· Tourist tax and levies on charity shops also blocked
David Hencke, Westminster correspondent
Thursday March 22, 2007
The Guardian
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.
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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