poll. Just 28 per cent of the public said that this criticism was unfair.949 In addition, stage-managed conferences and the use of party members as decorative adornments for leaders’ speeches have all made membership look increasingly pointless. The result of this alienation from the political system is that the main parties have become narrower and organised almost wholly around elections. Policy formation has gone to the civil service, universities and New Labour think tanks such as the New Local Government Network. Moreover, those elements of left culture that remain dynamic, organised around music, small-scale publishing or television, thrive through their independence from party political positions, not from any organic link. Hence a more plausible explanation – than the non-structural individualistic explanations of Patrick Seyd, Paul Whiteley and Russell Dalton – for class and party de-alignment is the increasing similarity between the three main parties. For instance, as Daniel Leighton states: Power is the political currency of the day. All three party leaders now extol the importance of ‘giving power away’, devolving power and empowering people.950 Yet, as Leighton’s Demos report fails to point out, all three main parties are committed to neoliberalism, which he never mentions. That is, Conservative New Right and New Labour governments and the Conservative Liberal Democrat coalition government – despite their rhetoric emphasising innovation, efficiency, ‘enabling’ and ‘community empowerment’ – in the state monopoly capitalist stage intervene on behalf of big business and the multinationals to restore the conditions in which profitable investment and capital accumulation can take place. However, Leighton’s report usefully maps the “power gap” in contemporary capitalism by showing that, for example the Labour party overwhelmingly represents the most powerless areas. Conservative MPs typically represent the most powerful, although there is also a relatively high representation of Lib Dems in the highest-scoring constituencies. There is also a strong relationship between least powerful constituencies and BNP target seats such as Barking, Burnley and Stoke on Trent, all of which score in the low and very low power bands.951 Therefore in the present political conjuncture – due to the “power gap” and neoliberal New Labour no longer being even a social democratic party – the working class has become detached from its traditional party. Paraphrasing Antonio Gramsci, ‘the old [New Labour] is dying and the new [a mass democratic working class party] cannot [yet] be born’.952 Leighton concentrates on ‘everyday power in Britain’: The aim of the power index is to democratise ideas of power by looking at the distribution of people’s capacities to be the authors of their own lives. To reframe the debate about power – and what constitutes power failure – it is necessary to turn the telescope away from elites to map people’s power in their everyday lives.953 Thus the major limitation of Leighton’s non-dialectical approach is that – by turning ‘away from elites’ and excluding issues of class, class politics and class power – it replicates the three main parties rhetorical focus on individual empowerment which obfuscates and precludes the need for collective socialist alternatives to neoliberalism if we are to close the “power gap” (see Chapter 14).954 In the 1950s, 4.5 million Britons (almost 10 per cent) were members of a political party: and the Conservatives claimed nearly three million members while Labour claimed more than one million members. But by 2004 only 500,000 (about one per cent) were members of political parties.955 The latest figures show that the Conservative, Labour and Liberal Democrat parties claim to have memberships of approximately 250,000, 166,000 and 60,000 respectively.956 However, there are a number of important limitations to the data: for example, as the Political Parties, Elections and Referendums Act 2000 does not include any specific provisions regarding membership figures, the numbers claimed by political parties remain unverified; and the Labour Party Conference Report ceased to publish membership figures for its affiliated trade unions and the Socialist and Cooperative parties in 1993. Nevertheless, there is strong evidence of a trend decline in individual membership of the three largest parties since the 1960s. This trend appears to be continuing today. Though there is some deviation around what appears to be a relatively linear long-term decline: for example, in the mid-1990s, Labour managed to reverse the decline in its membership. Since 1997, however, individual Labour Party membership has fallen from over 400,000 to 166,247 at the end of December 2008; and many of those leaving were socialists or social-democrats opposed to its neoliberalism and imperial wars.957 Insiders now put membership at a mere 135,000.958 The 15 Labour Party affiliated trade unions represent around three million working people.959 Moreover, income from affiliations, including trade unions, rose from £7.9 in 2007 to £8 million in 2008 whereas membership subscriptions fell from £4.4 to £3.9 million; and donations fell from £11.2 to £9.5 million.960 Labour recorded a £1.6 million rise in income from £32.4 to £34 million: but increased expenditure – from £24.9 to £26.2 