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Increase in number of tax bands in doubt ...
Increase in number of tax bands in doubt

By Kerry Lorimer, finance editor

A fundamental review of local government funding has been hamstrung by a government bid to diffuse the political timebomb of local taxation reform.

The inquiry, led by Sir Michael Lyons, was expected to consider the introduction of additional bands to the council tax system and some form of supplementary local income tax.

But both options have been effectively ruled out by Labour's pre-election pledges.

The addition of new bands to the top of the system was dismissed by local government minister Nick Raynsford on The World at One radio programme. He is understood to be desperate to avoid the expense and negative publicity that surrounded Wales' revaluation (LGC, 11 March). He said that England would not be following the Welsh example.

'We will have a neutral revaluation and there's no question of us imposing additional bands in the way the Welsh Assembly has done,' he said.

He later clarified his position, saying he intended to rule out the introduction of an additional band at the top of the system if it meant an increase in yield. Asked if it was possible to have an additional band without increasing yield, Mr Raynsford said: 'I don't know.'

He added: 'I have not pre-empted Sir Michael. His remit is to review council tax within parameters we have given him.'

On Newsnight, prime minister Tony Blair said: 'I think there are big problems [with] local income tax.'

The remarks by Mr Raynsford and the prime minister have been interpreted as a brake on Sir Michael's ability to recommend significant reform.

The Conservatives' pledge to delay revaluation added to the impression the main parties were anxious to avoid committing themselves to reform of the local taxation system, in case it proved an electoral minefield.

Comment - Sir Michael's poisoned chalice

When the government dropped the future of local funding in Sir Michael Lyons' lap last summer, it was careful not to let slip its own views on the subject. To do so would, after all, have committed it to some sort of policy on the reform of local taxation. There is no tax reform without losers, and with them, lost votes.

Now Sir Michael is carrying the poisoned chalice - the least ministers can do is stand back and let him get on with it. It is disingenuous for the government to claim local taxation is too complex for it to state its policy, and then, in the heat of an election campaign, to start ruling things in and out.

Sir Michael's approach, to his credit, has been open, honest and inclusive. He must be allowed to reach his own conclusions, and not have his hands tied by politicians desperate to duck tricky questions on local taxation.

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