Councils could charge income tax
TOWN halls could soon be given the power to levy income tax on local residents, it has emerged. The shock proposal - which is bound to lead to huge extra bills in many areas - could emerge from a Government review of council financing.
Ministers are concerned that local authorities raise too little cash and are forced to rely on handouts from Whitehall. Now they are looking at ways of giving town hall chiefs power to raise more money. Experts believe that could pave the way for local income taxes which vary between boroughs.
That could have a dramatic effect on house prices as people flock to live in areas with low income tax and shun high tax areas.
Dan Corry, a former Government adviser who now runs a local authority think-tank, said: 'Maybe we will see some radical options coming up, which could include a serious rebalancing between national and local Government, and even a local income tax.'
Local councils get three-quarters of their funding from central Government. They complain this gives them too little control over the level of services.
Tight central control, imposed by the Tories in the 1980s and only gradually relaxed by Labour, is intended to prevent high-spending town halls sending council tax rocketing.
A new income tax set locally would echo the US where the state of Vermont, for example, charges seven cents in the dollar more than neighbouring New Hampshire. However, local Government minister Nick Raynsford said it is 'unlikely that any dramatic changes will occur immediately'.
The plan is only the latest tax proposal being looked at by Deputy Prime Minister John Prescott's department. In another, those living near a new or improved railway line could be hammered in taxes for the transport benefits they enjoy. That scheme is being fought for by London mayor Ken Livingstone, who is furious that the new £3.5bn Jubilee line Tube extension has sent nearby house prices soaring without residents having to pay a penny.
In another threat to homeowners, Chancellor Gordon Brown - who is desperate to plug a £20bn black hole in his finances - has refused to rule out imposing VAT on house sales. Influential academics have suggested a 5% tax on sales over £200,000 to curb rising house prices. But critics say the house price boom is all but over and the extra tax would be unfair on housebuyers in the South East, where £200,000 buys a relatively modest property.
Other new taxes being considered by Labour include moves to encourage recycling by making households pay £5 for every bag of rubbish they put out, plus 9p for each plastic bag they use.
