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No doubt Toynbee and co will put this down to the propaganda of the right-wing press because we all know that the British electorate, when they put their minds to it, really really want Swedish levels of taxation and redistribution. Or not.

On a more serious note, how much money would have to be saved to:

Raise the threshold of the top rate of income tax (to, say, 40,000)

Raise the threshold of the bottom rate of income tax (to, say, 8000)

Abolish IHT, CGT and stamp duty on shares

Cut corporation tax to 28% (the same rate as socialist Sweden)

Admittedly I'm not sure what could be done about council tax - I'll leave that idea to others.

One has to be realistic; we can all vote for tax reductions that will benefit us personally but which of these proposals will benefit the country as a whole?
I am surprised that stamp duty on property transactions was not included, as arguably this needs reform more than IHT. It was never intended to catch first time buyers, so surely the threshold should be substantially raised (say to £500,000) and then to go up in steps.
I have always been in favour of raising the initial personal tax threshold very significantly to take millions out of tax and off benefit.

Under the present system, there are four ways to lower council tax:

1. More central funding, which means more central control, which runs counter to the alleged "localism" agenda because "he who pays the piper calls the tune".

2. More charges for services and more "civil penalties", or "fines" as we used to call them until it was pointed out that "fines" is the word used in the Bill of Rights.

3. Cuts in local services.

4. Efficiency savings.

Personally I would prefer to see central funding and therefore central control cut to the minimum, and alternative forms of local taxation introduced. I don't like council tax because in effect it's an annual levy on wealth, and I don't like Land Value Tax for the same reason. I would accept a local property gains tax, ie a tax on the gains actually realised when a house is sold, as a replacement for national stamp duty when the house is bought, and a local sales tax as a replacement for national VAT, once we've left the EU and regained complete control of our tax system. There's also the question of business rates, which are still collected by local authorities but then sent on to London for re-distribution as they see fit.

We need a major campaign that fills the tv about government waste.

The ground needs to be prepared for the tax cutting message.

Interesting, however these polls can be very misleading if taken on face value. People will consistently want to have and eat the cake. When asked if the want good public services, defence, police, roads, schools, universities, dental care etc. etc. etc. they will say yes. This is the reason we need Governments, they have to make the tough decisions on spending versus taxation.

The truth is that the Labour lie machine has been very effective in denouncing us as a party for the rich and taxation obsessed. Have the debate by all means, but we must tread carefully, Brown is a devious man and will be praying for us to overstreach ourselves on this.

For council tax reform, see the proposal from Douglas Carswell MP to abolish council tax and VAT and to replace them with a local sales tax.

I believe the figures are 66 billion for the central grant to councils, and 64 billion is raised via VAT. So abolish VAT, have a local sales tax with cross subsidy and a council might have a bit of real power worth voting for.

Would have to get out the EU first of course.

It's interesting that two suggestions for funding local councils posted here (possibly three if you include the one about Carswell's proposal) are predicated on leaving the EU, a move that is not now - and will likely never be - Conservative party policy.

For council tax reform, see the proposal from Douglas Carswell MP to abolish council tax and VAT and to replace them with a local sales tax.

I honestly don't know what party Carswell represents so this isn't a party political jibe when I say......BARMY IDEA.

For a start how do you deal with the groups of people who don't currently pay council tax? Like children or those on benefits. They are gonna have to pay this tax.

It's also got the potential to slow consumer spending, which isn't gonna do the economy a whole lotta good.

Now this tax is gonna have to be pretty high to replace both VAT and council tax. That is gonna make it worth evading. People are gonna go abroad to make big purchases. More commonly what about places like London where councils occupy small geographic aeras, and are right next to each other? How do you stop people from Camden or Lambeth shopping in Westminster or Chelsea? Is he suggesting people should be able to choose who they pay their council tax to?

