Tax the way to do it!

In council tax pledges for millions of pensioners, the Conservative Party may have produced a rabbit out of a yawning electoral abyss. Political Editor GRAHAM DINES looks at how Michael Howard's policy initiative has rattled Labour and the Liberal Democrats.

IT'S unusual for a charity publicly to give the thumbs up to a political party's policy announcement. But yesterday Age Concern couldn't hide its delight at the Conservatives' promise to pensioners.

If elected, the Tory Party would introduce a 50% council tax discount for every home in England where the adults are 65 and over, up to a maximum of £500.

With council tax bills nudging £1,300, it's not quite the "halving" of tax bills which the build up to the announcement suggested. But it is far more than the Labour Party expected the Tories to say.

At a stroke, the Conservatives have pledged to increase the disposable income of 3.8 million pensioner households by around £10 a week. The £1.3billion to pay for this largesse would come out of the Tories proposed £30billion plus savings in Whitehall efficiency and bureaucracy savings.

Age Concern director Gordon Lishman rushed out a statement. "The Conservatives have addressed an issue which is very important to many older people, and they are likely to welcome these pledges.

"Every party and every prospective candidate must start listening to, and wooing this group or they risk being punished at the ballot box."

West Suffolk MP Richard Spring spelled out the implications. "In Forest Heath district, council tax bills have gone up 98% since 1997. In St Edmundsbury, the figure is 91%.

"Pensioners are spending 35% of their income on council tax - it's the greatest source of anger with this Government among the electorate."

Announcing the policy yesterday, Mr Howard rounded on the Government. "The older generations have been air-brushed out of Mr Blair's Britain, but I will stand up for them. I will give every home where the adults are 65 and over a 50% council tax discount up to a maximum of £500.

"People will face a clear choice at the election - Conservatives who will increase the state pension and cut pensioners' council tax or Mr Blair who will forget them and raise their council tax."

That does, of course, overlook the Liberal Democrats, who are pledged to replace council tax with a local income tax which pensioners would not pay.

Treasury spokesman Edward Davey said: "The Tories have once again failed to target the most vulnerable. Many pensioners would still struggle to pay, even with the Tory discount.

"Pensioners should be wary that this is a promise based on uncosted figures and a cheque from the Conservatives is going to bounce.'

The Tory announcement left the Government flailing. Deputy Prime Minister John Prescott was forced to fall back on the standard Government line that to cut taxes, the Tories would resort to a slash and burn economic policy that would be disastrous for public spending.

"None of the Tories' sums add up," said Mr Prescott. "Today's promises from the Tories are not worth the paper they are written on.

"The Tories have to find more than £50billion of cuts to pay for the tax and spending commitments they have made - a scale of cuts that could only be found through frontline cuts to hospitals, schools, the police and vital public services."

Labour has set in motion a review of council tax, but even though the party believes council tax is unfair, has no specific pre-election pledge on a tax which has angered middle England and regressively hit pensioners and others on fixed incomes.

All we do know is that property revaluation after the election is likely to send average tax bills soaring to around £2,000 a year - in Ipswich, for example, that would be an increase of around £15 a week.

Council tax benefits are available for those on lower incomes - in Tendring 9,500 households receive the full amount of relief, which represents 15% of the total number of council taxpayers.

The Conservative plan has the advantage of not being means tested - every home with an eligible occupant will receive the relief.

As council tax takes no account of salary, the elderly who are just above the threshold for benefits pay the same property tax as the millionaire or the double-income couple who live in the same street,

To stop council tax going through the roof before the election, local authorities were given a £1bn bribe from the Treasury. This has allowed Suffolk county council to keep its tax rise down to around 2.5%.

Few however will forget that just two years ago, the county raised tax by 18.5% without so much as a bat of the eyelids. This swingeing increase - typical of the rises in the south and east of the country as the Government diverted council tax aid to the north and midlands - led to a pensioners' revolt.

It galvanised the Tory Party - which introduced the tax in 1993 to replace the unpopular poll tax which in turn had superseded domestic rating - to try to find a vote winning alternative.

It's been unable or willing to replace domestic rating, having ruled out local income tax and local sales taxes. They could have proposed, as the party in Scotland is pledged to do, to removed the burden of education spending from local authorities and funded it centrally

But yesterday's promise does go some way to mitigate the impact of council tax on the elderly.