Jessica Fino 20 Mar 2018 05:17pm

Call to abolish "regressive" council tax

The think-tank Resolution Foundation has called for the council tax to be abolished, saying it is “outdated and regressive”

The group said that the tax, which replaced the “hugely unpopular” poll tax in 1991, today shares many of the features of a poll tax, given its weak link to property values.

In its latest Home Affairs report, Resolution Foundation explained council tax operates within wide bands with a single band covering different property values, and has very small gaps between bands compared to differences in property values. Moreover, regional variation has allowed some areas with more expensive properties to charge lower tax rates.

The report called the council tax “highly regressive” and showed how young families are being “disproportionately and increasingly” hit by the tax’s flaws.

As a result, Resolution Foundation recommended the UK follow Scotland’s lead and increase council tax rates in the top four bands. It also suggested adding a mansion tax surcharge of 1% on the value of properties above £2m and 2% on the value of properties above £3m. Both changes would generate a combined £2bn.

The think-tank also recommended more radical measures, such as an exactly proportional tax of 0.5% of capital value, a 1% tax rate above a £100,000 allowance per property and a more progressive system of tax bands of 1% above a regionally-specific tax-free allowance. These three measures could bring an extra £18.8bn.

Such measures could mean 17 million households would be better off compared to nine million being worse off under the most progressive option, the report said.

Laura Gardiner, principal researcher at Resolution Foundation, said, “Despite replacing the unpopular ‘poll tax’, council tax has come to look increasingly like it.
It’s time we looked to abolish it.

“Young families and those in relatively cheaper properties are losing out disproportionately. The government should implement a new system that is truly progressive and avoids the ludicrous situation of people in mansions paying little more, and in some cases less, than families living in tiny flats.”

The group added that the revenues generated from its recommended measures could be used to significantly reduce the also highly unpopular stamp duty.