Of course if a local authority is going to rely on a local sales tax then its area has to include enough places where sales are made and the tax can be applied. The ratio between shops and dwellings won't be the same in all local authority areas - it could be the case that a local authority finds that while all its residents need their bins emptied within its boundaries, many of them do much of their shopping outside its boundaries, or vice versa. Hence it may be better to have additional sources of revenue which are definitely localised within its boundaries. But while I accept one of the arguments for Land Value Tax, namely that the value of the property depends upon the desirability of the location and its environment, and the property owner can't claim full credit for increased value and so shouldn't reap the full benefit from it, I think that the tax should only apply when the increase in value is actually realised, not as an annual levy, and it should be calculated only on the gain in value, not on the total value. In other words, whenever a house was sold in its area the local authority would receive a proportion of the capital gain made since it was purchased, after allowing for general inflation and a modest annual return on investment, giving the authority a strong incentive to maintain and improve property values within its area. This would replace stamp duty at the time of purchase.

honestly don't know what party Carswell represents

and the answer is.......Cornerstone. I might have guessed.

The reason that council tax is the most unpopular tax is that it is a HIGHLY VISIBLE tax that people must pay DIRECTLY by cash, cheque or direct debit.

It for these reasons of VISIBILITY and DIRECT PAYMENT that while unpopular, council tax is growing much less fast (or being cut in real terms) than the STEALTH taxes of which income tax by PAYE and VAT are prime examples.

Gordon Brown has raised income tax by almost 7% this year (I raised our district's council tax by only 2.7%) but people fail to complain because they never do the sums on how much tax their employer takes from them each month, and as the tax only increases when their salary does their net pay always increases, reducing the visibility even further.

VAT is no better, hidden as it is within the overall retail price.

As a taxpayer, don't be so quick to condemn council tax. Rather look at methods to increase the visibility of other taxes. Imagine Sir Humphrey's reaction if someone proposed the abolition of PAYE with everyone paying income tax by direct personal payment.

Despite being on opposite sides of the politcal spectrum I agree with everything Adrian says above. Council tax may not be popular (who enjoys paying tax?) but it is open and honest.

That's twice this year we have agreed, Adrian :D :)

Comstock, the figures for VAT and the central grant are the same. If anything, it will drive down prices as authorities will be competing with each other. Your points about people on benefits and slowing spending are scaremongering.

Have a read of this http://www.direct-democracy.co.uk/display_page.asp?section=policy&id=11

The only decent alternative is a local income tax. I have sent in a "100 policies" on local government reform but it is in the editor's in tray.
Sales tax only works in the States where the distances from state to state are too large to make cross border shopping economic. Property taxes like council tax are intrinsically unfair on people who are income poor but asset rich i.e. the elderly who vote Conservative and are another tax on savings.
Local income tax is only viable with an identity database so that councils can know the total income base of the people living in their area. But as the government is establishing one of those anyway, the rest is pure upside.
If Conservatives introduce local income tax we can ensure it is flat rate not dual band and so start the move to flat rate income taxes. To keep it at acceptable levels, education should be paid for centrally with vouchers and then we do not need local government grant and councils can raise all their own tax from income tax and NNDR, making them self sufficient. If councils keep their own NNDR, instead of seeing it wasted in a central pooling then they would be incentivised to support local businesses.
If income tax paid for the council services then people would have a much greater incentive to vote in local elections and would kick out high spending councils whether Labour or near-Tory.
Income tax is completely fair since the unemployed pay 3% of their benefits to have their dustbins emptied just as a City Banker pays 3% of his millions. This gives everyone the incentive to stop waste, which was the idea with poll tax but without the obvious unfairness of that tax.

Douglas Carswell MP was one of the first to back Cameron's leadership bid, which surprised many, a Cameron was not publicly offering a eurosceptric platform other than EPP withdrawal. What Cameron was saying to eurosceptic MP's in private to pull them into his camp, we may never know.

Douglas is a member of Better Off Out. He is one of the main authors of 'Direct Democracy'.

Outside the EU we could abolish VAT, which is highly expensive in bureaucratic terms, as well as suffering from losses to fraud of over £5 billion a year, and replace it with a local sales tax.

Once local sales tax is in place, council tax could be pregressively abolished. This would greatly reduce bureaucracy and fraud, as well as establish local accountability. Douglas Carswell's concept is win, win, win, win.

Have a read of this http://www.direct-democracy.co.uk/display_page.asp?section=policy&id=11

Read it. Still think it's a rubbish idea. Look at your own local authority. I'll bet you do most of your shopping in Derby? Apart from a few shops in Swad most people from South Derbyshire shop in Burton Derby or Tamworth.

Anyway it sounds as though this local sales tax is supposed to replace the money given from *central govt taxation* to local authorities, not to replace council tax. It would have to be a high tax indeed to replace both.