million – put its end-of-year surplus at £7.1 million, 5.6 per cent down on 2007.961 Net debt – due mainly to outstanding loans from donors who bankrolled Labour's election campaign in 2005 – was cut from £16 million in 2007 to £12.1 million in 2008 aided by a court decision which allowed it to claim back £4.6 million in overpaid VAT plus interest. A restructuring plan agreed with donors will see Labour paying off the debts by £2 million a year.962 The Party could therefore go bankrupt because of the estimated £15-20 million it spent in the 2010 general election.963 Meanwhile, the Communication Workers Union – if New Labour's proposed part-privatisation of the Post Office (now Con-Dem coalition policy) had gone ahead – would have balloted to disaffiliate.964 In addition, according to The Guardian, general secretary Dave Prentis announced on 16 June 2009 that UNISON was suspending constituency development money for 64 Labour MPs and holding back another £1 million in protest at MPs’ misuse of expenses and failure to fight the privatisation of public services. Ominously, moreover, a MORI poll commissioned by UNISON had just shown that only 30 per cent of public sector workers now support Labour. And in Glasgow – where in August 2009 council street sweepers, parks and roads staff voted to go on indefinite strike over management’s despotic style and the former council leader Steven Purcell threatened any councillor who refused to cross a picket line with de-selection –‘no Glasgow councillor has received a penny piece from the GMB since 2003, because of successive contractual and equal pay disputes’.965 Thus, as the Scottish Campaign for Socialism Secretary Vince Mills argued before the general election, ‘Labour's crisis is three-fold and all three aspects intensify each other’: Gordon Brown's ‘solution’ to bail out the banks with public money has failed to stop a full-blown recession and, worse, will lead to severe attacks on public expenditure....The related but essentially endemic crisis of the project relates to specific applications of neoliberal ideology in Britain....Everybody knows PFIs are a rip-off….the lie cannot be sustained any longer....And finally there is the crisis in Labour Party structures, membership and purpose....The much-vaunted policy forum process….having delivered its political objective, the Blair-Brown Project, can be safely consigned to the dustbin of cynical manoeuvres. Perhaps what is of most concern is that there are few activists inside the Labour Party who care very much anymore. That is why there is a crisis of purpose in the party which, combined with the financial and policy crisis, makes it almost impossible for Labour to win the next election.966 Little wonder then that the leading American Democratic Party pollster Stanley Greenberg – in a survey conducted after the general election – confirmed the theory that the electorate was unimpressed by all the parties. The Conservatives failed to emerge as a “hegemonic” party because they only solidified their core vote among the older population in rural areas, but failed to break through among first-time voters and in the crucial urban areas. Labour’s working-class support “crashed” because the party failed to convince it could be the party of fairness. People voted Labour to defend public spending: but there was no vision that brought them to Labour and 15 per cent of voters did not decide until polling day how they would vote.967 Though, as Susan Watkins points out – although a mere 18.9 per cent of the overall electorate voted Labour and 'New Labour's defeat will take its place within the wider story of the disintegration of European social democracy' – 'Muslims "came home" to New Labour...its share of their vote was up to 38 per cent, compared to 8 per cent for the Conservatives and 24 per cent for the Liberal Democrats. And inner London constituencies with anti-Blairite MPs also benefited from small swings among working-class voters and under-27s, as well as boundary changes': 'But these counter-flows were no match for the continuing flight of the mainly white working class, manual and clerical, in the Midlands and the Greater London region.'968 Watkins also suggests, moreover, that in the Con-Lib coalition: Though the Tories dominate in political heft – 306 out of 363 MPs; 19 out of 24 Cabinet seats – the ideological complement brought by the Liberal Democrats is the decisive hegemonic component. Firstly, although the main planks of the programme (the economy, welfare, education, etc.) are dismally familiar, given Britain's tri-partisan consensus, the Liberal Democrat input situates the coalition agreement minimally, but self-consciously, to New Labour's left: a bill to roll back Blair's surveillance state; a commission on the Glass-Steagall-style separation of investment and deposit banks; a mildly redistributive capital-gains tax.969 As is the decision to allow councils to return to the committee system if they so wish.970 Though – despite the spin – even these minimal proposals were subsequently negated by the 'brutal' anti-working class and anti-poor June 2010 emergency Budget (see Chapter 14). Nevertheless, as Fiona Mactaggart et al state: 'Parties still dominate our political system' and it 'is impossible to win state power without a party' or parties 'that can secure a majority in