Ministers stall radical shake-up of council tax

· No revaluation or extra bands before at least 2011

· Tourist tax and levies on charity shops also blocked



David Hencke, Westminster correspondent

Thursday March 22, 2007

The Guardian

The biggest review of local government for 40 years yesterday proposed radical reforms of council tax, including new bands for the most expensive homes and levies on charity shops as well as farms and derelict properties.

The sweeping proposals provoked an immediate response from ministers who tried to avoid a political row by either postponing or scrapping many of the ideas, although the study was commissioned by the Treasury three years ago.

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Phil Woolas, the local government minister, kicked into the long grass proposals by Sir Michael Lyons, professor of public policy at Birmingham University, for a revaluation and rebanding of council taxes, until 2011 at the earliest.

The move would see multi-millionaires being asked for more than double the present amount of council tax - some paying £5,120 a year - for homes worth £2.5m or more. The decision also meant the poorest owners, living in properties worth less than £81,000, would continue to pay £846 a year.

Following furious reaction, the ministry also blocked plans to consider a new tourist tax on hotel beds and a proposal to look at ending council tax exemption for charities' premises, which would have raised £724m.

The British Hospitality Association said Sir Michael's tourism tax plan was "muddled and highly discriminatory" and amounted to another stealth tax.

Stephen Bubb, chief executive of the Association of Chief Executives of Voluntary Organisations, said: "This ill-judged recommendation will be bitterly opposed by the third sector. I have been in touch with the third-sector minister, Ed Miliband, to urge him not to implement the recommendation."

The government also blocked proposals to take council tax spending out of ministers' hands via an independent grants commission, and ruled out abolishing powers to cap huge council tax rises.

Ministers seized immediately on a proposal which would raise £1.3bn for local authorities by levying council tax on empty and derelict buildings. Although Sir Michael said this should be reviewed, Gordon Brown announced the first tranche of the new tax in the budget. The rest would follow. Ministers also committed to raising a further £450m by confirming they would review farmers' exemption from council tax, and will look at allowing councils to charge for rubbish collection.

Other proposals are to go to consultation. They include a plan, exclusively reported in the Guardian yesterday, for a supplementary business rate to pay for huge transport projects such as London's Crossrail, and Manchester's expanded tram system.

Sir Michael has wanted special help for pensioners and the low paid who claim council tax benefits. He proposed replacing the benefit with an automated rebate for all pensioners with savings of up to £50,000 a year. He said that the unclaimed £1.8bn could go to pensioners. Mr Woolas was not keen on immediately implementing this, preferring to promise to get councils to improve take-up of the benefit.

Launching the report in London, Sir Michael said: "Council tax is not 'broken' but is seen as unfair." He reluctantly accepted that the government's stance meant revaluation was "an issue for the future", but believed that any property tax should be revalued regularly.

His report said that local government needed to be more trusted by the public and lead regeneration, improve people's skills and have a big say on transport. "Central government needs to leave more room for local discretion ... while local government needs to strengthen its own confidence and capability ... and stop asking for central direction."

Yesterday the shadow local government secretary, Caroline Spelman, called the report a "tax bombshell" for working families and pensioners. "Nice neighbourhoods and the rising value of homes will all mean higher council tax bills. Regular revaluations will turn council tax into a home improvement tax - taxing your patio, your conservatory and garden."

She said "rubbish taxes" could damage public health and the environment, leading to a surge in fly tipping and backyard burning. "This isn't a green tax, it's an excuse to tax more by stealth."

Main points: Winners and losers

· Council tax to remain main source of local authority taxes. Local income tax rejected. Revaluation of all homes in England - above average income home owners will pay more, poorest less

· Three new top council tax bands for properties above £545,000 to £2.5m, new split lower tax band for lowest properties under £102,000

· Replace council tax benefit with an automated rebate with aim of giving £1.8bn unclaimed cash to pensioners and raise savings allowance to £50,000.

· Abolition of government capping of local authority council tax

· Examine removing council tax exemptions for farms and farm buildings to raise £450m. Examine removing council tax exemption on derelict and empty property to raise £1.3bn

· Examine removing council tax exemption on charity shops and HQs to raise £724m

· New powers to charge for domestic refuse collection to tackle waste

· New tourist tax

· New supplementary business rate to pay for major infrastructure projects from Crossrail in London to extension of metro in Newcastle and tram system in Manchester

· New powers for councils to co-ordinate and lead economic development and planning issues and to regulate bus services

· Independent grants commission to set local council spending levels

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Lyons' lost pride

By shelving Sir Michael Lyons' recommendations on council tax reform, Gordon Brown has turned his back on a historic opportunity.