Better Off Out is the most exciting thing to happen to the party in years.

Let's hope that one of their representatives is invited to contribute a piece to conservativehome.com

Jonathan @ 14:50 -

"Property taxes like council tax are intrinsically unfair on people who are income poor but asset rich ..."

Only if they're levied annually and therefore usually have to be paid out of annual income, not if they're levied only when the asset is sold and its value is realised.

"... and are another tax on savings."

True, but maybe we're putting too much money into our houses as investments rather than into more productive assets ... but in any case, any tax should only be calculated on the capital gain realised on sale, not on the total value.

I don't see any huge practical problem with local income tax in the sense that the Inland Revenue already knows where each of us lives, can be told by the local council what tax rate they have set, and can then collect the local part of income tax and send it to the council. But it does seem peculiar that a lot of the local income tax collected for people living in this town would be for income earned in London, not locally. I'm not sure what the consequences of that would be, just as with local sales tax. At least houses don't move around.

"As a taxpayer, don't be so quick to condemn council tax. Rather look at methods to increase the visibility of other taxes. Imagine Sir Humphrey's reaction if someone proposed the abolition of PAYE with everyone paying income tax by direct personal payment."

That's not a bad idea for 100 policies actually (I've already submitted a few so someone else should work it up):

Keep PAYE (for convenience) but like in the US have everyone file a tax return every year totalling up how much they owe and comparing against how much they have already paid via PAYE (then paying the balance or receiving a cheque in the case of overpayment). Then Tax would be a whole lot more visible.

But it does seem peculiar that a lot of the local income tax collected for people living in this town would be for income earned in London, not locally. I'm not sure what the consequences of that would be

I'm not sure there would be any. After all a lot of the council tax paid at the moment would be money earnt in London. If anything it might make payroll's job a little more complex.

The idea of a local income tax does have some appeal to me (IMHO the only truly fair way to tax is on ones income, other taxes may have merits-like environmental taxes on fuel- but only income tax is fair)

That said Adrians point remains a strong one- council tax is open and honest- although income tax is less hidden than other so called 'stealth' taxes, especially if each payslip was required to display exact proportions given to local and national government.

Comstock, if the idea was implemented, I would imagine it would be county wide rather than district, so you would indeed have Tamworth, Burton and Derby competing for business which would guide the level the tax is set at.

A lot of the council tax paid now would be paid out income earned in London, but the amount of council tax is not based on that income. With a local property gains tax, there's an incentive for the council to make its area a better place to live so that property values and tax revenues increase. With a local sales tax, there's an incentive for the council to make its area a better place to shop so that sales and tax revenues increase. With a local business rate, there's an incentive for the council to make its area a better place to set up businesses. But if local income tax is based largely on income earned outside its area, it has no similar incentive to make its area a better place to work. I suppose it could end up with some salubrious areas where hardly anybody is employed locally, but with a large income tax revenue from high income residents who work elsewhere, and other grottier areas accommodating their workplaces but only receiving tax from the lower incomes of local menial workers. Dunno, really.

Comstock, if the idea was implemented, I would imagine it would be county wide rather than district,

I'm no expert on this but think I'm right in saying Derbyshire county council doesn't exist anymore, Andrew.

I know Staffordshire still have a county council but Derby just has city council I think, so you would need to bring the county council back

(not sure how typical this is but the rest of Derbyshire has very few major retailing centres- people go to Derby itself or Nottingham, Mansfield, Sheffield or Manchester)

Comstock thanks for the compliment at 13:35 and your continued debate on this site. Disproves the notion that it is solely for Tory Taliban!

A local sales tax has a logical feel to it and some strong arguments in favour. However, without unitary local government (and the Government appear to have stated that two-tier is here to stay) there would have to be, in the large parts of England that remain two-tier, two components to local sales tax - a large county element and a smaller district element.

The county element would make differences in sales tax between neighbouring areas very small. On a weekly family supermarket bill of perhaps £100 the difference would not be worth the fuel cost (never mind the hassle) in driving the additional miles to a neighbouring district with a marginally lower sales tax.

