Council Tax Revaluation

Late last week the government announced no council tax revaluations in this parliament.

Of course, council's will still be free to change the level of taxes (at least once the government removes it's centrally imposed freeze). So this announcement is about the distribution of the burden of council tax rather than the overall amount. Holding off on a major revaluation exercise probably makes sense when we are promised a full review of local government finance by summer 2012.

It is clear that the review needs to deliver some serious reform if the government wants to meet its objectives of devolving power to LAs. At the moment, LAs are "highly geared" with council tax receipts only covering a small percentage of total expenditures with the balance met by central government grants. This means that small changes in total expenditures need to translate in to much larger percentage changes in council taxes, and any changes can easily be offset by changes to central grants. This creates all kinds of problems for LAs when deciding on spending and revenues.

But the coalition decisions on council tax so far (a freeze plus no revaluations) signal just how difficult is devolution of tax raising powers. It will be interesting to see how that circle gets squared by 2012.

Resilience Rankings

Research for the BBC has identified the places most vulnerable to spending cuts. I am not sure it throws up that many surprises. As the Guardian puts it: "Assessing more than 30 separate measures of a local authority's ability to withstand tougher economic times, the report found that poor areas still feeling the effects of the recessions of the 1980s and 1990s were likely to be hardest hit."

The initial shocks in the 1980s were big, but this does highlight the issue that 30 years of intervention has done very little to address the problem. There seem to be two takes on this. One is to say we haven't spent enough and that the UK is sufficiently small that anywhere can be turned around. The other is to suggest that the shocks represented a fundamental shift that reasonable policy expenditure will struggle to ever address. My feeling is that the impact of this recession gives further strength to the latter argument.

NICs Holidays

Not some new, soon to be broke holiday company, but the government's National Insurance Contributions holiday scheme which started today.

According to HMRC: "The ‘Regional Employer NICs Holiday for New Businesses’ offers substantial reductions in employer NICs for new businesses in those parts of the UK most reliant on public sector employment." Looking at the list of eligible regions, this turns out to be the whole of GB except for the SE region and London.

My understanding of the (now quite old) evidence on regional employment subsidies was that they did have an impact but that the costs per job created were quite high. I imagine that will be the case with this holiday as well. It's an employment subsidy, so we expect some positive impacts, but because there will be plenty of deadweight (businesses that would have started anyhow) and quite a lot of displacement (new subsidised businesses driving out old) the net impact will be considerably smaller than the gross impact. It will be interesting to see how the effects play out.