Peter Jackson column
Aug 4 2005 By Peter Jackson, The Journal
Apart from the leadership, there's another debate in the Tory Party about what its philosophy and policies should be.
Some of the ideas seem good and some seem well, as PG Wodehouse would have put it - as full of holes as a Swiss cheese.
Take one that has been floated, for replacing the council tax with a local sales tax.
Initially I found it attractive. Council tax is iniquitous and a sales tax could return real power and relevance back to local government.
The idea is that it should replace VAT, which coincidentally raises about the same amount central government gives to local government.
Fair enough. Certainly, it would seem a bit much to put it on top of VAT, which is already at 17.5%.
But here we hit the first snag. VAT is very much an EU tax. Since 1967, it has required all member states to have a common system of VAT, which is used as a basic component of the EU's own revenues. Furthermore, since 2001, the minimum rate of VAT in the EU is 15%.
Even assuming we persuade the EU to let us off on this one, there still remains a fundamental problem.
Take an authority like Gateshead which, with a sales tax, would be one of the richest authorities in the UK, even with a low tax rate. How? Because of the MetroCentre, stupid.
On the other hand, the Wear Valley would probably need high rates to raise not very much. And the imbalance would grow so that shopping in Wear Valley would become so expensive people would find it worthwhile to do even more shopping in the MetroCentre, where prices would be relatively low. The result would be the closure of even more rural shops and the further decline of small town centres.
Of course, a sales tax could be more broadly based than just retail, as in the USA. I'm told, for instance, that in Connecticut there's a 6% tax which applies to actuarial and other consulting services.
But, I fear there are insufficient actuaries in Wear Valley to make up for the MetroCentre.
And can you imagine what a nightmare the VAT return would be if you buy goods and services from firms based in different authorities with different rates?
No, back to the drawing board on this one, I think.
