Council Tax Facing the Axe?
The government has this week dropped its controversial plans to revalue all properties in England for council tax, until after the next elections.
The announcement will have
come as a blessed relief to millions of home owners, who were faced with the prospect of paying hundreds more in tax as a result of the revaluation.
Of course, house prices in many parts of England have risen far more quickly since the bands were established in 1991 – when the poll tax was replaced with council tax as the main means of local government funding.
As a result, most estimates have put the number of households that would have to pay more in England at a staggering 22 million.
At the last general election, council tax was a major issue, with every party promising to do something about it – and the Liberal Democrats pledging to scrap it outright.
What is it about council tax that causes so much concern?
The first problem is the banding, which sees the tax liabilities of all residential properties in a council area set relative to a "datum point" – that is, an "average" or Band D-value property.
Each property is put into a band on the basis of its value on April 1, 1991. The problem is that, today, these bands have very little bearing on what houses cost.
The average UK house price reached £184, 924 in August, and in Greater London, the average price is a whopping £293,363.
Band D – the "average" band, remember – covers properties valued at £68,000 and £88,000 in England. Today's average value, on the 1991 bands, would put the average house in Band G, meaning it would pay one-and-two-thirds the basic, Band D, rate.
Band A covers properties valued at up to £40,000 – somewhat closer to the price of a top-of-the-range car than the price of a house today.
And house price inflation has progressed at different rates across the country, meaning that the impact of a revaluation would probably affect different regions in different ways.
The second problem is that council tax affects certain groups unfairly. Older people and people on fixed incomes who live in large, valuable houses, face high charges – which many claim they cannot afford, as evidenced in widespread "grey" protests.
At the other end of the scale, the top bracket – Band H – covers properties valued at £320,000 and above.
With no more levels, someone living in a fairly modest detached house in the south east or outer London faces the same council tax bill as Elton John, the Beckhams or indeed (were Royal palaces liable), the Queen.
And the third problem with council tax is that it is such a thorny problem that no one knows quite what to do about it. Local government funding has long been a reef that governments have foundered on, and it looks like Tony Blair's administration would prefer to sail around it again rather than try to navigate a passage.
Local government minister David Miliband announced earlier this week that the revaluation would be put off, pending a complete review of local government finance, to be headed by Sir Michael Lyons.
Will council tax survive? And if so in what form? Opponents would do well to look back to the 1980s and 1990s and remember the unfairness and inefficiency of rates on the one hand and the outrage generated by the poll tax before claiming that there are any easy answers.
