Wednesday, 31 August 2011

Land tax - its time has come?

The LibDems have just published an interesting discussion paper on local government finance policy.

Raising income tax has become increasingly toxic in Britain. All parties are fearful to even talk about raising it. This means that as governments have increased spending the only way they can politically raise more money is through higher borrowing and increasing indirect taxation, which hits the poor harder than the wealthy. 

At the same time raising local government finance and funding for the needs of rural communities have both become increasingly difficult.

The LibDems are great believers in communities and providing them with the opportunities and resources to manage their own affairs. In their paper they argue localised control of resources is crucial for supporting and delivering the right policies and better outcomes for communities.

They set out a four pillar approach for local government finance built on income tax, property tax, fees & charges and special local measures with an equalisation mechanism rum by central government to share resources between areas.

Amongst some of the interesting proposals they discuss a hypothecation of locally-raised income tax revenues as a step towards a locally administered income tax.

They also discuss a revised form of property tax to make it more efficient (through basing it on undeveloped land values), targeting wealth and re-localising control of rates.

Central government would retain a fund to support local needs and innovation through combinations of direct grants and matching funds to local authorities and other local bodies.

At the centre of these proposals is giving local authorities a much freer hand to raise reasonable revenues for local resources. This would be based on a wider and more diverse revenue basis, including the abilities to borrow and for investment according to local requirements.

Whether these ideas are the answer I cannot say but I believe they are a very welcome discussion and ideas worth exploring from a party which has always punched above its weight in idea generation.

I would like to see the Scottish party develop this thinking further.

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