Sedgefield nonsense Sedgefield borough "has the highest council tax in the country." A good story because it is Tony Blair’s own constituency. But complete nonsense. A shorthand has grown up for comparing council tax in different places: quoting the charge for a band D property – one valued at between ?68,000 and ?88,000 in April 1991. But this becomes misleading where there are big differences between local authorities in the proportions of their houses in the various bands. True, the charge for a band D property in Sedgefield is ?1,367 this year – higher than elsewhere, and high compared with ?1,151 in, say, Winchester. But about 70 per cent of Sedgefield’s homes are in the lowest value band A against less than 4 per cent of those in Winchester. On the other hand, only 1,750 are in the bands with 1991 value of over ?88,000 as compared with 19,300 in Winchester. The result is that the average council tax in Sedgefield is ?1,025 – nowhere near the top of the league tables – whereas the figure for Winchester is ?1,285.
Every man a millionaire? It is predicted that nearly everybody can be a millionaire by 2031 because by then the average house will be worth ?1m – at today’s values – even if it goes up at only 7 per cent a year, less than half recent rates. Hang on a minute. That is a sixfold increase. If the economy grows by a real 2.7 per cent, it will double by 2031. Average income of the (smaller) household will be up 80 per cent. Today the mythical average homeowner in an average house with a interest-only mortgage paid for out of average income would have a loan of ?125,000 – and 20 per cent equity in his house. His mortgage will be costing around ?6,250 – or about 19 per cent of household income. His successor in 2031, with an 80 per cent loan on a ?1m home, would be paying out ?40,000 – and that would absorb 60 per cent of a household income up from ?37,500 to about ?67,500. He would have ?27,500 to spend on everything else – no more than today. Who wants to be an impoverished millionaire?
Budget murmurs Gordon Brown has come under attack because the public sector borrowed ?10bn more in 2003-04 than he expected, taking new borrowing to just over 3 per cent of GDP. But to put this in perspective, the private sector added to its own debt at the rate of roughly ?10bn a month last year – a total of 9 per cent of its income. And between 1992 and 1996, John Major’s government borrowed an average of ?42bn a year: equivalent to over 6 per cent of the then much smaller GDP.
Labour’s stealth tax cuts "Fiscal drag" is economists’ jargon for people paying higher rates of tax as their incomes rise. But as far as income tax is concerned, Labour has been lessening the burden in real terms. Since it was elected, the RPI has risen by 18 per cent. Allowances before income tax starts have been raised from ?4,032 for a married couple to ?4,924 (?174 more than inflation). Tax at the lower rates applied to income up to ?29,532 in 1996-97, and cost up to ?5,964. Raising these amounts in line with the RPI would have meant earnings of ?34,485 before the top rate of 40 per cent applied, and tax of ?7,028. Instead, the limit is over ?1,800 higher, at ?36,324 and the tax taken is ?362 lower, at ?6,666. More people now pay top rates, but they have more real money too.