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FOWLER CHALLENGES HILARY ARMSTRONG OVER PENSIONS TAX

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Local authorities in England and Wales face a bill of over£250 million a year because of the pensions tax introduc...
Local authorities in England and Wales face a bill of over£250 million a year because of the pensions tax introduced by Gordon Brown in his first budget. The extra bill affects councils throughout the country, and will lead to further increases in taxation - on top of the record council tax rises which came into effect this month. The survey has been carried out by local authorities in collaboration with the Local Government Pensions Unit of the DETR, and the Association of Consulting Actuaries.

Commenting on the survey, Sir Norman Fowler, shadow secretary of state for the environment, transport and the regions, said:

'The results of this survey justify our warnings that local authorities face a massive new bill because of the pensions tax. Councils throughout the country face a severe loss of income through the abolition of tax credits. The extra costs will lead to further increases in taxation, on top of Labour's record council tax rises.

'London boroughs face an extra bill of£47 million a year. Amongst the worst hit councils are:

Lambeth (facing a new£2.7million a year bill)

Lewisham (£2.4 million)

Hillingdon (£2 million)

Greenwich (£2 million)

Croydon (£1.9 million)

Westminster (£1.9 million)

Wandsworth (£1.8 million)

Southwark (£1.7 million)

Tower Hamlets (£1.6 million)

Hammersmith and Fulham (£1.5 million)

'Metropolitan authorities face an extra bill of£72 million a year. Amongst the worst hit councils are:

Greater Manchester councils (facing a new 20£million a year bill)

West Yorkshire (£17.2 million)

West Midlands metropolitan authorities (£12.3 million)

Merseyside pension fund (£10.4 million)

South Tyneside (£6.4 million)

South Yorkshire (£6 million)

'Shire counties face an extra bill of£106 million a year. Amongst the worst hit are:

Lancashire (facing a new£7.2 million a year bill)

Essex (£5.6 million)

Hampshire (£5.4 million)

Kent (£4.6 million)

East Sussex (£4.3 million)

Staffordshire (£4.9 million)

'Other councils facing an extra bill of at least 3 million a year include Cheshire, Derbyshire, Devon, Hertfordshire, Leicestershire, Norfolk, Nottinghamshire, Surrey, Bath and North East Somerset, and the East Riding of Yorkshire.

'Labour are desperately trying to play down the importance of the pensions tax changes, but the public should not be taken in. Local authorities are deeply concerned about what is happening. The government is simply saying `wait for the actuarial review'. Yet the truth is that the pensions tax is already biting. The bills for local authorities are already mounting up. Month by month, since Gordon Brown's first budget, the cost has been rising. But the government has consistently refused to say how the extra expense will be met. Inevitably it means either an increase in council tax or in general taxation. There is no other way that these costs can be met. I challenge Hilary Armstrong to come clean about the extra costs, and tell the public how they are going to be paid for.'

Note

In their July Budget, the government announced the abolition of advance corporation tax credit for pension funds. This means pension funds will be able to claim less tax back, and will therefore have less money to invest.

The effect on local authority pension funds will be severe, and will vary from authority to authority depending on the number of employees in the fund. Many council pension funds are in deficit. Furthermore, whatever the condition of the fund, the tax increase will inevitably involve a higher level of employer contributions than would otherwise be the case (hence a higher level of council tax).'

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