Top economist attacks ‘regressive’ council tax and calls for fundamental reform

With local government elections looming, the subject of council tax has become an all too familiar battleground for parties, as they bid to get wavering constituents on side.

However, according to one top economist, such political posturing is pointless when the current council tax system is unworkable and in dire need of reform.

Gerry Holtham insists that until steps are taken to ensure that the rich pay more and the poor pay less, then all other attempts at reform will be redundant.

In a paper published by the Institute of Welsh affairs think tank, Mr Holtham argues that “council tax is the misbegotten offspring of political misjudgement and political cowardice.”

A look at some figures from 2013 add credence to his claim that it was never a fit-for-purpose replacement for the poll tax in the early 90s and had led to penalisation of those living in cheaper homes.

In Wales last year, the average council tax on the lowest band, attributed to properties worth up to £44,000, amounts to nearly 1.9% of the value of the property. For homes in the £44,000 – £65,000 value range, it falls to nearly 1.5% and continues to drop as the value of properties increase. For those worth more than £424,000 the amount of council tax payable represents just above 0.5% of capital value.

Mr Holtham believes the Welsh Government would save on council tax benefit, if it were to endeavour to reverse this unfair trend by increasing tax on more expensive properties while reducing it on cheaper ones. The devolution of income tax to Wales could also act as a sweetener to richer homeowners paying higher council tax because the extra revenue accrued could allow the introduction of a lower income tax rate for higher earners.

In response to his comments, a Welsh Government spokesman said: “We are open to suggestions for improving the way local services in Wales are funded and so will be interested to hear Gerry Holtham’s views.

He insisted however that there has been some positive reform of council tax in Wales unlike in England, adding: “Measures Welsh ministers have taken have included a revaluation exercise in 2005 and introducing a new top band for properties valued over £424,000. This contrasts sharply with England where council tax bands are still based on 1991 values and the highest band for properties is over £320,000.

If you believe you have been placed in the wrong council tax band or are in dispute with your council over your repayments, contact Council Tax Advisors (CTA) today. We offer free, independent advice on council tax arrears and can help with dispute resolution.

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