Published: 06:00, 07 March 2021
The clamour for reform of council tax grows louder every year, particularly as Kent households grimace at the prospect of paying more for less in 2021/22 as hard-pressed councils trim their budgets.
After 30 years of rising bills, politicians are fending off complaints that something needs to be done. But are there any alternatives? KM Group political editor Paul Francis reports.
Council tax needs an overhaul. On that, there is pretty much a political consensus - though it is not one the government likes to acknowledge.
The consensus tends to fray as soon as you start a debate on whether it should be wholly replaced or reformed.
The issue is a political mantrap partly because successive governments have refused to act on a system of taxation that is regressive, out-dated and based on property values that are now 30-years-old.
This year, council taxpayers in Kent face a 5% hike in the county council share of their bill - 3% of which is so the authority has more to spend for caring for the most vulnerable adults.
How have we got to this state?
The failure to reform is a direct result of a straightforward political calculation based on the fear-factor.
Council tax may be rocketing but meddling with the formula would unsettle voters and inevitably be seen as producing more losers than winners.
The precedent for this fear was shaped three decades ago when the then Prime Minister Margaret Thatcher proposed something called the community charge, more commonly known as the poll tax - an individual tax paid by everyone for council services.
The theory was that the way to engage the public was to make them more aware of how their money was spent.
Engagement was achieved but not in the way politicians expected.
There was a revolt and it was a revolt that came from the Conservative heartlands as people began to discover they were likely to pay more for services than they previously did under the old rates.
Protest marches took place in the most unlikely of places - feelings were running high even in the Prime Minister’s north London constituency of Finchley, where people took to the streets.
The Prime Minister’s refusal to back down proved fatal, with protests leading to a mass march in London that descended into riots and ultimately cost Thatcher her job.
After she was ousted by her own party in 1992, her successor John Major moved to ditch the poll tax and ordered an alternative.
That came in the form of a hybrid tax based on a property element and a personal element.
The council tax was implemented in 1993 and at the time, its chief virtue was not that it was necessarily better, but that it was not the much maligned poll tax.
Some three decades on, it has remained largely intact, despite the fact that it is based on property values that bear no relation to their actual value.
Despite its flaws, the reluctance of governments of both stripes to carry out a radical overhaul indicates that the scars of the poll tax run deep. But the fact that there is a growing recognition that it is not sustainable in its current form seems to indicate that reform may finally be on the cards.
And if you want a sign that the disquiet is growing, it came recently when the parties at County Hall joined forces to press the government to tackle the inequities of the council tax.
On its own, a stiff letter to the local government minister might not amount to much but it feeds into the sense that the case for some kind of reform will soon be compelling.
So, if the council tax is to be reformed or replaced, what are the options?
Revise the existing property bands
This has been advocated by many who contend it would address the problem of how much we pay being based on property values in 1991.
The IFS (Institute of Fiscal Studies) carried out a major study, published last year, that argued inconsistencies in the current arrangements could be ironed out by a revaluation of property prices.
For example, the bill for a Band H property is just three times that for a Band A property, despite Band H properties being worth at least eight times as much as Band A properties.
Study authors said 4% of the poorest fifth of households would see their net tax bill fall by more than £200 a year under a proportional council tax, while just 4% would see it increase by more than £200 a year.
Likelihood? Of all the alternatives, this is probably the least disruptive and the most politically neutral option. But there would still be losers.
Kent and the south east have seen property prices rise much higher than elsewhere and it could adversely impact traditional Tory heartlands, especially if the government did not adjust its own funding to councils.
Add more property bands to the existing eight
This has also had some support, notably in a review into local government funding ordered by the Labour Chancellor Gordon Brown.
The Lyons review - it was carried out by Sir Michael Lyons - reported back in 2007.
It concluded council tax was not broken but needed reform: as well as a revaluation, the report suggested new bands to reduce bills for those in the lowest value properties, paid for by increased bills for those in higher value properties paying more.
Likelihood: Although it received a lot of attention, the report was kicked into the long grass and nothing was done and the government studiously ignored it.
Give councils power to raise money through local income tax
Another option is to allow councils complete financial autonomy and give them the power to raise money through a form of local income tax
Likelihood? Although attractive to those who feel the government holds the whip hand when it comes to finance, highly unlikely to happen.
The nuclear option, the government’s controlling instincts would make this too much of a gamble.
Permit councils to become more commercially focused
Many councils already use powers to invest in property developments and in Kent, in recent years, they have spent tens of millions of pounds of taxpayers’ money on retail shopping centres and leisure centres.
However, their returns on these investments have in several cases declined because of the combined effect of the recession, the speculative nature of some of these investments and Covid 19.
Likelihood? No prospect of this happening, particularly given that Chancellor Rishi Sunak has decided to rein in councils investing simply to make money.
A million pound mansion tax
Promoted by the Liberal Democrats when in coalition with the Conservatives, the party argued there should be an additional wealth tax as a way of addressing inequalities.
Likelihood? No prospect at all.
Through the roof - Kent council tax facts and figures