Missing from the manifesto – why council tax needs urgent reform

With the election frenzy settling down, eyes have turned to Labour’s policy commitments. From ‘take back control’ to the summit with the Combined Authority mayors, Labour have committed to a programme of widening devolution for local government. Yet on tax plans, they have also ruled out reform to council tax — this is a mistake, council tax reform is long overdue.

Local government finances have faced successive challenges in recent years. Rising demand across statutory services and sharp reductions in central government grant funding have increased reliance on council tax to fund already-squeezed local public services. In 2019/20, council tax provided the largest income stream to local government, at 38.95 per cent.

Yet the council tax system in its current form is flawed and outdated — bands are regressive, valuations have not been updated since 1991, and ability to raise local revenue through council tax is not correlated to need in statutory services. Households in lower valued properties pay more as a proportion of their property value than those in higher value properties, with the IFS estimating that Band (H) properties pay three times more council tax than Band A properties, despite being valued at least eight times more valuable.

Authorities with higher levels of deprivation also tend to raise less council tax from the social care precept, but typically have higher demand for children’s social care and more residents entitled to state funded adult social care. For example, 1% of council tax raised in Stoke on Trent produces ￡700,000, whilst 1% in Surrey produces ￡7.5million , yet Stoke has significantly higher adult and children’s social care demands.

Any attempts to ‘level up’ and deepen devolution across England must address the financial crisis facing local government, and with council tax being such a significant source of income, ruling out reforms to council tax feels like a missed opportunity.

At a minimum, council tax should seem fair to taxpayers, be as progressive as possible, and match current property values. Whilst revaluating council tax bands will produce winners and losers, the current system produces an unfair penalty for many already. Government should take the plunge, and reform it.