March 23, 2007 11:30 AM | Printable version

Gordon Brown should hang his head in shame. Not for the budget, but for the government's response to yesterday's side show, the convenient launch of the report he commissioned three years ago, calling for a radical reform of local government finance and powers.

The man who would be prime minister threw away an opportunity for a real change that would have hit the rich and helped the poor. Sir Michael Lyons, professor of public policy at Birmingham University, in a well-argued report, said the time had come for a radical overhaul of council tax. He proposed a really big increase for the multi-millionaire class in the amount - some 100-200% more - they contribute to the local community and some much needed help for the poorest first-time buyers, scraping to buy the last remaining homes worth less than £102,000 in England.

Phil Woolas, the local government minister, with Treasury backing, within hours of its publication threw out the plan for at least the next five years. This was great news for Russian oil tycoon and Chelsea football club owner, Roman Abramovich, and Labour donor and Indian steel magnate, Lakshmi Mittal, to name but two people with property worth in excess of £2.5m. They have saved paying anything up to an extra £3,000 a year - a cool £15,000 for the next five years. For magnates like them, this is loose change compared to the billions they spend every year, but no doubt they would be delighted that a Labour chancellor is so keen to make sure they avoid any unnecessary tax.

Rather surprising, though, is the reverse side of the coin of Gordon Brown's decision. By not doing anything, he has also mugged the wallets of the inner-city poor. For a chancellor who makes such a issue of taking millions of poor people and their families out of the poverty trap, he has actually thrown out, on Michael Lyons' figures, the chance of rebating £150 a year in council tax to those living in the cheapest property. Unlike the other group, I have a feeling they could find quite of lot of uses for the extra £750 they would have had for the next five years.

No doubt, Gordon will say that the poorest would be able to claim council tax benefit, anyway. But that case is crushed by Sir Michael as well, when he points out that there is £1.8bn unclaimed council tax benefit because of complications and stigma in filling in forms. He has a good answer for that: give them an automated rebate instead. But guess what? The government, faced with paying out with almost as much as they can raise on a 1p income tax, isn't keen on doing that immediately either.

If Gordon has wimped out on doing anything redistributive on council tax, the Tories have even been worse. Caroline Spelman, their spokeswoman, issued hysterical statements warning the middle class, Daily Mail readers, of tax bombshells if they repaved their patios. She appears to want to preserve the ludicrous 1991 valuations, which are presently used to work out council taxes (even for homes built in 2007), in aspic. No doubt, if council taxes had not been invented, she would still be defending medieval tithes, as the best way of raising taxes.

The Liberal Democrats' plan to replace the council tax with a local income tax is also exposed in the report as not being properly thought-out. This left Labour with a chance to be bold, to go out and argue that those who have made the most out of England's obession with ever-rising property prices should pay a little more tax. The change would have left those in the middle neither better-, nor worse-off. But I was forgetting that the old "s" word, socialism, is only used by Gordon as a bit of rhetoric at trade-union rallies.

sirmichaellyons gordonbrown philwoolas counciltax treasury chancellor carolinespelman propertyprices propertyvaluations

Single mothers with three-year-olds may have to seek work

By Andrew Grice, Political Editor

(Privilieged Champion)

Published: 06 March 2007

Single mothers could be forced to seek work when their youngest child reaches the age of three, or face benefit cuts under wide-ranging government plans to reform the welfare state.







At present, lone parents do not have to make efforts to find jobs until their youngest child is 16. That is expected to be reduced to 12 from next year under proposals by David Freud, an investment banker who reviewed the Government's welfare-to-work strategy.







Mr Freud said that Britain could eventually shift to a Scandinavian-style system where single mothers have to seek work when their youngest child is three. Ministers admitted that was only a long-term idea, but suggested the age could be lowered from 12 in stages as Labour honours its pledge to provide all-day child care from 8am-6pm from 2010.







If they did not try to find at least a part-time job, lone parents would face the same sanctions as the unemployed, who can lose benefits for refusing to attend job interviews or training.







Other elements in the Freud review include an expansion of the role of private and voluntary groups to help "hard to reach" jobless people back into work through one-to-one counselling. They will be paid a bonus if someone remains in work for three years, but trade unions criticised the "part-privatisation" of the benefits system and warned that jobs would be lost.







Another controversial proposal is for stricter tests for new claimants for incapacity benefit. The partners of the unemployed would face similar pressure to find work.







