Council tax reform must be part of the business rates review

By Michael Burton | 18 March 2020
  • Michael Burton

Last week’s Budget was notable for ignoring two vital issues concerning local government: one was the future funding of social care and the other council tax revaluation. Both are political hot potatoes, hence their absence, but it is difficult to see how the Government can announce a review of business rates, as it did in the Budget, without also looking at council tax. If the review, facing immense pressure from beleaguered retailers, is likely to recommend a reduction from where will the funding gap be filled?

Helpfully, along comes the respected Institute for Fiscal Studies, which has been working on how a revamped council tax might look. The IFS is realistic enough to know it is unlikely the Government will want to open this particular Pandora’s Box and after looking at the figures you can see why no minister has dared launch a revaluation ever since property levels were set in 1991. Of course it is ludicrous that the tax bands are based on prices almost 30 years old and bear no semblance to actual property changes since then. It means that residents in high price areas like London and the South East are paying less than they should in comparison to areas where property has risen more slowly. Nor do the current bands reflect the spread of prices. The average property in Kingston-upon-Hull is worth around £101,000, while the average property in Kensington and Chelsea is worth around £1,536,000, over 15 times higher. Yet all band H properties attract the same tax regardless of whether they are worth £320,000 (in 1991 prices) or are multi-million-pound mansions.

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