Monday, January 08, 2007

The home Improvement Tax

This story seems to surface from time to time. You can read what the Sunday Telegraph had to say here.

Basically it seems that there is a trial in Northern Ireland (no Labour seats there) for a new way of doing what amounts to council tax.

They seem to want yearly valuations. Except these won't actually be proper valuations, because to send a qualified valuer around every year to asses the tax would have in 1997 have cost between 50 and 150% of the tax collected and would now still be a bit silly.

No they are talking about taking a base line valuation then adding for "home improvements". This would be various ways of finding out if you have done up your bathroom or put up a shed. Apparently Sir Michael Lyons who is leading an inquiry into local government finance is in favour of annual revaluations as we have the technology.

One of the problems we face is those who will not learn from history and those who have no idea how other people live. I can see two problems with this policy.

Firstly, there is the window tax case. When the window tax was introduced to raise money it was a great idea. You can now see houses built in this period because they have small windows and windows which would be there but for the tax. The ultimate result will be a cut in the home improvements business, as in DIY shops and builders. It will also mean that people who have struggled to get on the housing ladder will get penalised for fixing up their house. Not good for the economy or hard working families.

However there is the second and I suspect unintended consequence which is this: The effect on social housing.

The householder in a council or housing association house is responsible for the council tax, unless there is no adult in the house working. These houses are getting money spent on them albeit sporadically, on things like new bathrooms and double glazing. The tenant's do not get much of a say, but will be hit by an increased tax bill for some thing they have not done. Some of these people work in marginal jobs as it is, and this may push them over the edge.

You have to ask though what is the main motivation for the reform? The answer will look like a new way of raising tax, it will hit a sector of the economy and will also hit people in social housing with unexpected increases in tax. In short it will be a disaster.

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