Sunday Times: True cost of Brown's stealth taxes

by Jessica Bown

A new report reveals how families have been hit by sneaky increases in charges for local services, on top of soaring household bills. By Jessica Bown

TAXPAYERS are forking out an extra Pounds 10 billion a year in charges for NHS and local-authority services under Labour, according to a damning report to be released tomorrow.

These "stealth" taxes are equivalent to almost 3p on the basic rate of income tax, and come as hard-pressed families struggle to cope with the rising cost of mortgages, fuel and food, says the Taxpayers' Alliance.

Local authority fees, which cover everything from pest control to parking fines, have more than doubled in England, from Pounds 5.5 billion a decade ago. Meanwhile, NHS charges, including parking fees, have nearly tripled from Pounds 1.3 billion in 1998.

Matthew Elliott, chief executive of the Taxpayers' Alliance, said: "The rise in taxes has reached unsustainable levels and is pushing millions of families to the brink."

The average household's monthly expenditure on essentials such as food, fuel and utility bills has shot up more than 7% in the past 12 months - way above the 3.7% rise in pay.

Changes introduced in the budget last year, including the controversial removal of the 10p tax band, threaten to make things worse.

Thousands of investors in popular company share schemes face an 80% increase in their capital-gains tax bills when they sell, while the much-trumpeted 2p reduction in the basic-rate tax band to 20% means that millions will have to pay more into their pensions to achieve their retirement goals.

Frank Haskew of the Institute of Chartered Accountants said: "Government budgets are under pressure, so families are feeling the squeeze. Council tax, for example, has gone up because central grants have fallen."

Steven Peers, a security consultant from Welwyn Garden City in Hertfordshire, has seen his annual council tax increase by 138% to more than Pounds 1,400 since 1996. He said: "Things in the area have improved since I bought my house in 1996, but certainly not by 138%."

Peers, 40, who lives with girlfriend Sarah Waller, 39, son Finn, six, and twins Lucienne and Olivia, three, has also noticed a big rise in overall living costs. "In real terms, I am worse off than I was a decade ago," he said.

We reveal some of the sneakiest charges adding to your tax burden and offer tips on reducing your bill below.

Local services Local-authority fees and charges have soared 130% in the past decade, outstripping the 17% rise in prices on the government's preferred consumer prices index (CPI). Elliott said: "It's not widely appreciated how much the public sector charges for services that were once free, or virtually fee, at the point of delivery."

Pest-control services, which used to be free to most people, are now almost universally charged for. Dealing with a rat infestation, for example, costs up to Pounds 80.

The cost of a school meal, meanwhile, has jumped 50% over the past decade to Pounds 1.64. With 3.25m meals served daily, the annual cost is now more than Pounds 1 billion.

Parking charges and fines have also leapt about 5% a year on average over the past decade, while the cost of some public car parks has jumped more than 40% in a single year.

Peers said: "The cost of parking at our local car park has gone up by 20% in the last 12 months alone."

Homes While the government's windfall from fuel duty has been widely criticised, the growing burden of Vat on utility bills has been largely overlooked. Vat is charged at a reduced rate of 5% on energy bills, but the government's tax take has nevertheless soared as fuel bills have risen. The typical bill is up 14% this year at Pounds 1,050, and the total Vat stands at Pounds 1.3 billion, up Pounds 140m in 12 months.

By far the biggest stealth tax on homeowners, though, is stamp duty. This has soared by an astonishing 314% over the past decade from Pounds 3.5 billion to Pounds 14.3 billion.

Healthcare The Taxpayers' Alliance estimates that NHS charges have increased 186% to Pounds 3.7 billion since 1998. Until 15 years ago, most NHS hospitals provided free car parks, but over the past decade charges have escalated so they now cost patients at least Pounds 100m a year.

Prescription charges have also increased - from Pounds 321m in 1998 to Pounds 459m today.

Cars Between 50p and 60p of the Pounds 1.10 or so you pay per litre of petrol is made up of fuel tax and Vat. Figures from accountant Grant Thornton suggest rising costs mean the government collects an extra 9p on every litre.

Mike Warburton at Grant Thornton said: "We say the chancellor can afford to help motorists with a 9p reduction rather than allow the 2p increase that is currently planned. Either way, it is a stealth tax."

Drivers are also being squeezed by rising costs at government quangos. The Driver Vehicle and Licensing Agency now makes Pounds 300m a year from the sale of licences, while personalised number plates bring in Pounds 100m.

Holidays Research from currency card provider FairFX shows that three in five families are cutting holiday expenditure this year. Air passenger duty has leapt Pounds 1.5 billion to Pounds 3.5 billion in the past 10 years, while the cost of a new passport is up from Pounds 18 in 1997 to Pounds 72.

Peers said: "We are planning to go camping this year for the first time, which is indicative of the phenomenal cost of living today."