Tax reform and a Corbyn-led government will save our local services

Peter Latham, author of Who stole the town hall?, argues that the Spring Budget highlighted the Conservative Party’s allegiance to the City of London, not the small businesses, entrepreneurs and self-employed they profess to support.

He says that, to resist Tory-driven austerity policies and save our public services, we need a resurgence of social democracy and a reformed tax system.

“The Chancellor’s decision not to increase self-employed national insurance contributions (NIC) by £2bn, in a U-turn following the Spring Budget on 8th March, showed that the Tory government is ‘imprisoned by a minority of its backbenchers and by the Daily Mail’ according to The Guardian, 16 March 2017.

Moreover, as Aditya Chakrabortty noted, the government’s policies ‘hit the just-about-managing harder than the rich’. For example, the 2016 red book lists reductions to taxes on big businesses worth £18bn over the next five years.

Conversely, Jeremy Corbyn’s devastating assault on the Chancellor’s provision of just £2bn over three years to cover the crisis in social care – just a third of what the Local Government Association calculates is necessary – was slated by the mainstream media for not mentioning the Tory manifesto: even though he attacked the decision to raise the NIC rate.

Many Tory MPs fight shy of acknowledging their party’s first priority to the City of London, preferring to pass themselves off as the voice of small businesses, entrepreneurs and the self-employed. Increasing Class 4 NICs for the self-employed stuck in their craw, leading many party members to inform Philip Hammond and Theresa May that they would not support it.

Labour’s national leadership until the election of Jeremy Corbyn as leader was committed to neoliberalism, austerity and ‘corporate welfare’ – i.e., all the subsidies and grants paid to business, as well as the corporate tax loopholes, subsidised credit, export guarantees – which was £93bn and amounted to £3,500 a year given by each UK household (The Guardian, 8 July 2015). This was greater than the entire public sector deficit in 2015/16 (excluding the effects of the bank bailout) of £89.2bn.

“Ending tax dodging by the super-rich and big business would bring in £120 bn a year.”

In my new book – Who stole the town hall? – I argue that to fund increased provision of directly provided local authority and other public services, the threshold for income tax should be raised to £20,000 per annum, and in stages later, to £30,000, retaining the basic rate of tax at 20 per cent; and a new 60% rate of tax for incomes over £60,000 should be introduced.

There should be a 2% annual wealth tax on the richest 10% of the population – who owned 45% of Great Britain’s wealth in 2012/14 estimated to be £11.1 trillion – generating revenue of £100bn a year (see here). In addition, ending tax dodging by the super-rich and big business would bring in £120 bn a year (see here).

Some councils, which have been cut harder than the rest of the public sector, are already becoming financially unviable. I also propose that the council tax, stamp duty land tax and business rates should be abolished and replaced by a system of land value taxation (LVT).

“It (LVT) would lead to the more efficient use of land, and eliminate the scourge of derelict sites and homes standing empty.”

The latter has a number of advantages, not least that it is a fair tax, since it allows society to reclaim the rising value of land created by the economic activity of society as a whole instead of going to the owners of land who contribute nothing to its rising value.

Furthermore, it is fair because, in effect, people are charged according to the space that they occupy and its value. In addition, it would lead to the more efficient use of land, and eliminate the scourge of derelict sites and homes standing empty.

That is because the tax would be payable whether or not the land is being utilised according to its permitted use, which would act as a powerful stimulus for landowners to develop the land to its maximum potential (in line with prevailing planning regulations).

It would also prevent the escalation of land prices, the main element in property bubbles, thus making homes more affordable, and leaving more money available for investment, which would provide more jobs, thus helping to promote economic development. Tenants under this proposal would also no longer be liable to property taxes.

Recent reviews of local government finance – for example, by the Institute of Fiscal Studies and The Greater London Authority’s Planning Committee – have also concluded that there is a very strong case for introducing LVT. And there is now a broad alliance of support across the political spectrum for LVT. Of the major parties, only the Conservatives lack a campaign group promoting LVT. Moreover, as the Labour Land Campaign’s press release noted, the Autumn Statement 2016.

…subsidies for builders, transport infrastructure and Business Rates will immediately capitalise into land value, thereby further the enriching the wealthy….If Philip Hammond were serious about making the economy work for everyone, the underlying causes of low productivity, the housing crisis and growing inequality would have been ‘tackled’….But then, his party has powerful vested interests to keep happy (the wealthy and specifically landowners).

The EU’s imposition of neo-liberal policies on all governments, including those led by the traditional parties of the Left, has resulted in the collapse of support for social democracy. Moreover, there is still a crisis of working class representation in Britain: because most Labour MPs and councillors do not support Corbyn.

If Labour fails to respond to the challenge of building a mass campaign of resistance to Tory-driven austerity at local level, it will fail to create the political basis in public opinion for getting a radical Corbyn-led Labour government elected, which is the pre-condition for implementing the above alternative political and economic strategy.”

 

Who stole the town hall? by Peter Latham can be ordered here for £10.39.

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The views and opinions expressed on this blog site are solely those of the original blog post authors and other contributors. These views and opinions do not necessarily represent those of the Policy Press and/or any/all contributors to this site.

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