The downward leverage on the tax rates would only really come from the infrequently purchased large-ticket items and I fear that like VAT a local sales tax would hit lower-income households that rely on public transport.

it sounds as though this local sales tax is supposed to replace the money given from *central govt taxation* to local authorities, not to replace council tax. It would have to be a high tax indeed to replace both. (Comstock)

The losses to fraud of VAT are colossal. A local sales tax would not be so easy to avoid and defraud as VAT. The relationship between rates of taxation and tax take are far from linear. If tax rates are reduced, tax take can rise. The elimination of VAT as a burden on business would give a spurt to growth, for example as many businesses decide to remain below VAT threshold and stop growing. This would affect huge numbers of businesses.

Council Tax couldn't be replaced on day 1 by local sales tax. The cost of adminstration of local government via quangos could be eleiminated by local democracy. There are huge potential efficiency gains which could be realised in this way, which could also be used in time to eliminate council tax.

"We need a major campaign that fills the tv about government waste.
The ground needs to be prepared for the tax cutting message."

Posted by: HF | August 27, 2006 at 10:44

This is a very sensible suggestion.
Have we not already listed numerous examples of government wastage (one of the latest examples being the cost of cancelling the proposal to merge police forces) to provide necessary ammunition?
Not only should we identify as many of these as possible with Gordon Waste-a-Lot, but we should also produce examples of:
* how much a middle aged teacher or nurse really has to pay in tax (i.e. by aggregating tax and NI)
* the situation confronting a recent graduate with a student loan to pay off contemplating marriage and having to buy his/her first property.
* what proportion of income goes out in tax and NI when someone earns between £7,186 and £33,592.

Mmm, I would still urge caution against setting out a revolutionary agenda. Slowly slowly catchie monkey. The electorate are naturally - yup - conservative in nature. They don't do radical change. Our manifesto should reassure the public to the point where they are at last willing to give us a chance. That given they are unlikely to endorse some kind of blitzkreig on taxation and public services, the percieved risks and predictablilty of the outcome would make them skeptical (another natural conservative instinct my friends)...

Better to promise limited reform and maeasure reform to the taxation systen in the first term. That will get us in the door, and if we deliver, get a further mandate.

Unterestingly - we should not be considering massive reform wholesale, BUT the big question is what is our 'devolution bomb'. Labour capitalised on their rocket to power by quickly getting devolution through in a vote. What could we do? Or is it just them that are that underhand and calculating with momentary opportunities in the public mood?

re Council Tax

For my pains, I had to study local taxation as part of my RICS training and that was before the "rates" were replaced by the Community Charge!

The fact is that because not enough is raised from the local electorate, the tax is distorted and Councils can get away with blaming central Government for not giving them enough grant.

Also, replacing C-Tax with another single tax will always fall foul of the "little old lady in big house" problem. (little old lady in big house pays £X, family with two grown up children in identical house netx door also pay £x, despite having four - potential - wage earners).

The answer is to allow councils to raise more of what they spend, say up to 50% initially, by giving them a range of things to tax. Hotel rooms, business turnover, local sales tax, property taxes and, yes, even local income tax. Also many, many more direct charges, eg for refuse. Why is domestic refuse covered in C-Tax? Why don't people buy bags like businesses do and pay only for what they use?

This does two things. It removes the defence of "not me guv" from local Councils, and it make people see a more direct link between the local tax bill and what the local politicians do. The saving in national tax would of course have to go back to pensioners primarily as their taxes would rise not their income, but that also sounds like a winner for me.

This nonsense that seems to be doing the rounds at the moment that people should be charged for there rubbish really would only lead to one thing and that would be more rubbish being dumped on the streets.
Council tax is unpopular because it is simply unfair and hits those on fixed incomes and the poor particularly hard.
Tax should always be decided by someone`s ability to pay therefore personally I think the fairest way forward for local taxes is a local income tax.
Mind you at the end of the day lower tax bills will only come when local councils become more accountable and efficient and stop spending in the cavalier and inefficient way they spend at present.

Many of them are able to pay, but only if they find a way to withdraw equity from their houses. So overall it comes down to everybody who is working must pay more tax on their earnings so that people who are no longer working can build up capital in the form of their houses, without any taxation, at the expense of those who are entering the housing market or moving up, and then some of those who are or have been working will inherit accumulated capital while others will not.

