Council Tax

Council tax reform in the age of localism: why councils should take the lead

  • Published 2nd Dec 2015
  • Category: Council Tax

Why council tax reform is needed now

1. In England (and Scotland), council tax is still levied on the basis of the 1991 property values used when the tax was introduced in 1993. Since then, all houses and flats have gone up in value but some have gone up more than others. As time goes by, council tax becomes ever more arbitrary.

2. To end this arbitrariness, the basis on which the tax is levied needs to be updated to current property values and then regularly updated thereafter. This is “revaluation”. In turn, revaluation opens up the possibility of changing the structure of the tax: crudely, the difference between what a bigger place and a smaller place pay in council tax. This is “reform”. Other features of the tax, such as the single person discount and the empty homes premium, can also be reviewed as part of reform.

3. Council tax benefit gave households receiving means-tested state support full relief from council tax. In doing so, it made the whole council tax system fairer. CTB’s abolition in 2013 for those of working-age strengthens the case for council tax reform.

4. Cutbacks in local government funding since 2011 and changes to local government responsibilities mean that council tax is now equal to about half the spending which councils fully control. Further cutbacks will increase it further. This makes the link between truly local spending and locally-raised tax stronger than for many decades.

5. Local democracy will wither if councils stop using council tax as a source of extra money. To stay in office, councils will have to engage with local citizens to explain why the tax is going up. Even small amounts of extra money shape how services develop. If council tax does not provide it, local provision will change in response to the wishes of businesses, property developers and others. An arbitrary tax that asks too much of some and too little of others is a barrier to democratic engagement.

Why local authorities should decide

6. The decision to reform should be taken locally rather than nationally. The outcome of revaluation is too uncertain for central government to risk it. It is also impossible get any intuitive sense of what is fair between, say, a flat in Barnet, a semi in Barnsley or a terrace in Bath. By contrast, the likely outcome of local reform and whether it is fair is much easier to grasp.

7. Central government’s role is to set out a framework within which these decisions can be made. The question is how tightly this should be drawn. The cautious proposal here is that the regularity at the heart of the current system, between bands B and F, should be extended, downward and upward, by splitting bands A, G and H.

8. Council tax support should be reformed on the same basis. CTS is an integral part of the council tax system, of primary importance to low incomes households. Central government should specify limits on CTS schemes so as to check the race to the bottom now taking place and stop the poorest residents facing tax rises.

About this report
This report was written by Dr Peter Kenway of the New Policy Institute and Ines Newman. The facts presented and views expressed in this report are those of the authors.