Sinister death tax' planned, warn Tories

The government plans to introduce a "sinister death tax" to help pensioners avoid paying council tax while they are alive, the Conservatives claimed today.

The Tories raised the spectre of a deferred tax after realising that a similar proposal was put out to consultation in Northern Ireland at the end of last year as part of the devolved region's rates review.

Under the scheme, pensioners faced with rising council tax bills could choose to defer part or all of their local tax bill, which councils would then collect from the sale of their property after they died.

Sir Michael Lyons, former chief executive of Birmingham council, has explored this option as part of his inquiry into the future of local government finance in England.

A spokesman for his office confirmed that "deferring council tax was something he was considering in the review". Any recommendation on introducing a deferred tax system will be part of his report, due to be published later this year.

A spokesman at the Office of the Deputy Prime Minister dismissed the Conservatives' claims that the government was considering introducing a similar proposal in England.

"This is entirely a matter for Northern Ireland", he said, adding that Northern Ireland does not even have a comparable council tax system in place.

Caroline Spelman, the Conservative spokeswoman for local government and communities, said the Northern Ireland proposal was a "worrying policy development" for England.

"It is a sinister death tax by any other name. I fear that that the elderly, struggling with soaring council tax bills, will be pressured into signing away their homes to the tax man," she said.

"This is another smash and grab raid on the savings of middle England - pension funds were first, your home is next," Ms Spelman added.

Sylvia Hardy, a 73-year-old council tax rebel who faces a week in prison after refusing to pay her arrears by a deadline set by the courts for midnight last night, said the proposal sounded "all right" in principle, but could be thwarted by the growing number of pensioners opting for an equity release scheme.

Mrs Hardy said that any deferred council tax scheme would exclude people who did not own their own homes, including others like her, who had sold their homes to specialist equity release companies.

This scheme allows a homeowner to sell their home for cash but live in it rent-free until they die or go into residential care. "The government will not be able to get their hands on my money when I die or go into residential care," she said.

Magistrates in June gave Mrs Hardy - who owes ?63.71 in council tax from last year, together with ?10 costs - a 56-day suspended committal order to pay her dues, which expired at midnight yesterday.

Mrs Hardy, a former social worker, now faces a seven-day jail term.

She said she was ready to face a prison term after deciding to pay only a 1.7% increase in council tax, in line with the increase in her occupational pension.

"I thought about this before decided to embark on this," she said. "I am the kind of person that, if I decide to take something on, I will see it through.

"Some people ... went as far as they could and then gave up because of family considerations, but I have no family commitments so must see it through."

She is now waiting for a summons from the courts to arrive.

An Exeter city council spokesman said earlier that if Mrs Hardy had not paid by the deadline, they would inform the court. It was then up to the court to issue a summons and fix a court date. "It is our duty to collect the council tax," he said.