The tricky task of taxing country life

A new report's proposals to discourage rural development may mean extra costs for country dwellers, says Paul Slade

MOVING FROM the town to the country could mean paying more tax on everything from council services to your car insurance, if proposals from this week's Urban Task Force report become law.

Among the Task Force's more than 100 suggestions to discourage rural development are plans for council tax cuts, removal or reduction of stamp duty on house purchases and tax relief on home contents and car insurance. These tax breaks would be available only to those living in what the Task Force calls Urban Priority Areas - principally inner city "brownfield" sites.

Inevitably, this will mean country dwellers are asked to subsidise people living in the inner cities. For example, insurers fear rural car owners would not understand why their taxes were going to reduce premiums for drivers living in areas with far more crime.

Malcolm Tarling of the Association of British Insurers says: "I may live in a fairly affluent area, but not be a particularly good risk, so my insurance costs may be quite high. Why should I subsidise someone who lives in a different area?"

The Task Force suggestion is that an unspecified level of tax relief be given on home contents and car insurance premiums paid by people living in Urban Priority Areas, where crime is likely to be high. "Burglaries are the major deterrent we're trying to tackle," says a Task Force member Tony Burton.

The Task Force also wants to see a new band of council tax introduced for those in Urban Priority Areas, giving a saving to those buying homes which would currently be in bands A, B or C.

These bands cover properties worth up to pounds 68,000. Government figures suggest the average council tax bill for 1999/2000 will be about pounds 531 for band A, pounds 620 for band B and pounds 709 for band C. The size of discount offered by the new band is unclear.

The Countryside Alliance head of policy Nigel Burke is not convinced his members will accept changes such as these. He says: "So many promises have been made on rural regeneration. Country-dwellers will be concerned that the focus is now back on the inner cities."

But Mr Burton, who is also assistant director of the Council for the Protection of Rural England, says such subsidy flows both ways. We all pay the same price for a first-class postage stamp, he points out, despite the fact that deliveries can be made much more cheaply in tightly-packed cities than they can in the countryside. Mr Burton says: "There are huge benefits to the countryside in making towns and cities more attractive places to live, because the countryside is suffering enormously from people moving out of the towns. Protecting the countryside requires rejuvenation of the towns.

"There are wide benefits to society of people living in urban areas, which we should recognise. We must remove some obstacles to people living there, whether these involve council tax or disproportionately high insurance premiums."

The Task Force also calls for removal or reduction of stamp duty for homebuyers prepared to live in an Urban Priority Area. Stamp duty is charged only on properties worth pounds 60,000 or more. The rates are 1 per cent on properties worth between pounds 60,000 and pounds 250,000, 2.5 per cent on those worth between pounds 250,000 and pounds 500,000 and 3.5 per cent on ones worth pounds 500,000 or more.

Latest figures from the Halifax, Britain's biggest mortgage lender, show the average house in the UK sells for pounds 76,877, creating a Stamp Duty charge of pounds 768. A Halifax spokeswoman says: "People in the north of England very rarely pay stamp duty, but if you're in London or the south-east, virtually every property purchase you make is going to have stamp duty.

"Removing it only on purchases in urban areas would make this inequality even worse, and we would rather see stamp duty go across the board."

One idea discussed by the Task Force was abolishing mortgage interest tax relief (Miras) for country-dwellers, but retaining the relief for borrowers in town. This idea was leaked in January, but quietly dropped following protests from bodies including the Countryside Alliance. Miras will be abolished for everyone from April 6 next year.

The next step towards any legislation springing from the Task Force proposals is a Government White Paper, promised in the next 12 months. Mr Burton hopes each local council with Urban Priority Areas on its patch will then be able to select a menu of measures most helpful for its own needs.