Gordon Brown, who is expected to become prime minister this summer, promised to "champion" the reforms set out in the Freud report and said they would be taken forward in his Budget in two weeks' time and a government-wide spending review this summer. The Chancellor launched the report yesterday along with Tony Blair and John Hutton, the Work and Pensions Secretary, in a clear signal that he would continue the reforms.







Mr Brown signalled a drive to prevent teenagers slipping through the net when they leave school. The 16-25 year-old age group could be offered special allowances, but they would lose them if they did not go into training, work or full-time education.







Mr Hutton said looking for work when a child reached the age of 12 was a "perfectly reasonable starting point", adding that there was a case for progressively reducing the age even further in the future.







But the plans have run into immediate controversy. Chris Pond, chief executive of One Parent Families, said: "Taking a strong-arm approach to these parents would be wholly counter-productive, intensifying the pressures on them while deterring those lone parents who are work-ready from coming forward for the excellent voluntary, New Deal scheme."





The Freud review recommendations







* JOBS







To achieve the Government's "extremely challenging" target of an 80 per cent employment rate, it should help get 1.3 million of the 3.1 million people who have been on benefits for more than a year into work - including 300,000 of the 780,000 lone parents on income support and one million of the 2.68 million people on incapacity benefit.







* PROVIDERS







Jobcentre Plus, the Government's network, should focus on the easier-to-place jobless while private firms and voluntary groups should tackle the hard-to-reach groups such as the long-term unemployed, who often suffer multiple deprivation and need one-to-one support.







* LONE PARENTS







The report's author, David Freud, said that "work is an escalator out of poverty" for single mothers. He proposed that they should have to seek work when their youngest child is 12, rather than 16 as at present, and said the age could be gradually reduced to as low as three. He cited the system in Denmark and Sweden, where the rate in effect is three but there is greater child care provision.







* SICK AND DISABLED







Stricter tests for new claimants of incapacity benefit should gradually be extended to all 2.68million people on the benefit. The system requires people capable of some work to take up job or training opportunities.

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Foreclosures May Hit 1.5 Million in U.S. Housing Bust (Update3)

March 12 (Bloomberg) -- Hold on to your assets. The deepest housing decline in 16 years is about to get worse. As many as 1.5 million more Americans may lose their homes, another 100,000 people in housing-related industries could be fired, and an estimated 100 additional subprime mortgage companies that lend money to people with bad or limited credit may go under, according to realtors, economists, analysts and a Federal Reserve governor. Financial stocks also could extend their declines over mortgage default worries. The spring buying season, when more than half of all U.S. home sales are made, has been so disappointing that the National Association of Home Builders in Washington now expects purchases to fall for the sixth consecutive quarter after it predicted a gain just last month. ... Subprime lenders Ameriquest Mortgage Co. in Irvine, California; Ownit Mortgage Solutions LLC and WMC Mortgage Corp., a subsidiary of General Electric Co., in Woodland Hills, California; Mortgage Lenders Network USA Inc. in Middletown, Connecticut and Fremont General Corp. together have fired more than 5,600 workers in the past year...New Century already has cut 300 jobs and its 7,000 remaining employees are waiting to see if the company will survive. ...Defaults may dump more than 500,000 homes on a housing market already saturated with leftover inventory built during boom times, New York-based bond research firm CreditSights Inc. said in a March 1 report. ...Mortgage defaults may climb to $225 billion over the next two years, compared with about $40 billion annually in 2005 and 2006, according to debt strategists at Lehman Brothers Holdings Inc. The portion of subprime loans more than 60 days delinquent or in foreclosure rose to 10 percent as of Dec. 31, from 5.4 percentin May 2005, the highest in seven years, according to data compiled by Friedman Billings Ramsey Group Inc. of Arlington, Virginia. "What we're seeing in this narrow segment is the beginning of the wave, This is not the end, this is the beginning.'' Bies said.

