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Tony Travers: Tax workforce cut bodes ill for local reform

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While the government’s devolution policy appears becalmed, the organisation that operates the valuations for both business rates and council tax faces a sharp cut in its staffing.

Up to a third of its employees, and a higher proportion of senior staff, are to be lost as HMRC reduces the scale of the Valuation Office Agency as part of the ongoing process of cutting the cost of government. Regional offices will also be scaled back.

The VOA represents about 5% of total HMRC staff and its shrinkage takes place at a time when there is still a major backlog of appeals against the 2017, 2010 and even 2005 revaluations. The process of appealing has been changed so that back-dating of repayments will reach only to a set historic date. The government has said some appeals are “spurious” and clog up the system.

The signal sent out by the decision to, in effect, downgrade the VOA’s capacity (coupled with the time-limiting of over-payments) is that there will be less possibility of making an appeal in future. Such reforms will inevitably affect the accuracy and quality of the agency’s work. Businesses will pay the price of any worsening of quality, with potential distortions to the economy.

Worse, such a small organisation would find it hard to plan or manage any future reforms to the local tax base. The VOA’s shrinkage could easily be seen as a signal that council tax will never be revalued again. Annual revaluations of non-domestic rates, which would make the tax far more sensible, are surely now impossible.

Of course, it would be possible for them to contract out work to private companies. But the permanent loss of professional planning and management capacity could not be made good overnight. Moreover, the chances of any local tax innovation being delivered are still further reduced by the decision to take 1,000 staff out of the VOA.

Governing is all about priorities. Ministers signal their favoured programmes and departments with relative generosity in terms of cash resources. The valuation of the local tax bases appears to be a low priority: not an encouraging signal when it comes to devolution or even local tax reform.

Tony Travers, director, LSE London

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