I agree with Oberon. We need to be very cautious about this tax survey and what it tells us. Of course people say they don't like paying taxes and of course they have drifted up too high. But people also want services and are very quick to complain if they are cut. We are seeing these debates across the country depending on the actions of each council. To a large degree improvements depend on efficiency savings but these are not always easy to achieve in practice and don't feed through quickly. One of the problems we faced before when we talked about tax cuts is that many voters now know this and of course white collar workers know this at first hand. A fair proportion of them are sceptical about what can be done and din't want to upset the economic apple cart. They were susceptable to the Labour message about cuts and they were doing quite well (house prices bouyant, inflation low etc). To some degree that mood may have changed but in my view not enough yet. I think talking about lower business tax and simpler tax generally would be a good message as we talk about improving the economy. Simpler tax systems would also mean less bureaucracy ie less admin costs and less hassle for tax payers. I feel this would be a good approach for us,

Matt

Dennis Cooper What sort of Conservative are you? Income tax means you are taxed on your income If you are working on your salary if you are retired on your pension and dividends. I do not understand how any English Conservative can support attacks on property or treat a family home as a crime or a tax scam. AFAIK support for property's about the most fundamental principle the party's got. Giving your nest egg to your family or friends is also pretty fundamental. The whole nightmare of 20th century politics started with Lloyd George's politics of envy in 1909 and with the centenary coming the Conservatives ought to be reminding the country that selling peerages wasn't his only mistake.

Matt Wright and Oberon Yes the public does not believe us that tax cuts can be achieved without service cuts. It is probably right not to do so, whilst services remain as they are now.
However, we should be shouting louder and louder that Blair's additional money has meant no increase in service provision and has been largely wasted. The public do believe this.
What we need to do to square this circle is to come up with an alternative method of service provision which allows us to save this wasted money and return it to the voters as tax cuts. Education vouchers is the easy option for schools and universities. Working out an alternative for health is much more tricky. Personally I favour vouchers there too.

"It's also got the potential to slow consumer spending, which isn't gonna do the economy a whole lotta good."

It will if it encourages saving. Higher savings rates = higher growth. It was one of the main causes behind the phenomenal growth of the Far East.

"Dennis Cooper What sort of Conservative are you? Income tax means you are taxed on your income If you are working on your salary if you are retired on your pension and dividends. I do not understand how any English Conservative can support attacks on property or treat a family home as a crime or a tax scam."

What is so Conservative about income tax? On the free market, people who rent more expensive accommodation have to pay higher rates. Council tax is therefore a rather crude reproduction of such a market mechanism. That doesn't change the fact that it has defects, simply that income tax is not necessarily more conservative.

"Of course people say they don't like paying taxes and of course they have drifted up too high. But people also want services and are very quick to complain if they are cut."

Why don't they pay for those services themselves with the extra tax money? Or is it that they want other people to pay for their services...

Council tax is unpopular because it is simply unfair and hits those on fixed incomes and the poor particularly hard.

Correct.

It's a huge pity that the Community Charge almost certainly cannot now be resurrected.

This eminently fair flagship policy was one of the very best ideas to come out of the Thatcher era.

"Sales tax only works in the States where the distances from state to state are too large to make cross border shopping economic."

Well, yes and no. I can't imagine the differences between adjoining localities in the UK would often be so dramatic as going from, say, Massachusetts or Vermont to no-tax New Hampshire.

"Sales tax only works in the States where the distances from state to state are too large to make cross border shopping economic."

Since the highest Sales Tax is c. 8% it is not a big deal.............then again Property Taxes are a bigger headache in the US than Sales Tax.

We pay Council Tax + 2.5% VAT for local services or have you forgotten Lamont raising VAT from 15% to 17.5% ?

The keystone of our tax policy needs to be freedom of choice. That's true Conservatism in action.

Our commissions should be looking into the idea of vouchers which the public can choose to spend on schools, hospitals, whatever, using money as well to buy what they want.

Only the very poorest in society need a social safety net.

Personally I would put the Adam Smith Institute in charge of working out future Conservative tax policy.

We need radical ideas - and fast.

Goodness, Jonathan, anyone would think that I've proposed the liquidation of the kulaks ... it's hardly an attack on property to believe that a home is a personal haven, but it shouldn't necessarily also be a tax haven; that nobody who owns their house can plead genuine poverty when it comes to paying a local tax; that it's wrong to make every working person pay more tax on their earnings to protect the unearned inheritances which some but not all of them can expect to receive on their parents' death; that the housing market creates an excessive transfer of money from those who are young and starting at the bottom, to those who are old and sitting at the top; and that perhaps it would be better in the long run if more of that money was invested in productive assets, rather than in houses.

