Opinion: Council tax is grossly unfair. It’s time for a rethink

After it has gone up again in the face of cuts, it’s time to look at alternatives to this unfair and out-of-date tax.

Opinion 29th May, 2019

Matty Edwards

After it has gone up again in the face of cuts, it’s time to look at alternatives to this unfair and out-of-date tax.

Illustration: Louis Wood

“Big society, not big government.” Remember 2010? Thanks largely to Cameron and Osborne, local politics since then has been dominated by the stripping away of council funding by central government. By next year, 60% will have been slashed and the revenue support grant phased out, meaning councils will no longer receive any core funding at all.

This is why your council tax went up by 4% in April. Bristol City Council is faced with a tricky decision – push a greater financial burden onto Bristolians or risk more cuts to services. This year the tax increase, an average of £80 per person per year, will raise an extra £8.2 million and help prevent further cuts to education budgets and libraries.

While the council is forced to fund services with council tax and business rates, it’s good to see them increase council tax as much as possible; the government relaxed the maximum rise in 2016. The council also deserves credit for keeping its council tax reduction scheme, which gives discounts to poorer households (a campaign blocked cuts to the scheme in 2017), and for increasing the council tax premiums charged to empty properties.

But if we’re to rely on local taxation to fund social care, libraries and youth services, we need a drastic rethink. Simply put, council tax is grossly unfair – it’s based on house prices 30 years out of date and highly regressive i.e. poorer households pay more as a proportion of their income.

Bristol’s property prices have ballooned out of control in the last 20 years, but particularly in certain pockets of the city. A St Paul’s house worth more than £300,000 is in band A (the lowest), but there are lots of households in poorer areas in bands C and D, meaning they’ll pay £400-600 extra this year. That could easily mean the difference between having a family holiday or not.

A recent study by the Joseph Rowntree Foundation (JRT) compared council tax to what it replaced – the poll tax, which provoked mass riots and the beginning of the end of Thatcher. The report slammed the unfair council tax system for failing to keep up with booms in property wealth, meaning the people benefitting from rocketing house prices don’t pay enough, while those on lower incomes and young people are penalised.

In addition, richer areas have more properties in higher bands so can set lower rates and still fund the services they need. A four-bed house in Mayfair in London worth £4.2 million is in the highest band (H), but has to pay Westminster council £1,400 a year – just £150 more than the lowest band in Bristol. This postcode lottery simply can’t continue.

What about the alternatives?

But the power to change things is limited. In Bristol, we’d need a referendum to reform council tax. This happened before in 2001 when Bristolians voted against raising rates to pay for services, but this was during the New Labour years, before austerity decimated council budgets.

Bristol Momentum, a grassroots pro-Corbyn organisation, has proposed reforms to make council tax more progressive by increasing the rates paid in the top band by 200%, which would raise an extra £25 million a year. This would also require a local referendum.

If a referendum isn’t possible, one alternative is for the city to create urban parish councils similar to those traditionally found in rural areas, which give greater tax powers to local communities. For example, the library in Long Ashton has closed, but the parish council has increased the parish precept to fund the running of a community library at a new site.

One of the UK’s only urban parish councils was set up in Queens Park, London, in 2014. The community council stepped in to provide a grant to the local youth centre after it lost all its funding from Westminster City Council. This could be an option for Bristol communities who are worried about local services and feel their voices aren’t heard.

But with the council’s limited powers in Bristol, changes to our council tax system may need to be instigated by central government. For example, England could replicate reforms in Scotland, who raised council tax rates in the top four bands, and recently committed to an overhaul of the system.

Labour has also proposed a number of alternatives including the ‘mansion tax’, an annual charge on properties worth over £2 million, and a land value tax, where a percentage of the value of the land is levied annually – a more logical way to measure individual wealth.

However, there are more radical ideas. The JRT report recommends replacing council tax with a property tax related to up-to-date values and regular revaluations. The tax would either be proportional to property value or progressive, via tax-free allowances and different rates to cater for regional variation in property value. Either option would reduce bills for the vast majority while increasing income for local councils.

Whether the current council tax system is reformed or scrapped altogether, one thing is certain – it can’t go on like this. If Bristolians are going to pick up the pieces left by government cuts, it needs to be done fairly.

But until we get this much-needed national reform, Bristol needs to think about what we can change locally so that our services are funded without the tax burden being shoved onto those who can least afford it.