Thatcherite economics in 1979 was straight-forward. Income tax was reduced and capital assets lightly taxed to reward Conservative voters.1 Lost revenue was replaced with massive increases in regressive taxes like VAT. George Osborne, a Thatcherite without the brains, introduced The Age of Austerity, 2010-24. His freezing of Council Tax ultimately made Havering bankrupt because lost revenue wasn’t replaced.
Ray Morgon borrowed £52m, at 7%, from the government to replace the lost revenue in 2024. This is like using credit cards for day-to-day spending, which is obviously insane. Worse, the council is selling capital assets to fill the hole Osborne made. (Bankrupt aristocrats call this, ‘selling the family silver.’) It’s a futile tactic to buy time.
In a full year, 2% of council tax will be needed to pay the interest on the loan.
Havering is bankrupt because council tax is too low.2. Trivial *cuts* like four libraries reduce the deficit by £300,000.3 Havering’s budget is £180M.
What does inflation, 2010-24 tell us?
General inflation: 61%4
House price inflation: 100%+5
Council tax inflation: 46.7%6
The 2024-25 budget deficit is expected to be £32M.7 This is caused by Council Tax not being inflation linked. Council Tax is a Property Tax.
House price inflation has been at least 100% because of the magic ofThatcherite economics. Wealth in assets is lightly taxed and rises in value. Or, as the Bible says, The rich get richer.8 Born-again Thatcherites like Andrew Rosindell probably know this. Meanwhile pot holes are a symptom of bankruptcy.
Ray Morgan and Gillian Ford should beg government for the freedom to set Havering’s Council Tax.
Notes
1 BBC Budget 97 “In his first [1979] Budget he raised VAT from….8% to a single rate of 15%….an increase in prescription charges from 20p to 45p and a major relaxation of exchange controls.” In the same budget higher rate taxation was reduced from 60% to 40%.
2 Havering Council Tax: Is It Too Low? – Politics in Havering
3 Havering launches new library strategy | London Borough of Havering
4 £1 in 2010 → 2024 | UK Inflation Calculator (in2013dollars.com)
5 House Prices in Hornchurch (rightmove.co.uk) 11 Ravensbourne Crescent, Romford increased 142%. 17 Ravenscourt Grove, Hornchurch increased 117%
6 Previous years’ bands | Council Tax bands and bills | London Borough of Havering Using Band D.
7 Cabinet agrees “toughest budget ever” | London Borough of Havering The actual out-turn won’t be £32M because much expenditure is demand led and not quantifiable accurately.
8 Matthew 25:29
Politics in Havering 