Anybody who wants to be sure of enough cash to be able to live comfortably in their old age, and pay their taxes, should invest some of their working life savings in liquid assets rather than just a house. Or, if they chose not to do that and left themselves starved of liquidity they could withdraw some of the equity from their house. Or, as I suggest, rather than an annual levy related to the whole property value there could be a tax just on the gain realised when the house was sold.

Denis Cooper, What you are talking about is prudent management of one's old age. That has got very little to do with whether the government should tax housing or wealth, which for many Britons is the same thing. I see nothing wrong with people who have lead decent sensible hard working lives storing up some money and passing it on to their children. This is not an excessive transfer. Working people are not paying more they are paying the same share of their income as a retired person is paying of his. When did the Conservative party become in favour of wealth taxes?

The "excessive transfer" is from young working people who have to pay in huge sums and take on massive debt to get on the bottom rung of the housing ladder, and then more again when they need to move up before they can start a family, which money ends up in the hands of those who were fortunate enough to enter the market decades ago and/or their heirs and who now demand to reap the full benefit of that peculiarly tax-exempt investment even though that means that those who are actually working and earning their money have to pay more tax.

If there is any surplus tax revenue, then in my view the order of priority for tax relief should start:

1. Those who are working and earning their money.

2. Those who are saving some of their earnings to provide for their future.

and those who are receiving large unearned sums of money should be much lower down on the list of priorities.

That's not because there's anything wrong with giving or leaving money to your children, it's just that the recipients should not necessarily escape taxation on those unearned sums when people who are working are taxed on their earnings.

Incidentally, not only were they fortunate enough to enter the market decades ago, they were also fortunate enough to get income tax relief on their mortgage interest payments. Not only is it a myth that inheritors have somehow already paid tax when the house was purchased, their parents also only paid tax on a part of the money they used to purchase it.

We're getting off topic here but..
Housing is disproportionately expensive in this country because it is a national charachteristic to value property (its one of the things that marks us as English) in complete contradistinction to France and Germany where everyone is happy to rent (9% stamp duty is either chicken or egg in that I expect). Secondly because this island is so crowded that the supply of property is insufficient especially given that a) we have no regional policy worthy of the name so that everyone wants to live in the SE 20% of the island and b) that we have had an open house policy to every sleazy Russian billionaire and indigent African who think they will be better off in a country of tolerance and law and order rather than the hell hole they have made of their own country of birth.
This is the working of the British housing market. I thought Conservatives believed in markets. If you leave markets alone they achieve their own equilibrium. If you must interfere then the Conservative solution is not to tax it but to treat the cause by slamming the door on the open house and by culturally and economically re-valuing those other 80% of the British Isles.

The Conservative party under DC is once again highlighting the benefit of small government. Why then do we need 52 district councillors in Mid-Sussex who all now draw an annual "salary" for what used to be a part-time voluntary commitment. It was supposed to be a choice between a well paid executive or a remunerated elected body.

Well we have both and I do not hear the Conservative majority moaning too much about it. Services are being slashed and the MP's appear helpless (Nick Herbert and Nick Soames have resorted to appealing via the local papers for electors to petition central government to halt further NHS cutbacks) and we are in a solidly Tory area at all levels of representation.

The public are immune to cries of money being redistributed to Labour heartlands. We need to take responsibility and show some leadership. If we are to retain the present council tax system, even within the restraints of current central government allocations, we need to show creative plans that are recognised by the electorate.

In the long run a local sales tax might be much fairer. But even then the money will still be in the hands of those who have so far proved unable to work with what they have available to them. There is no reason this year to increase council tax (at least around here) by even 1%.

Council Tax - why does more central funding necessarily mean more central control? The bugbear has always been the relative inefficiency and unfairness of the various kinds of local tax gathering - so why not just abandon it altogether? Let Parliament decide how much is to be spent locally per head across the country, let the Revenue collect the money and central government simply remit the appropriate share to each local authority - who then have complete local autonomy about how they decide to spend their allocation (or even to return some of it to their electors!)

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