parliament or local councils.971 And as the Councillors Commission noted, it is still the case that: ‘The selection processes of political parties are the route to council membership for the great majority of councillors’.972 Chapter Twelve Local taxation in advanced capitalist countries and orthodox reform proposals The first section in this Chapter compares the system of local taxation in Britain with that in other advanced capitalist countries. The second section discusses orthodox proposals to reform Britain’s council tax, council tax benefits and the business rate. The third section considers orthodox British local income tax proposals. Local taxation in advanced capitalist countries Advanced capitalist countries’ systems of local taxation tend to fall into two broad categories; those primarily reliant on income tax, and those dependent upon property tax. Generally, within the EU, income taxes dominate. In Belgium, Denmark, Finland, Germany, Iceland, Luxembourg, Norway, Sweden, and Switzerland, more than 80 percent of tax revenues are derived from personal and/or corporate income tax. On the other hand, property taxes contribute more than 80 per cent of local tax revenues in Australia, Canada, Ireland, the Netherlands, New Zealand, Britain and the United States. Other countries which employ a local property tax, albeit to a lesser degree, include Austria, Finland, Germany, Portugal, Spain, Belgium, Denmark and France. However, a number of countries use a combination of both taxes. Property taxation, as Lars Feld and Friedrich Schneider in their work on the political economy of state and local taxation show, is frequently used in conjunction with income, and other taxes (see Table 12.1). Austria , France, Greece, Italy, Portugal and Spain are unusually fiscally diversified; they rely on a mixture of local tax sources.973 On the other hand, Britain is unique in its exclusive reliance upon property taxation (see Table 12.1 and Figure 12.1). Table 12.1: State and local tax assignment in advanced capitalist countries (2005)
[a] Fees on alcohol, tobacco and petroleum products. Source: L.P. Feld and F. Schneider, 2005, p. 18 In the United States property taxes are the principal revenue source of local governments (see Figure 12.1). As in Britain, a capital value system is used; however, some states define the taxable value as a fraction of market value. These percentages differ between states, depending on the type of the property.974 Various reliefs (depending on the State) are offered to certain taxpayers or types of property. These include owner-occupiers, pensioners, veterans, disabled, etc. Many states also place upper limits on tax rates. In California, there is a limit on both actual rate liability and on future increases. In an attempt to ensure affordability, ‘Proposition 13’ was passed in 1978, stating that the tax rate on any property cannot exceed 1 per cent of its assessed value (based on 1975-6 values). Furthermore, the assessed value of a property cannot increase by more than 2 per cent per year, (or inflation – whichever is less) except when there is a change of ownership, or when value-adding improvements have been made.975 During the 1980s, many other states followed this example and imposed similar tax limits. A similar scheme of rate limitation was introduced in Florida, known as “Save Our Homes”. This seeks to assist pensioners and low-income families and is based upon the assumption that these individuals have considerably less mobility (that is, they move house less) than other taxpayers. In the same way as Proposition 13, this amendment provides that the growth in the assessed value of an owner-occupied property cannot exceed 3 per cent per annum or the percentage change in the Consumer Price Index (whichever is lower). It should be noted that ‘Proposition 13’-type schemes have had what is referred to as a ‘lock in’ effect, whereby homeowners became reluctant to move house (and to invest in improvements). The scheme created a disincentive to move (and/or improve), distorting the workings of the property market – an outcome which is economically unfavourable. In an attempt to alleviate this an extension to Proposition 13 was approved in 1986, whereby residents aged 55 and older are entitled to carry the benefit with them when moving within participating counties, and to a property of equal or lesser value.976 Local government in the United States is now in crisis. In California, which has the eighth largest economy in the world, counties, cities and the state itself, which has $24 billion deficit, are in absolute crisis. The main cause of the crisis is the collapse in income tax as a result of the economic meltdown. But matters have been made much worse by the 1978 legislation limiting rises in property taxes, which leaves a requirement for a two-thirds majority in the state senate to raise any other taxes. The state is therefore over-dependent on income tax in a time of economic depression - and state revenues have fallen 27 per cent in a year. State employees had already had their wages cut by 10 per cent at the end of last year: now they are being reduced by a further 5 per cent. Healthcare provision is being cut-back, including for children. College grants will reduce. Prisoner welfare and rehabilitation schemes are being slashed, with non-violent