Teresa Hunter: SNP's tax would increase burden on struggling families

Published on Saturday 6 September 2008 17:12

DID you see the amazing story of the son who had cremated his father only to see him appear eight years later on his television screen?

He'd been living in a care home after losing his memory following a head injury. Meanwhile, the family had a full funeral for a badly decomposed body found by the police and thought, mistakenly, to be their dad.

And then he came back from the dead, much to everyone's delight. It all put me in mind of the Scottish National Party's plans to introduce a local income tax. They were toast long before they left Alec Salmond's lips.

Yes, we all know council tax is unfair. But it has survived countless attempts to kill it off, because no one ever comes up with a better plan.

A local income tax sounds attractive, and certainly would be to pensioners and other non-workers. But how fair is it on two-earner families killing themselves to keep food on the table and clothes on the backs of their growing families? Their bills, from food to fuel, have already rocketed. They need a local income tax to take a bigger chunk out of their salary like they need a hole in the head.

There is already an element of choice when it comes to council tax. You can always move to a smaller house. I confess, I get a bit tired of listening to elderly people complaining about how awful it is to live in a nice home but not afford the tax.

Why don't they move and make way for a family? Before my recent move, we were the only young family in a road full of large family homes. True, my neighbours had moved in when they were young. But now the houses were exclusively inhabited by single people or couples in their 80s or 90s.

Talk about scandal. Children, not old people, should have been living in those houses. That's why we have a housing shortage, and today's young families can't hope to buy the kind of homes previous generations did. Why should they expect council tax on the cheap as well.

Pensions pressure

OF COURSE, many living in the lower council tax bands are also struggling to meet their bills, but I'm not sure how changing to a local income tax will change that.

The unpalatable truth is council tax has risen to eye-watering proportions to fund the pensions of public sector employees. And that cost will continue to soar.

The unions meet for their annual conference in Brighton tomorrow and we will hear much about how their members' wallets are being squeezed by prices rising on every front. I have no doubt that they are.

The Government has been able to resist calls for wage increases, so far, particularly with regard to low-paid public sector workers. As autumn turns into winter, it is doubtful it will be able to hold the line.

Low-paid public sector workers should have better wages, but not while they benefit from a disproportionately lucrative pension scheme.

According to Hargreaves Lansdown, if index-linked final salary schemes ended today, a child born tomorrow is going to have to work until he is 77 simply to pay the tax required to meet the pensions earned by state employees already.

Rates start to drop

THE mortgage market is taking off, with more interest rate cuts bringing home loans down to what is beginning to look like affordable levels.

At long last we are seeing a range of mortgages below 5.5% (see Unzipped and best buys) which are at a respectable rate.

We have always said that lower interest rates were the solution to the current housing crisis. The banks and building societies are starting to get the message. Let's hope the Bank of England cottons on before too long.

Carry on writing

IT IS nearly a year since we launched our Money Help Desk, so thank you to readers for your very interesting conundrums which have led to such fascinating and informative comment from our panel of experts.

Many queries have focused on tax, and have been excellently answered by our tax expert Valerie Smart at PWC. Also popular are mortgage matters, dealt with, as today, by John Postlethwaite. But savings, pensions, investments and debt also loom large, and we have specialists in them all.

But we were short on the legal front, and in the light of increasing queries about legal matters, we have asked Rachael Kelsey of Pagan Osborne to become a new panel member.

Rachael is famous for her expertise in family law, so is brilliant on divorce and prenuptial agreements and so forth. But she will draw on the expertise of her colleagues to answer your queries on a range of legal matters from property to estate planning. Please keep the letters coming.