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Over recent years, I have been fortunate enough to visit many of the former countries of the Eastern Bloc. And one particular issue which always interested me was the attitude of the media towards taxation, especially taxes raised at a local level to fund municipal services. On one such visit to the Russian Federation, where I was part of a team advising the Ministry of Finance on the reform of property tax, I discussed this very issue with one of my Russian colleagues. He responded by saying there were two newspapers which were read by the Russian public – one was known as Isvestia which, in English, means ‘the news'. The other was known as Pravda which, in English, is known as ‘the truth'. His view of these two voices of the media in relation to taxation was that ‘there was no news in the truth, and no truth in the news'. A similar view could be put forward when the national media in this country puts forward its opinion on the financing of local government. The debate often discussed in our national newspapers is centred on the strategic role of local government, and how the services delivered locally should be financed. The aim of the media is to stimulate a public debate on what we want local government to do, and how those functions should be paid for. The current proposals of the Scottish National Party to abolish the council tax and replace it with a local income tax has been an opportunity for the press to engage with the public on a matter that will affect every household in Scotland. The debate has been refreshingly mature, with the approach being driven by detailed analysis of the impact of the proposed changes rather than ill-informed political rhetoric. The development of the argument in Scotland has some way to go, but I would encourage those advising the Scottish Parliament in its deliberations to take a careful look at the development of the domestic property tax in Northern Ireland. Not only has the assembly there retained the property tax, but it has continually challenged the components of the tax and, where necessary, introduced reforms which have enhanced the balance and incidence of the tax. The first major decision was to abolish the rental basis of valuation and replace it with individual capital values. The assembly resisted the temptation to go down the path of the crude, banded regime adopted in England, Scotland and Wales. It also took the opportunity to use modern, computer-based techniques to assist in the valuation process which has created a model that can be manipulated to achieve regular revaluations at a fraction of the cost of conventional approaches. The importance of regular revaluations of a property-based tax cannot be underestimated. If any property tax is to gain public acceptance, it must be based on realistic values which the taxpayer can relate to his or her personal situation. But, the politicians in Northern Ireland did not stop there. They first looked carefully at the council tax and rejected the introduction of circumstance-based discounts, and instead took the opportunity to give the discretion to enhance the statutory benefit scheme locally. Powers were taken to adjust the components of the scheme to meet the needs of certain client groups who were perhaps not being best served by the measurement of need and resources of the overall scheme. To date, they have adjusted the measurement of need for key client groups, and made changes in elements which have been long-neglected in the annual uprating. In particular, they have taken the brave step to increase the capital limit to a more realistic level of £50,000. Perhaps the debate in Scotland needs to be developed. As we await the results of the consultation process, which has resulted in excellent, well-balanced responses from the IRRV, CIPFA and SOLACE, the media in Scotland should turn their attention to analyse the real alternative of a modernised property tax that is fit for purpose. Mature and responsible reporting of this critical decision is vital in the development of a strong and financially-secure local government. As we move forward to a general election, it is essential that political parties, as they develop their manifestos, take a careful look at the debate in Scotland and developments in Northern Ireland. David Magor is chief executive of the Institute of Revenues, Rating and Valuation

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WHITEHALL

The fair funding challenge

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