“It’s a fairness thing. Just the idea that somebody sitting in a two-bedroom house in Hartlepool is paying more council tax than somebody who’s living in a mansion – it’s just offensive.”
The Labour backbencher Jonathan Brash, Hartlepool’s MP, is on a mission to draw attention to an issue he jokingly calls “the third rail of British politics” – because no mainstream party, including his own, wants to touch it for fear of electoral death.
Brash, a former teacher, has bravely (perhaps brashly) set up an all-party parliamentary group for council tax reform. And he is right to point to the madness of the current system.
People who live in a Band H property in Hartlepool pay £4,755 a year in council tax. For the same band in Westminster, the figure is £1,946.32.
Yet it hardly needs saying that the value of the most expensive properties in the London borough will be several times that of their equivalent in Hartlepool. A quick search turns up a nine-bedroom, stucco-fronted house in Westminster on the market for £45m; in Hartlepool, £1.5m will buy you a seven-bedroom manor house, sitting on a couple of acres.
Set up to replace the ill-conceived poll tax, which sparked payment strikes and street riots – and contributed to Margaret Thatcher’s ejection from office – the council tax is one of the few levies on wealth in the UK. But Brash points to two sources of unfairness. The first is the one that makes all right-minded economists tear their hair out: council tax is hopelessly regressive, because it is stuck in a time warp.
As an exasperated note from the Institute for Fiscal Studies’ local finance expert David Phillips pointed out during the general election campaign, properties have not been revalued for council tax purposes since 1991, “when Mikhail Gorbachev was president of the Soviet Union and Chesney Hawkes topped the charts with The One and Only”.
Since then, as the IFS points out, house prices have risen sevenfold in London, and less than fourfold in the north-east.
The same absurdities are evident across the UK. Wales has introduced an extra band for the most expensive properties, and did revalue in 2003, but has not done so since. The Scottish government proposed, but ultimately dropped, reforms.
The second form of unfairness is about what council tax pays for. Local authority settlements have been squeezed hard over the past decade and more, but the demand for some of the services for which councils have statutory responsibility, including children’s and adult social care, have risen inexorably.
That means that a growing proportion of the budget – two-thirds on average, according to the Local Government Association – is being spent on these vital services, which most citizens do not need (for now at least) or perhaps even see – while more visible local services have deteriorated.
“What you’re doing is, you’re breaking the bond between the taxpayer and the services that are being delivered with that money,” Brash says.
“It’s community fabric that breaks down. It’s the street that doesn’t get cleaned, the bin that doesn’t get collected as often, the library that doesn’t get looked after as well. It’s those things, that people really associate with their area, that suffer.”
Just how politically untouchable council tax remains was demonstrated once again during the election campaign, when the Tories challenged Labour over every conceivable tax increase.
Rachel Reeves initially declined to rule out a revaluation, which would at least have helped to make the tax more progressive. But when the Conservatives seized on Labour’s ambivalence, the frontbencher Jonathan Ashworth, who went on to lose his Leicester South seat, firmly ruled it out.
So there are at least two issues interacting here that fall into the category of “too difficult” for politicians, apparently even a new Labour government with a healthy majority.
One is the absurdly out-of-kilter nature of council tax, which is a side-effect of the long property boom of recent decades, which has driven up the wealth of those lucky enough to benefit.
Labour has promised a much-needed overhaul of the council funding formula, aimed at tilting it back towards the most deprived areas. It is also about to publish radical proposals for local government reorganisation. But neither is expected to include tinkering with the council tax bands, let alone moving towards anything that looks like a progressive property tax.
The political challenge is genuine. The Centre for Cities thinktank recently suggested that two-thirds of households could save £500 a year if councils were allowed to set council tax more progressively, at local level – introducing a couple more bands at the top. But the rest would of course pay more, and the losers from any reform tend to shout louder than the winners.
The other neglected issue is the vexed question of social care funding, which Labour has shelved.
A move towards something that looked more like social insurance, collectivising more of the risk that falls on a minority of unlucky families, might help to lift the burden off local authorities. Labour’s long-term plan for a National Care Service might help here.
But again, reform is deemed politically hazardous (as well as being costly). Fresh in politicians’ memories is Theresa May’s insistence that “nothing has changed” as she scrambled to rewrite social care policy on the hoof in 2017.
Political caution on both these fronts is entirely understandable. Yet it leads to a situation in which we are tolerating a system that is patently unfair, and threatens to undermine support for council tax altogether; and that surely carries political risks of its own.
As Brash puts it of his Hartlepool constituents, who raise the issue with him on the doorstep: “They’re paying a fortune and getting less for it. It’s not OK.”
