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Local government

MPs Warn of Undermining Local Democracy as Council Tax Squeeze Bites

Strategic Insights

— 2 min read

As council tax bill rises hit 5% for the third year in a row, a parliamentary inquiry has concluded that the current broken link between the local charge and the quality of services risks undermining local democracy. Critics argue that the tax, still based on property values from 1991, is both outdated and arbitrary, with the most expensive properties attracting three times as much tax as the least valuable, despite being worth more than eight times more. The inquiry calls for councils to be given interim powers to revalue properties, define property bands, and set rates, as well as a broader devolution of fiscal powers, such as applying tourist tax.

Key Takeaways:

  • Council tax bill rises hit 5% in April for the third year in a row, with almost all councils increasing bills up to, or close to, the maximum permitted.
  • The inquiry recommends that councils be given control over council tax, including the power to revalue properties, define property bands, and set rates.
  • The current system is deemed outdated and arbitrary, with the most expensive properties attracting three times as much tax as the least valuable, despite being worth more than eight times more.
  • The Institute for Fiscal Studies found that council tax is highly regressive with respect to property values.
  • A recent analysis commissioned by the County Councils Network found that allowing councils to administer and retain taxes generated locally would boost funding for services by more than £4 billion in many areas.
  • The inquiry also calls for the Government to reconsider its decision to freeze local housing allowance rates and extend support for local authorities to acquire new housing stock through the local authority housing fund.
  • The Local Government Association (LGA) and London Councils have expressed support for the inquiry's findings, but raised concerns over the Government's plans for changing the way funding is distributed.

Statistics:

  • Council tax bill increases have hit 5% for the third year in a row.
  • The most expensive properties (Band H) attract three times as much tax as the least valuable (Band A), despite being worth more than eight times more.
  • The Institute for Fiscal Studies found that prices have risen most in affluent areas.
  • A recent analysis commissioned by the County Councils Network found that allowing councils to administer and retain taxes generated locally would boost funding for services by more than £4 billion in many areas.
  • The Government has announced over £5 billion of new grant funding for local services on top of the £69 billion already made available this year.
  • The LGA has stated that all councils remain under pressure and face having to increase council tax bills to try and protect services.

Sources:

  • [Councils should be given control over council tax as the current broken link between the local charge and the quality of services risks undermining local democracy, MPs have warned](https://www.telegraph.co.uk/news/2023/04/24/more-power-councils-control-council-tax/)
  • [Institute for Fiscal Studies](https://www.ifs.org.uk/)
  • [County Councils Network](https://www.countycouncils.gov.uk/)
  • [Local Government Association](https://www.local.gov.uk/)
  • [London Councils](https://www.londoncouncils.gov.uk/)
  • [Deputy Prime Minister Angela Rayner has backed fiscal devolution](https://www.gov.uk/government/speeches/deputy-prime-minister-angela-rayner-backs-fiscal-devolution)

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