Opinion: The City of Westminster's voluntary tax on high end properties is an innovative way to fund local public services

Alexander Jan
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Westminster City Council recently hit the headlines when its leader floated a proposal to introduce a voluntary supplement to the city’s council tax.

Occupiers of around 2,000 properties worth more than £10m – the top end of 15,000 houses in Council Tax band ‘H’ – would be asked to pay more. With a council tax of just under £1,400 the scheme could raise between £2m and £3m a year, depending on take up.

At one level, the idea is not entirely new. Business Improvement District members pay a supplement of around two per cent of their property taxes after a ballot. Resources are used to top up public services, such as street cleaning, security, greening and recycling facilities and to provide a helping hand to visitors to help boost retail footfall.

But asking residents for more money is novel. There are a number of reasons behind it. Firstly, austerity. London boroughs have seen big real terms reductions in their Whitehall grants. In the six years to 2018/19, Westminster alone is having to make savings of some £200m.

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London boroughs across the board are in the same boat. The best run councils are going to find it increasingly difficult to deliver further efficiencies without damaging front line services.

Then there is our over centralised tax system. According to the London Finance Commission, barely seven per cent of all the tax paid by London residents and businesses is retained by London government. The equivalent figure in New York is seven times higher.

The City of Westminster’s proposal is an innovative attempt to break a central government log-jam

This gives our councils very limited wriggle room to raise revenues for much needed services. It also means that only big rises in council tax generate a significant overall increase in resources. That is understandably a political headache.

At £2m to £3m per year, the amounts raised by Westminster’s community contribution would be modest. Westminster’s total revenue in 2016/17 was around £1.3bn. But it’s a start. And as a proportion of Council tax – some £49m – it is more significant.

If all Inner London’s 14 authorities were to follow suit, some £40m per annum could be raised if, say, half of all band H payers were to contribute. That starts to become a substantive sum. Spent wisely it could protect provision for some of the most disadvantaged residents of the city.

For years, Whitehall has put off reform of domestic property taxes. That policy has become increasingly unsustainable as it has shifted the burden on to other payers. This year’s delayed business rate revaluation meant nearly 8,000 London businesses saw a sudden 45 per cent increase in their bills. Some may go to the wall. The City of Westminster’s proposal is an innovative attempt to break a central government log-jam.

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Consultation is aimed to allow for an April 2018 introduction and neighbouring councils will be looking over their boundaries to see how the idea goes.

If it gets the green light by Whitehall and is locally acceptable, it might just mark a turn in the way London pays for local government services. For residents and businesses who depend on well-funded local public services, that point can’t come too soon.

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