prisoners released a year early. Most state parks will close. Meanwhile California has increased the rates of income and sales tax, doubled the vehicle license fee and withdrawn $2 billion of funding to its municipalities: the cities and counties. This means that city libraries will close. They will also have to make big cuts to police services and fire protection. There will also be massive closures of community school schemes, with after school provision being abandoned across much of California. And worse could follow. With the state saying it cannot afford to continue to pay healthcare at the level it has provided, it is considering passing some of the responsibility down to local government for it to decide what it can fund, what should be cut and what other services will have to go as a result. California is now making severe cuts to its healthcare programme for the poor – just at the time that President Obama is trying to repair a system that lets down the underprivileged. As a result, the municipalities’ own medical centres are likely to face an upsurge in demand. Los Angeles County expects to lose about $300m of money it would have received from the state, in a period when its economy is in dire trouble. This will lead to cuts of about 20 per cent in its discretionary funding.977 Some teachers, as Paul Harris reported in October 2009, launched a hunger strike in protest against cuts and the sacking of 60,000 California state employees. Moreover, as Harris further notes: Nowhere is the economic cost of California's crisis writ larger than in the Central Valley town of Mendota, smack in the heart of a dusty landscape of flat, endless fields of fruit and vegetables. The town, which boldly terms itself ‘the cantaloup capital of the world’, now has an unemployment rate of 38 per cent. That is expected to rise above 50 per cent as the harvest ends and labourers are laid off. City officials hold food giveaways every two weeks. More than 40 per cent of the town's people live below the poverty level. Shops have shut, restaurants have closed, drugs and alcohol abuse have become a problem.978 Undoubtedly, the financial crisis in California and its municipalities is the worst in the United States. But the same situation, to a lesser extent, is felt across the country. Washington state has lost $4.2 billion in revenues since November 2008, on a $32 billion budget. In Pennsylvania, a deficit is projected of $2.3 billion – and rising quickly. In New York state, income has collapsed. Whereas in 2008 the state collected $8.6 billion in revenues, in 2009 it has fallen by 44 per cent to $4.8 billion. On income tax, there was a 49 per cent fall in taxes collected. In response, the state is increasing its tax rate on the highest earners. The state’s pension fund declined 26 per cent in value in 2008. But the financial crisis in states and municipalities spreads across the country and affects more than revenue budgets and pension funds. A planned $2.5 billion privatisation of Chicago’s airport has been abandoned. Other schemes intended to sell real estate and use the proceeds to build new roads, bridges and other infrastructure have also collapsed. Cities and counties are now concerned at the limited prospects for alternative methods of financing infrastructure improvement - seen as necessary not only because much of it needs replacing, but also to stimulate the economy. Some desperate municipalities are looking to sale and leaseback of assets, but this will drive-up future revenue overheads. Thus many municipalities and states now want Obama to bail them out in the same way he is trying to rescue the banks and car makers.979 Moreover, as bankers on Wall Street were celebrating the official end of the recession, Detroit was $300 million in debt and cutting many of its services, such as transport, street lighting and bus services. The unemployment rate was 29 per cent; and Detroit’s ‘suburbs are following the inner city into decline with middle-class families receiving food parcels from charities to which they once donated’.980 That is, as Paul Harris further notes, the official end of the recession will make little difference across America – in Flint, Youngstown, Buffalo, Binghamton, and Newton – where a collapsed manufacturing base has been further damaged by the recession and working-class Americans have seen a relentless decline all the way from Iowa to New York.981 Property and related taxes are the main source (about 63 per cent overall) of own source revenues in Canada. Real property taxes (taxes on land and improvements) provide, on average 41.9 per cent of total revenues – the remainder is attributable to business taxes, payments in lieu of taxes from other governments /agencies, lot levies, and special assessments. The property tax base includes land, buildings and structures, and in some provinces machinery and equipment attached to the property are included. The assessment of property in Canada is based on market value, but special consideration is given to agricultural land, forests and mining property. Assessments also favour residential property, especially that pertaining to owner-occupiers. Rates vary widely among municipalities; however, a property tax equivalent to one to two per cent of market value would be typical for residential property.982 Rates on property are