It’s time to abolish council tax once and for all

Everyone hates it and it doesn’t even work. That could describe any number of long-standing British political institutions, but few leave people with their blood boiling as much as council tax.

Any budding social scientists looking for a PhD thesis could do worse than investigate why it feels so egregious to have to shell out from your bank account each and every month to pay for potholes and bin collections. National insurance, for example, sucks up far more cash – but because it is swiped seamlessly from paychecks, it is easy to write off as money you never had anyway. Out of sight and out of mind.

And yet, most people will soon see their direct debits go up still further. In February, more than two thirds of local councils reported that they were planning council tax increases in line, or almost in line, with the maximum legal limit. One in four will issue demands for over £2,000 to households in ‘Band D.’ This covers everything from terraced houses to grubby flats, not just millionaire playboy pads. And many of those in line for a bigger bill will have seen their finances hammered over the course of the pandemic as companies cut back and freelance work dries up.

The Labour Party kindly added up the overall cost of the rise, branding it a “£2 billion tax bombshell” facing working families. But their own councils are among the worst, particularly in Central London where Tories are about as popular as a coughing fit on the Tube. In Brent, for example, with Kier Starmer’s party holding 59 of the 63 available seats, young professionals are being clobbered with an overall increase of almost six percent. If they don’t like it, those same young professionals are more than welcome to vote for someone else – but local officials are betting their jobs on the fact they won’t.

These rises, as is the case almost every year, are above inflation and, indeed, well above average wage rises. And so municipal government costs more and more. Seemingly at no point has anyone bothered to justify to their constituents why this should be the case, or whether they can expect better roads, more frequent rubbish pickups or friendlier council employees as a result. Dear readers, please do get in touch if you notice these things happening.

That said, it’s easy to forget that the councils themselves have had a torrid time of it. At least 25 are facing bankruptcy, the National Audit Office reports, and 94 percent are planning spending cuts amid a tough year for costs and diminishing revenues. Yet a recently published paper from Kate Ogden and David Phillips at the Institute for Fiscal Studies found that, by and large, central government has stepped in to relieve “most of the short-term COVID-19 financial pressures” affecting local government, with the pandemic exacerbating historic shortfalls. The virus might yet prove fatal for some local authorities, but only because of serious pre-existing conditions.

One reason is that council tax is probably the worst conceivable tax to fund councils. Poorer areas have lower property prices, and therefore lower rates. Places that need the most funding for adult social care tend to have the largest populations of pensioners eligible for reductions and exemptions. Other revenue-raising powers similarly work well in towns and cities where businesses are thriving, but not communities where the high street is boarded up, and where many are either retired or out of work. There are, of course, funds controlled from Whitehall that aim to redress the balance, but they never quite seem to be enough.

The tax also drips with a sense of unfairness. The rates, as we are often reminded, are based on decades-old assessments that have no bearing on modern house prices. And forcing renters to pay it on properties owned and let by landlords for profit makes little sense and targets those who could otherwise get saving to put their first foot on the housing ladder.

Rarely in politics do the stars align, with a policy that makes sense and also makes people happy. Scrapping council tax altogether could prove to be one of them. Local authorities are evidently struggling to make ends meet through the system, and irate households are footing the bill with few options to hold the decision makers accountable. Folding the funding of local government into other forms of taxation would cut red tape, remove the expensive burden of chasing up non-payers and give people clarity over how much they’re really handing over for basic services.

While taking away councils’ rights to raise revenue from residents themselves, and instead funding bin collections and social care from general taxation would be seen as a Westminster power grab, local leaders could also breathe a sigh of relief. Not only could cash be better distributed according to need, but residents would blame the government for any increases, rather than exhausted councillors on the doorstep. 

Anyone who has ever campaigned in an election can attest to the fact that the public often have little idea where central government ends and local authorities begin anyway. One fed up voter in a vital bellwether seat at the 2017 election told me he’d be voting differently to usual, not because of Brexit, but because he’d seen a spate of littering in the area and he was worried the country was becoming less beautiful. Given few even know the names of their local representatives, and council elections often attract low turnouts, making Downing Street responsible for any underfunding of the things that matter most to people can only increase accountability.

At the same time, it would offer an opportunity to overhaul broken systems like social care. Forcing councils to pick up the tab for big ticket items like care homes and fitting stairlifts has created the kind of regional roulette that makes growing older with dignity in Britain entirely dependent on where you live. Again, make it Whitehall’s problem and you increase accountability, while reducing inequality.

But all of this comes second to the fact that people really, really don’t want to pay council tax. Knowing, as most employees would, that the money that lands in your account each month is yours to keep, and your total tax burden has been settled, is more than just pleasing – it’s transparency. No more stealth increases, and no more financial bombshells without forcing government to justify it. Without council tax, Britain would be a fairer country. And maybe a happier one too.