Reform urged for outdated council tax that hits poor hardest

The current council tax system is a “wealth tax” on poorer parts of Britain and is in urgent need of a comprehensive overhaul, according to a coalition of academics and thinktanks from across the political divide.

The crudity of the system means there are eight parliamentary constituencies in which the average household pays no more than 0.2% of their home’s value in council tax. However, there are 41 constituencies in the north and Midlands in which the average household’s council tax burden is 1% or higher. In Easington, County Durham, when the charge is measured against the average cost of a home, some are paying as much as three times the rate of council tax.

In a letter to the chancellor, Rishi Sunak, prominent thinktanks and campaign groups including the Institute for Public Policy Research, the Social Market Foundation, Demos, the Centre for Policy Studies and the liberal Conservative Bright Blue group said property taxes must be reformed “so that they are based on today’s property values and homeowners’ ability to pay”.

“Any such review should begin by focusing on council tax, which is poorly designed, out of date, and unpopular,” they write. “This tax is based, in England and Scotland, on property valuations that are now almost 30 years old and therefore bear no resemblance to the realities of current house prices. It would appear that council tax is a material wealth tax for those in modest houses but is a service charge for those in wealthier areas. This places the heaviest burden on the young, low-earners, and those living in less prosperous parts of the country, who typically reside in modest properties.”

According to research commissioned by Fairer Share, a campaign to abolish council tax, an average home in Easington valued at £88,000 could pay £1,498.53 a year in council tax – equating to 1.7% of the property value. An average home in Westminster valued at £1.2m would pay £1,127.07 a year – which is just 0.09% of the value of the property.

This means that within 20 years a homeowner in Easington can expect to have paid 37% of the value of their property in council tax, while a homeowner in Westminster would have paid just 1.9% of the value of their property.

The news comes as the annual amount paid in council tax on a typical property will exceed £2,000 a year for the first time in two English regions. The typical council tax bill in England will rise by 4.3% in the next financial year, according to research from the Chartered Institute of Public Finance and Accountancy.

The body found that such rises mean the average band-D bill in north-east and south-west England will breach the £2,000 mark.

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