It’s not often that I’ll agree with my friend, as our political viewpoints are diametrically opposed. However, when he posted on Facebook that his council tax bill starting from next month was £3,756 and followed it with some fairly choice language, I had to concede that he had a valid grievance. Not only is that a fairly substantial sum to find, but it is a mandatory tax, paid from taxed income. His house is not what one would call palatial, and his income as a pensioner is just enough not to receive benefits, but not large enough to cushion a charge for over £300 a month.
Council tax doesn’t do the job
In close to 25 million households across the UK, occupants will need to start paying their council tax for the next tax year from April. Now in its 31st year, council tax replaced the short-lived “Poll Tax”, aka Community Charge, which itself replaced the domestic rates that had been in existence in some shape or form since the 1600s.
A regionalised government required to manage the provision of local services is a necessary by-product of the need for such services, and is a model that is ubiquitous across countries and systems of government. It follows therefore that this must be funded. However, when one in five councils in England is predicting they will be bankrupt in the next 12 months, and when council tax can now exceed 10% of the median salary, surely the system is broken?
Deeply unfair disparities
It’s a tax which is set at a local level, so there are winners and losers, depending on your postcode. If you’re lucky enough to have an SW1 postcode, and are therefore administered by the Kensington and Chelsea local authority, for a Band D property in 2023, you’d have paid £1,442 p.a. – not bad when your property in that band would be worth north of £1m. Your council tax would work out, on average, as 0.12% of the value of your property. Live in postcode BB10, in Burnley, and in 2023 your bill in band D would be £1,000 more per year, and your property worth a tenth as much as that in SW1. Here in the East of England, council tax in 2023 was “only” 7.3% of median gross pay, but as my friend pointed out, it’s a tax paid from net income, not gross, so, rather like VAT, a tax on taxed income. Failure to pay can result in your assets being seized, and possibly your liberty, with up to a three month sentence on offer if you take the “can’t pay, won’t pay” attitude.
Proportional property tax
So, if the system is broken, what could replace it ? There are several alternatives: either a flat rate proportional property tax (PPT) or an additional income tax.
PPT is championed by Fairer Share and if you go on their website, you can see how much you would stand to save, or lose, were it introduced. At the proposed flat rate of 0.48% of the value of my house, I would apparently save £764 a year under PPT, that figure changing every year when my house would be re-valued. It’s calculated that under PPT, around 18m households would see a cut in the taxes they pay for local services.
PPT would not be a vote-winner for the current government, as those in the South East with the highest property values would see their bills rise. To counter the argument that there are plenty of people – like my friend – having both a low income and a relatively valuable property, Fairer Share would propose that it would be possible to defer payments until the house was sold, which seems fair enough. The additional £5bn p.a. it would raise conveniently plugs the predicted deficit in council budgets by next year.
Income-related taxation
However, an even fairer method (to my mind) exists – paying for our local services through income-related taxation. If a rate of 3% of disposable income were used in replacement of council tax, only the wealthiest 20% of households pay more, with 80% paying the same amount or less. This not only reduces the computational burden of having to revalue properties, it takes the value of the property you live in completely out of the equation; you pay according to your means. This is why I personally prefer this method; I am fortunate enough to be a higher-rate taxpayer, who currently lives in a “modest” band B property. It’s right that if I have more, I pay more; that’s an argument hard to counter.
Watch this space
There’s a current silence from the official opposition on this subject – bar Keir’s statement that the decrease in National Insurance will be wiped out by increases in council tax. It’s hard to argue that this tax is not regressive; that as a stop-gap measure introduced by John Major’s government to replace the Poll Tax that ousted the blessed Margaret and brought him to power, it is well past its sell-by date. Either of the alternatives I’ve suggested would be fairer and raise more money.
Whether anything changes before the 2025 bills arrive in a year’s time is anybody’s guess. In the meantime, my friend pays more than twice as much as I do, on a fraction of my income, for the benefit of having two more bedrooms than I do. Go figure.
