Research Project

Escape from Council Tax: Curing the symptoms of failure
24 January, 2008

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Escape from Council Tax: Curing the symptoms of failureThe super rich earning over £200,000 could pay a small supplement in their income tax and help cut overall council tax bills by £200 per household, according to an NLGN report. It argues that the measure is crucial to ensure that pressure is taken off council tax bills, allowing urgent reforms to take place without penalising householders.

NLGN is calling for an additional 10% income tax band for earnings over £200,000 a year to be used to fund a general reduction in council tax. It calculates that this new ‘local property levy’ would save an average Band D council tax payer £205per year.

NLGN also argues that reducing council tax would allow otherwise difficult reforms to take place including:

  • abolishing council tax as we know it and renaming the charge as a ‘Local Property Levy’;

  • a long-overdue revaluation of properties in England to take place for the first time since 1991. Properties prices could then be tracked on an annual basis to ensure that levels of Local Property Levy valuation remained fair and consistent;

  • new fiscal autonomy including the ability to introduce local variations to current national ‘banding’ rules. This would allow councils to set the number of Local Property Levy bands, the range of property values covered by each band and the differences between the tax rates set for each band;

  • removing the right of Government to impose ‘capping’ on Local Property Levy increases.

    Council Tax is currently Britain’s post unpopular tax, with 67% in a recent YouGov survey believing it to be unfair. NLGN’s suggested reforms would take financial pressures off ordinary households, whilst allowing local authorities greater freedom over local finances.

    In the report, author Dick Sorabji argues:

    “Council tax is broken. The immediate crisis in council tax is simple: it is too big. The first step on the route out of the trap is to offset a national cut in council tax with less unpopular increases in other taxes. The income tax thresholds have been chosen so that they will only affect the very highest earners in society. The result would be no net increase in tax, but a transfer in which people pay less council tax but more on incomes over £200,000”.

    “With reductions in council tax it will be possible to revalue all properties in England and then apply a reformed property tax without increasing the tax bill for any resident. Reducing council tax removes the symptoms of failure. Annual revaluation ensures that the problem will not recur in a form that is so hard to resolve”

    “Local choice on property bands, and simpler less intrusive assessment will give councils more autonomy from Whitehall. With a smaller and truly local property levy in place it become easier to complete the reform of local government finance”

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Publication Date: 24 January 2008
Authored by: Dick Sorabji