To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net

Supervisors Re-Examine Affordable Housing

Mar 13, 2007 By Anthony Ha Hollister- The Board of Supervisors will discuss revising the county's affordable housing policies at its meeting today. County Planning Director Art Henriques said he will present a series of staff recommendations and ask the supervisors to provide further direction. Those recommendations include reducing the county's 30 percent inclusionary housing requirement, changes to its inclusionary housing fees and the addition of a full-time housing analyst to the county's planning staff. According to Henriques, the last sizable affordable housing development built in unincorporated San Benito County was the Riverview Estates, a development completed in 2002. The supervisors held a special study session on Jan. 30 to discuss affordable housing issues. At the meeting, planning staffers acknowledged that existing policies haven't led to the creation of much affordable housing - only three developers have paid the county's inclusionary housing fee since the fee was approved in 2003. And of those, two have received refunds. Many of the meeting's speakers were critical of the county requirement that developers sell 30 percent of their housing at less-than-market rates or pay in-lieu fees. Beverly Bryant, executive director of the Home Builders Association of Northern California, southern division, said the inclusionary housing requirement is too high and scares developers away from San Benito County. And since development is needed to fund affordable housing, everyone loses, she said. "I think what the county needs to do is look realistically at what it's set up," Bryant said. "If there has to be inclusionary zoning, there are ways to do it to make more housing available, more housing at lower cost." Henriques said the 30 percent requirement is much higher than that found in neighboring counties. "Our sense from surveys is that 15 to 20 percent is not unreasonable for communities in California that have (a similar) requirement," Henriques said. At January's meeting, county planner Byron Turner said that if the inclusionary housing fee is updated to match increasing affordability requirements, it could jump from $27,019 to $109,755 per unit. Henriques said Monday that the supervisors are interested in lowering the fee, as well as broadening it to include the builders of individual homes, not just the developers of large subdivisions. Henriques said the supervisors will need to tell staffers which efforts should take top priority. "Working on these issues takes staff time," he said. The lack of time, Henriques added, is the main reason he's recommending the addition of a full-time housing analyst who would both work on county housing issues and coordinate with the City of Hollister, local nonprofits and developers. "We don't have a person who can pull all this together," Henriques said. Supervisor Pat Loe said she's interested in looking at policies in other counties. She noted that - as described by Assemblywoman Anna Caballero in her recent visit to San Benito County - Salinas has an a flexible inclusionary housing requirement, ranging from 20 to 35 percent. Developers who provide more affordable housing also have more flexibility about how they build, Caballero said. "That's a good place to start," Loe said. Many believe that the supervisors aren't going to resolve the issue at today's meeting, or at their retreat next week. "The solutions are going to take a while," Bryant said. "They're not going to come overnight." Anthony Ha covers local government for the Free Lance. Reach him at 831-637-5566 ext. 330 or aha@freelancenews.com.

GE Money: Time to put the low doc loans genie back in the bottle.

Crikey.com Glenn Dyer writes: Some of the biggest names in US finance have been caught up in the spreading collapse of the so-called sub-prime mortgage market. These include Citigroup, HSBC, Goldman Sachs, GMAC and General Electric's finance arm, GE Money which operates in Australia and aggressively markets similar loans through the Wizard Home Loans operation it bought in late 2004. The crisis in the US sub-prime mortgage market (that's what we call no doc/low doc housing loans with no deposit) is worsening with the second biggest lender in the area likely to go bankrupt very shortly. It's just not an isolated event: the sub-prime mortgage market in the US has been responsible for much of the boom in home prices over the past two years as more and more money has been lent. Some US analysts say that it has been the single most important factor in the US housing boom, which peaked last year and then collapsed, threatening the rest of the US economy. Now billions of dollars of mortgages are going bad as default rates skyrocket, people lose their homes and new lending dries up. GE Money bought a small sub-prime lender called WMC Mortgage Corp in April 2004, fed it billions of dollars and watched it jump from number 12 to number five among sub-prime lenders. Last Friday it shut off new loans, closed several offices and laid off at least 20% of its staff, some 450 people, as the realisation grew that it is going to lose a lot of money for GE. The reason for the problems is that many loans were sold not only as 100% financings with no deposit and no or low documentation, but they contained cheap starter rates where the initial interest rate was held down for six months to more than a year. Those higher rates are now kicking in and many people can't afford them: as well as the value of their houses being dragged down by the fall in the overall housing market. It's a horrible double whammy that has seen the industry contract and turn off the lending tap in the space of a month. And why is this important in Australia? The purchase of WMC gave GE Money a taste for similar businesses and six months later it bought Wizard Home Loans and its parent, from a group of investors which included PBL, founder Mark Bouris and ABN Amro. Last weekend saw Wizard advertising a new offering of a no doc/low doc loan with 100% finance (ie, no deposit), the very product it has stopped offering in the US because the business is imploding. Here's the Wizard Website with its 100% finance offered in the banner headline at the top of the page. There are growing problems with no doc/low doc/no deposit loans here, especially in the suburbs of western and southwestern Sydney where foreclosures are still rising and house prices are falling. It's not the crisis it is in the US but it makes you wonder how GE can continue to offer this sort of finance here, with our problems, and knowing the problems that it has got itself into in the US.