also the most important single source of revenue for local government in New Zealand (see Figure 12.1). The property rate is levied on land and property, and is relatively complex in that municipal councils can choose from among various rate-levying methodologies. They can choose between levying rates on the capital value of land, or on the annual land value; in practice, 50 Territorial Local Authorities (TLAs) use land value, 23 TLAs use capital value, and a single TLA imposes actual rental value. In terms of exemptions, the Local Government (Rating) Act 2002 excludes various categories of land from rates, including land used for charitable, educational, religious purposes, and Crown land and national parks.983 European local governments have some leeway over the property tax, with the exception of Danish countries, where the rate is centrally determined. As is the case in Britain, local governments in Germany, Ireland and Belgium have the discretion to set the rate. However, the Belgian regions can temporarily put a ceiling on the rate. In Spain and Finland, local governments can set the rates between limits. In Finland, property taxation was introduced in 1993 as part of the income tax reform. The rate applies to land and buildings, with farmland and forest exempted; municipalities are free to set their own rate, within limits set by law. In France, property tax is also paid on buildings and land, however, the assessment basis is the rental value of the property. In the Netherlands, property tax is based upon the value of the property, which is re-evaluated every four years. The rate can be set at the discretion of municipalities, however limits apply. For example, the tax rate applicable to owner-occupiers must not exceed 1.25 times that applied to tenants.984 Britain’s exclusive reliance on property taxation is potentially disadvantageous in that property taxes are not as buoyant as other tax alternatives; associated revenues may stagnate due to lags in revaluation. Secondly, as has already been stated, property tax can be regressive in nature, resulting in a disproportionate burden being placed upon low or fixed income ratepayers. Recently, criticism of property tax has prompted many U.S. states to limit property tax revenues. Local governments have been increasingly relying on other broad-based taxes to finance local spending; income taxes and retail sales taxes have been used in this regard. Thirdly, a local authority’s choice of tax is an important one for another reason; fiscal policy also creates incentives and can cause tax competition between regions. This is an important consideration in assessing alternative tax options. In introducing local taxes; it is important to choose/adapt the tax base so as to minimise economic distortions. Resident based taxes (such as those on land, labour and capital) are generally preferable to source based taxes (those on goods and services) in minimising tax-induced distortions, in that they reduce the scope for tax exporting, as John Loughlin and Steve Martin note: A reliance on resident-based taxes rather than source-based taxes can lessen tax-induced distortions by reducing the scope for tax exporting. Resident-based taxes (also known as destination-based taxes) are taxes on factors of production such as land, labour and capital based on the owner’s residence and on goods and services based on the residence of the consumer. In contrast, source-based taxes or origin taxes involve taxing factors where they are employed and goods and services where they are purchased. Under resident-based taxation, governments have much less capacity to export their taxes onto economic units elsewhere. Source-based taxes on the other hand are often much easier to administer because the tax is taken out where the resource is deployed.985 Figure 12.1: Composition of Local Tax Revenues in advanced capitalist countries (2001)986 
Capping, revaluation, the council tax, council tax benefits and the business rate The current arrangements for local authority finance in Britain are widely recognised as deeply flawed, particularly with regard to the council tax. Furthermore, it is overly dependent on the whims of central government, and currently, its push for more privatisation. Moreover, the key ‘reference’ documents in the House of Commons Communities and Local Government Committee’s May 2009 Report – The Balance of Power: Central and Local Government – are the Layfield (1976) and Lyons (2007) reports on local government finance. This is because: First…both recommended shifting the balance of power between central and local government in favour of the latter….Second, the government response to both reports serves to highlight enduring government resistance to a radical enfranchisement of local government. In each case, the government’s response appears to us to be a missed opportunity to benefit from a more substantial move towards greater local autonomy.987 The Committee also concluded that: There is clearly a wide division of opinion between the Government’s view of recent developments and the views of the majority of our witnesses, many of whom believe that central direction and control remain unchanged or even that they have increased. The Government’s record appears to us to be mixed. There remains a sizeable gap between the newly empowered local