Council Tax Campaign

The Campaign For A Fairer Council Tax

Local Government Bill 2003

Key Council Tax Measures in the Local Government Bill

Council Tax revaluation will be introduced in April 2005 in Wales and April 2007 in England. Future revaluations will have to take place at least once every ten years.

The government will have the power to introduce transitional arrangements to dampen the impacts of changes.

The government will gain the power to change the number of tax bands so it can introduce additional payment brackets beyond the existing eight. Under the Local Government Finance Act 1992 the government can already change the price range of bands and the payment differentials separating them. This means the government will have the framework to introduce significant reform of the system at the time of revaluation.

Councils will receive the power to vary the discounts they apply to second and empty homes, which currently receive 50% discounts. The government has announced that it will allow councils to charge second homes up to 90% of Council Tax and empty homes 100%.

Councils will also be able to introduce local discounts and exemptions to deal with particular examples of hardship.

Students living with non-students will no longer be liable for Council Tax, ending an unfair loophole in the current system.

Reform of Council Tax is not Guaranteed

The bill is enabling legislation which provides a framework for reforming Council Tax. On its own, however, it provides no guarantee that change will happen. The legislation could lead to nothing more than an updating of property values, or it could be used for a radical overhaul of Council Tax.

None of the crucial decisions about the details of the new system have been announced. During and after the passage of the bill it will be essential to articulate the case for radical change.

What Is Wrong With Council Tax?

Bills are based on out-of-date property values. Council Tax is based on the value of properties in 1991. Since then increases in house prices have varied hugely. Price inflation has differed between regions, between local authorities within regions, and even between individual neighbourhoods. The result is that homes which are currently in the same band can have very different prices. This undermines the credibility of the tax. Revaluation is therefore important in its own right, as well as providing the opportunity for wider reform of the system.

The gap between top and bottom payments is too low. At present households with the most valuable homes pay at most three times more Council Tax than those with the cheapest. In contrast the most expensive homes can be thirty times the price of the cheapest (prices vary from around twenty thousand pounds to in excess of half a million). Government statistics show that rich families typically have ten times more income than poor ones (around £50,000 per year compared to £5,000).

Council Tax is becoming unaffordable for low paid workers. By April 2003, average Council Tax bills will have increased by 50% since 1997. Over the same period ,prices have increased by around 13% and average earnings by around 25%. Those with the very lowest incomes are protected from these tax rises by Council Tax Benefit, but low paid workers have been worst hit. Future Council Tax rises will only be affordable if the system is reformed so that variations in bills better reflect ability to pay.

Where the Bill Does Not Go Far Enough

The Bill retains a single, uniform Council Tax system across the whole of England. As a result households with similar incomes will face very different bills according to where they live, because of the large differences in property values across the country. In particular, key workers and others with low or modest pay in the south may face a substantial rise in their Council Tax bills. This problem will be made worse if the payment difference between high and low bands is increased.

To give itself room for manoeuvre the government should amend the Bill to give itself the power to introduce sub-national variations to the Council Tax system across England. One way of doing this would be to have different band limits in different regions as is already the case for Scotland and Wales.

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