Next Wednesday, Conservative-led Elmbridge plans to decrease the council tax in real terms for next year by keeping the rate the same. Prudent stewardship or a gradual collapse into private wealth and public squalor?
National government taxes like: income tax, national insurance, VAT and corporation tax increase each year automatically in line with either income or prices (unless income or prices fall) – known to economists as fiscal drag.
But the single tax supporting local government – council tax does not. So if council tax is not adjusted each year then it gradually falls – it does not keep up with prices or salaries.
So, oddly, if you want council tax to fall in real terms simply don’t change it.
The whole situation is greatly affected by the extra freeze grant that the national government hands out to local government to encourage no increase in the council tax rate. This grant is powerful because if Elmbridge raised the council tax by just 0.1% it would mean a total loss of the grant. And this year the coalition guarantee the freeze grant for two years in succession (to get them past the national elections in 2015. What a way to run the country!
What’s your view?