government that the Government believes it has established in principle, and the actual impact as witnessed at the local level.988 Within a few hours of publication of the Lyons report the government rejected its recommendations about the abolition of capping, regular revaluations, extra council tax bands and transforming council tax benefit into an entitlement.989 Proposals to make the council tax more palatable include increasing the number of bands, especially at the top end, by raising the ratio of tax paid by those in the top band from the current 3:1 to, say, 30:1.990 This would at least make it less regressive, one of its biggest drawbacks. The New Local Government Network – using figures based on current estimates for the financial year 2008/09 – proposes reducing the Band D council tax of £1169 by £205 or 15 per cent funded by a 50 per cent rate of income tax for those with incomes above £200,000: which they argue ‘would ensure no net increase in tax, but a transfer in tax payments in which people pay less council tax but those on incomes over £200,000 pay slightly more’.991 New Labour’s 2009 Budget increased income tax for people on incomes over £150,000 by 5 per cent to 50 per cent from April 2010: but not to fund B and D council tax reductions. The top rate of income tax was 60 per cent until Nigel Lawson’s 1988 Budget reduced it to 40 per cent: and – as William Keegan argues – should have been increased in 1997 ‘when the country was under the forgivable illusion that it had elected a Labour government’.992 Gateshead Council point out that, although the government has previously announced its intention to undertake a revaluation for council tax purposes, the lack of this clearly continues to penalise council taxpayers in deprived urban authorities outside of London and the South East, such as Gateshead, who are predominantly in lower valued properties. They therefore propose:
The Communities and Local Government Committee recommends:
The Tories before the general election pledged to:
Then Shadow chancellor George Osborne, moreover, told BBC radio in August 2009 that the Conservatives were "the progressive force in British politics now" because only they were truly committed to the privatisation of public services such as health and education. He called for an end to the "state monopoly" on free education, claiming that sending profit-hungry privateers into Britain's schools would drive down costs. Osborne declared: "It is the Conservatives, as the progressive force in British politics now, who are thinking seriously about how you change the way you deliver public services so that they can improve the quality of service delivery even in a period of budget restraint." He also went on to praise Sweden and the US for part-privatising their education systems, a decision which he claimed had led to better contracts for computers, textbooks, land and lower overall costs. But, according to Mona Sahlin, the Swedish Social Democratic Party leader, her party is about to abandon the school reforms the Tory-LibDems are to introduce in Britain because: The free school system, implemented without imposing clear standards, has seen schools opening in sub-standard facilities, often without libraries, and with a far greater number of unqualified teachers....creating a free market as the Conservative proposals do without providing the funding to allow for the surplus capacity you need will certainly harm standards.1004 Moreover, an Ipsos-MORI poll for UNISON published on 11 August 2009, which was carried out between 12 and 14 June, showed that 73 per cent of adults in Britain agreed with the statement that ‘public services should be run by the government or local authorities, rather than by private companies.’1005 Local income tax Six EU countries – Belgium, Denmark, Finland, Italy, Spain and Sweden – have local income taxes which account for a significant source of revenue for their local government. In the case of Sweden, income tax is in fact the only source of locally-raised revenue (see Figure 12.1). In general, local income tax rates are levied at a flat, locally established rate on the same base as the national income tax and collected by central government. However, in Belgium and Switzerland, the tax is levied as a percentage of the national tax liability (that is, as a percentage of local tax receipts), rather than on the national income tax base.1006 In the United States, property tax provides the primary source of local government revenue, however, in some states this is supplemented by local income taxes. In 11 US states, local governments are given the option of imposing additional local taxes on incomes. These states are Delaware, Indiana, Iowa, Kentucky, Maryland, Michigan, Missouri, New Jersey, New York, Ohio, and Pennsylvania. Rates of income tax are generally low and quite simple. For example, in Maryland, the flat rates across counties vary from 1.25 per cent to 3.10 per cent of taxable income. However, in New York tax rates are progressive, with a maximum marginal rate of 4.25 per cent on incomes above $150,000 for married couples, and $100,000 for individuals.1007 Whilst less regressive than property tax and better linked with ‘ability to pay’, a specific criticism of local income tax is based upon the ‘Tiebout hypothesis’. This states that an individual