Labour’s Pay As You Die tax: Give up your home as council tax soars
Pensioners to be forced to sign away their home’s equity to stave off town hall bailiffs.
Labour have legislated to create ‘enabling powers’ to create a deferment scheme for pensioners, allowing the elderly to pay off their accumulated local tax bills when they sell their property.
In order to stave off local authority tax collectors and bailiffs, this Government scheme was quietly enacted in November 2009 and will permit pensioners to ‘defer’ their council tax bills, and instead pay - with interest - when they their property is sold or on death of the surviving resident spouse. Such a policy though will pressure many pensioners on fixed incomes to sign away their homes if they are struggling with their council tax bills. Council tax will effectively become a form of inheritance tax.
· Ulster first, England next: Northern Ireland is being used as the testing ground for the tax scheme, just as the poll tax was controversially first trialled in Scotland. The ‘enabling’ legislation was passed by Labour Ministers in Whitehall under direct rule in 2006. In an unnoticed announcement in November 2009, it has now been implemented across Northern Ireland, raising the prospect of the rest of Britain facing the scheme in any Labour fourth term.
· £73,000 Pay As You Die bill: Estimates suggest that over a twenty year deferment, a typical home in England would be left with a £73,000 tax bill, which would be levied on top of inheritance tax and any cost for social care. A charge would be placed on the property, giving local councils second call after the taxman had grabbed his inheritance tax share. Town halls will effectively raid estates from beyond the grave and make children pay huge bills left by their dead parents.
· ‘Robbed of their birthright’: Pressure groups have expressed their alarm at the plans. The Institute of Revenues Rating & Valuation has warned of a "perception that the ratepayers and their offspring are being robbed of their birthright". The Fair Rates Campaign have labelled it a "Pensioners Savings Tax" with pensioners becoming "debtors to the government". The Consumer Council has said "older people may feel forced into a system that they don’t fully understand... We are worried about the potential amount of debt that an older person could accumulate against his or her property."
· Support from across the left: Such a town hall death tax has been supported by Gordon Brown’s review into town hall finances by Sir Michael Lyons; by former Local Government Secretary Stephen Byers; and by Vincent Cable and the Liberal Democrats.
Caroline Spelman, Shadow Secretary of State for Communities and Local Government, said: “This is another savage raid on the savings of the elderly – pension funds were first, then social care, and now people's homes. Under Labour plans supported by Liberal Democrats, the vulnerable risk being pressured into signing away their homes’ equity to stave off the tax man. This pay as you die tax is just an excuse to hike up council taxes even more while avoiding the sight of pensioners being sent to jail for non-payment. Gordon Brown is intent on turning council tax into a second inheritance tax, and there is nothing he won’t tax.”
Lord Glentoran said on behalf of the Conservatives in the House of Lords: “We are completely opposed to this new system... People on fixed incomes—pensioners who might be asset-rich, but in cash terms, poor—single-person households and those just outside the benefits system will be hit especially hard... To gather the information required to implement the new system involves huge erosions of liberty. Unprecedented powers are being given to the Government to compile data on family homes, literally to spy on people using aerial photographs and the like. I mention too the sinister Article 38 powers of entry and invasions of privacy for government inspectors to assess, with fines for those who simply want to keep the snoopers out. The new system is unjust and undemocratic. It is opposed overwhelmingly across the community in Northern Ireland"
The Consumer Council have said: “Older people may feel forced into a system that they don’t fully understand. We have particularly noted that any costs and fees related to the scheme can be rolled up as an additional charge along with the rates on the property, this may also include the cost of accessing advice. We are worried about the potential amount of debt that an older person could accumulate against his or her property. Furthermore, the availability of a deferment scheme may set a precedent with the threat of charges other than rates and the associated costs being made against the property. Short-term expediency may be stronger for some than the longer term implications.”
