Reform of council tax could aid ‘levelling up’ agenda

The Institute for Fiscal Studies has claimed that revaluation and reform of council tax could be a key part of the government’s ‘levelling up’ agenda, and could help the poor, young and disabled.

The IFS says that over 10 million households would benefit from lower council tax bills if the government reformed the ‘arbitrary and unfair’ annual property charge to better reflect the growing divide between London and the south-east and the rest of England.

According to the economic forecasts, average bills across most of the Midlands and north would fall by more than 20 per cent, with more modest falls across much of the south-west and parts of east England should government ministers introduce a system more aligned with house price growth over the past 30 years.

Ins one areas the benefits are even more noticeable. For example, council tax bills would fall by 56 per cent in Blackpool, 57 per vent in Stoke-on-Trent and 60 per cent in Kingston upon Hull, ending decades of punishing tax rates in many of Britain’s most deprived areas.

In contrast, London and its outskirts would face an average 20 per cent increase in council tax bills, with households in Westminster and Kensington and Chelsea facing increases of 410 per cent and 358 per cent respectively.

The spending watchdog estimates that approximately 2.6 million (11 per cent of) households would see their bills fall by more than £200 a year, while a similar number would see them increase by more than £200 a year. By making council tax more proportional to value, 42 per cent of households would see their bill fall more than £200 a year compared to 17 per cent who would see it go up more than £200 a year.

Stuart Adam, a senior research economist at the IFS and an author of the report, said: “The failure to revalue council tax for almost 30 years means the tax bills households face bear less and less relation to the values of their properties. At a minimum the government should therefore revalue properties and put in place a cycle of regular and frequent revaluations to stop us getting in this situation again. Ideally it would undertake more radical reform too.

“Reform would create millions of losers as well as winners, which means doing it would probably involve some political pain. But it must be done at some stage, or we would still be basing council tax in 2091 on relative property values in 1991 – an absurd state of affairs. With a government with a large majority, the next few years looks like as good a time as ever.”