chooses where she/he wants to live, at least in part, by weighing costs (taxes) against associated benefits (public services) - known as “voting with feet”. The validity of this hypothesis will depend upon the extent of mobility within a particular region; assuming a mobile population, a local income tax might result in taxpayers moving out of a region. Some studies find that this is an issue faced by US states in determining tax policy. If states levy a higher personal income tax than its neighbouring jurisdictions, there is evidence that its mobile citizens emigrate (or move their capital there) to enjoy a lower tax burden.1008 Denmark provides another example; despite having no official limits on local income tax rates, in practice, the freedom to vary these are restricted by mobility levels in a country which is small and has a strong political culture of striving for equity and fairness.1009 However, evidence from other OECD countries does not support the hypothesis that small tax differentials could lead to significant movements in population. That is, the United States is different from European states, including Britain, in terms of social mobility.1010 The international experience presents another potential problem with the implementation of a local income tax: the reluctance of central government to share this tax base with local government.1011 And the yield from a local income tax, as Jodie Carson notes, could – as now – be compromised during periods of economic downturn.1012 The Final Report of the Lyons Inquiry into Local Government in 2007 concluded that: Income-based taxes could introduce greater progressiveness to income both for the poorest households and at the top of the income scale, in a way that council tax presently cannot, even with full take-up of council tax benefit. They could significantly reduce the burden of local taxes on those groups with the lowest average incomes, notably pensioners and lone parents. However…LIT might mean substantial increases in tax for the working population….I am satisfied that a local income tax could be feasible in England….Implementation…would however require thorough preparation to ensure that it could be properly integrated with existing PAYE and Self-Assessment systems, and that local authorities and HMRC were given adequate time to prepare for a transition….The desirability of a LIT is a matter of political judgement….a preparatory period of more than one parliamentary term should be assumed, making a LIT a significant undertaking and an option for the medium to long term.1013 Layfield, however, argued that property tax alone could not finance local expenditure: and – after reviewing other possible taxes – it advocated a LIT, not to replace the property tax but to supplement it. Moreover, as Professor George Jones and Professor John Stewart – who were both members of the Layfield Committee – argue: We have a virtual local income tax now: it is that part of national income tax that goes from localities to the national Exchequer and is returned to local government in grant. Layfield advocated that this hidden local income tax should be made explicit, and determined by local authorities accountable to their local voters. Lyons did not take this step. For some reason, still unexplained, the Lyons report contained nothing about Layfield’s proposal for council tax to be supplemented with a local income tax that would reduce central grant and hence national income tax.1014 They therefore suggest that this option should be put back on the agenda: HM Treasury should welcome this reform as a way to make local authorities its allies in seeking the wise use of resources. No longer would local authorities be like drug addicts calling on central government each year for their fixes of grant. Instead they would be incentivised to be responsible local decision-makers, balancing their spending against their taxing decisions.1015 The Liberal Democrats’ proposal to replace Council Tax with LIT was approved at the 2003 conference. Ed Davey said that Council Tax was "the least fair major tax", as it took 5.1 per cent of the income from the poorest taxpayers, and 1.2 per cent from the richest; and that their replacement 'local income tax' would take 3 per cent from higher tax brackets and less than 3 per cent for poorer brackets.1016 In 2008 Nick Clegg stated the party still advocated this, as part of devolving power to regional and local authorities, where they set their own tax levels.1017 And their 2010 General Election Manifesto proposed:
Though, as indicated in Chapter 13, the Liberal Democrats’ also have policies on land value taxation. But introducing LIT, as Jerry Jones points out, is not straightforward. First, because so many people live in a local jurisdiction different from where they work, its collection would be more complex and more costly compared with council tax (and income tax at national level), especially if it included unearned income not covered by PAYE. It would also be more costly if local authorities themselves became the tax collectors instead of HM Revenue and Customs (in the unlikely event that central government would allow that). Furthermore, it would be inequitable because of the large difference between the mean income in more affluent areas and in poor areas.1020 This could be mitigated through some