A poor tax – Council tax in London: Time for reform

Click on the picture to access the interim report.

Is council tax ‘too difficult to touch’ when it comes to reform? Perhaps the conversation carries with it much political baggage, hence its avoidance in political circuits, but a recent interim report argues this conversation is a critical one to have. The report, entitled A poor tax – Council tax in London: time for reform, was published by the Institute for Public Policy Research and authored by Luke Murphy, Charlotte Snelling, and Alfie Stirling. LSE London’s Tony Travers and Christine Whitehead provided feedback in the process. The document can be accessed by clicking here

The report makes the clear argument that leaving council tax unreformed is becoming more unsustainable. This is especially true for local authorities across the country who are increasingly cash strapped as a consequence of government cuts to their core grant funding and limits on their ability to raise funds through council tax and other sources. Moreover, this argument carries more weight when one considers the direction of public policy geared towards greater devolution and allowing local politicians to have greater say. In other words, devolution without council tax reform is limited.

The argument the authors seem to stress most in the report is that the current system has become unfair and riddled with spatial inequality. While the research focuses on London, the relevance for the whole system across English is evident. This is especially true when one considers how council tax has become increasingly regressive with regard to property values—the cheaper your property, the more you are likely to pay as a proportion on your property value.

Overall, the authors use the report to make the case for change that rests on fundamental and practical arguments. Here are the arguments as quoted from the report:

  1. The council tax system is increasingly regressive with regard to property value and is therefore unfair. We also highlight the spatial inequalities that exist in the capital with substantial differences in what is charged in different areas of London.
  2. The council tax system, including its income support system, council tax reduction (CTR1), takes too little account of ability to pay and is therefore unfair. Furthermore, recent changes to the CTR system and cuts to its funding will only worsen the impacts for the capital’s poorest.
  3. The council tax system is inefficient. We expose the inefficiencies of the council tax system including its reliance on outdated property prices, discounts and exemptions and the inconsistencies between residential and commercial taxation.
  4. The wider context of local government finance is making council tax increasingly unsustainable. Council tax is becoming ever more important as a source of local government revenue but as local authorities become more reliant on it, it is increasingly not up to the task.
  5. There is public appetite among Londoners for reform. The public recognise many of the flaws in the council tax system and want to see change.

Click here to download the full-length report. IPPR will be setting out its recommendations for reform in a report later in the year.

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