Jon Bright (London, OK): Interesting bit of blue sky localism thinking by Daniel Hannan (of Direct Democracy) in the Telegraph here. Hannan calls for a Local Sales Tax to replace VAT, a tax that could be set by each local authority and would allow them to determine the majority of their level of expenditure themselves. He says:
The LST has several advantages:
- Almost everyone would pay it. Every alternative system of local government finance falls disproportionately on some group or other. A property tax hits pensioners. The poll tax penalised the working poor. A local income tax would exempt nearly 40 per cent of electors altogether, giving them every reason to vote for higher spending, secure in the knowledge that their neighbours would be picking up the bill. But we all buy things and, because rich people tend to spend more, the LST would be more equitable than its rivals.
- LST would not be a “new” tax; it would visibly replace an existing one. And, unlike VAT, which is complicated and expensive to administer, LST would be payable just once at the point of retail.
- There would be tax competition, as each local authority sought to ensure that its shoppers didn’t decamp across the county line in search of lower mark-ups. Think about it: tax competition! And downward pressure on rates! When have we ever known such things in Britain?
He recognises, of course, that we couldn't bring in such a system whilst we are in the EU. But this is an implementation problem, and doesn't have to be included necessarily in a debate over whether this would be, fundamentally, a good way of organising local democracy's revenue collection.
I think Hannan is right that any serious attempt at localism is going to require giving local councils some significant powers to raise and spend their own budgets. The real question is, I suppose, whether Cameron's localism agenda will include something like this (as a lot of people have pointed out, local referendums on council tax rises would only follow increases over a nationally set limit - only the most desperate council would actually want to trigger one).