sort of equalisation mechanism that already exists: but it would be more complex to administer with LIT. In addition, to make it fair, LIT would have to be combined with some sort of a wealth tax. Chapter 13 therefore discusses a new approach to local government finance based on land value tax plus progressive taxation of income and wealth. Chapter 13 Annual Land Value Taxation plus major redistribution of income and wealth Section one of this Chapter discusses socialist local income tax proposals. Section two on Henry George, Marx and Engels shows why Marxists on both theoretical and empirical grounds reject Georgist arguments that all existing taxation should be replaced by land value taxation (LVT). Section three demonstrates that Marx’s concept of monopoly rent is pivotal in David Harvey’s analyses. Section four evaluates recent comparative studies indicating that more than 700 cities worldwide now apply LVT. Section five shows that socialist and other progressive advocates of LVT in Britain today also support additional forms of progressive taxation of income and wealth. Section six concludes that the council tax, stamp duty land tax and national non-domestic rates should be abolished and replaced by a system of annual LVT plus progressive taxation of income and wealth. Socialist local income tax proposals Major redistribution of wealth and income via progressive tax systems is an essential requirement for any socialist alternative to New Labour’s local ‘governance’ project. Eurostat data shows that for England, Scotland and Wales in 2007 the Gini coefficient was 33. Only two other EU countries – Portugal (37) and Romania (38) – had a higher coefficient: that is, greater income inequality.1021 The poorest fifth, moreover, pay more of their gross income in taxes than the richest fifth: 36.4 per cent compared with 35.5 per cent. While indirect taxes take up 26.9 per cent of gross and 29.7 per cent of disposable income for the poorest, they absorb only 10.8 per cent and 14.3 per cent, respectively, of the incomes of the richest. Mike Danson and Geoff Whittam also show that ‘the only direct tax, which exacerbates this, is the Council Tax (CT), which costs the poorest 5.2 per cent of their gross income – even after Council Tax deductions and Council Tax Benefits – but only 1.7 per cent for the richest’.1022 Hence they argue that, if the CT was replaced with a tax based on ability to pay, then the overall tax system would become progressive and a start could be made to reducing income inequalities and poverty. The flawed SNP local income tax proposal (LIT) – now withdrawn – was discussed in detail in Chapter 8. The main socialist version of LIT is the Scottish Service Tax (SST) developed by Danson and Whittam for the Scottish Socialist Party, which is a tax on personal income with marginal increases applied to five specific income ranges. The first £10,000 of anyone’s income is automatically exempt. This effectively removes the vast majority of pensioners and hundreds of thousands of low paid workers from any liability. On an income of £10,000 or less, citizens should not have to pay the SST as they are effectively living in poverty. The rates proposed are £0 to £10,000 – 0 per cent; £10,000 to £29,999.99 - 4.5 per cent; £30,000 to £49,999.99 – 15 per cent; £50,000 to £89,999.99 - 8 per cent, and more than £90,000 at 20 per cent. These are marginal rates, so someone on £40,000 would pay nothing on their first £10,000, 4.5 per cent on their next £20,000 and 15 per cent on their last £10,000. Thus, such an individual’s SST bill would amount to £2,400. Danson and Whittam have also calculated the impact for the SST of the potential loss of council tax benefit to Westminster. So even if Westminster had insisted on retaining the £300 million sum then paid in council tax benefit, the SST would have raised £2,022 million, or £269 million more than council tax, for the financial year 2002/03, but in a fairer fashion. The pensioners and low paid would pay less or nothing at all, while the highest paid and wealthy would pay more. As a percentage of their income, individuals on salaries around £168,000 such as the former Glasgow Housing Association boss Michael Lennon1023, for example, would only be paying 16 per cent of their income while a hard pressed teacher or social worker on £24,300 would pay 2.6 per cent of their income.1024 Nevertheless, such a tax would still have the shortcomings of a local income tax mentioned already. And it would still raise only around a quarter of local government revenue since it would merely replace the revenue raised by the current council tax. Hence, to reverse the present cuts and expand directly-provided local government services, SST would have to be combined with a wealth tax, and other taxes on big business. The Communist Party of Great Britain, as shown in Chapter 3, also supported LIT plus major redistribution of wealth and income – as does the CPB today.1025 Though this study – as does the Marxist economist Jerry Jones – argues that the council tax, stamp duty land tax and national non-domestic rates should be abolished and replaced by a system of annual LVT plus radical progressive taxation of income and wealth (see below). Henry George, Marx and Engels Yüklə 5,87 Mb. Dostları ilə paylaş:
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