What is council tax?
Council tax is a tax charged to the occupiers of residential property by local authorities.
It was introduced in Great Britain in 1993 to replace the community charge (commonly known as the ‘poll tax’), which replaced domestic rates in 1990 in England and Wales (and in 1989 in Scotland). Rates date from at least 1601. Domestic rates have not been replaced in Northern Ireland.
These rates are applied to residential properties in eight bands based on 1991 property valuations (nine bands on 2003 values in Wales). Local authorities set local rates, but the ratios and valuation bands are set centrally (by the Scottish and Welsh administrations outside England).
How much is council tax increasing by?
TaxPayers’ Alliance research has found that council tax in England has more than doubled in the last 20 years.
Rates increased by 60 per cent during the first decade of the 2000s, and increased by 32 per cent in the last ten years. Since the tax was first introduced in 1993, it has more than trebled.
As of 2021-22:
- The average band D council tax bill in England is £1,898. This is an increase of 111 per cent in cash terms from 2001-02, when the figure was £901.
- A total of 104 authorities have council tax bills of over £2,000, around one third of the councils in England. The number of councils charging over £2,000 has almost trebled since 2020-21 when 36 councils charged over £2,000.
- Residents in Nottingham pay the highest council tax in England at £2,226. Residents in Westminster pay the lowest at £829. Wandsworth is the only other authority charging less than £1,000.
Why is council tax always increasing?
Local authorities have consistently raised council tax levels for their residents.
Councils have claimed this is due to government cuts (most notably, the austerity programme of the 2010s), as the grants given to them by central government were reduced. Others have pointed to local authorities spending money on massive projects such as new headquarters, energy companies and commercial property portfolios.
Other charges included in council tax bills - called ‘precepts’ - have also contributed to higher costs. For example, the top 30 council tax increases in percentage terms in 2021-22 were all in London boroughs, due to the 9.5 per cent increase in the Greater London Authority precept.
What should be done to stop council tax increases?
Year-on-year, above-inflation council tax rises are unsustainable.
In order for local authorities to stop inflicting regular rate hikes while continuing to provide necessary frontline services, they must eliminate all wasteful spending. Expecting central government to fund wasteful spending simply means taxpayers are paying for it through other taxes, such as income tax.
Over the years, the TaxPayers’ Alliance has uncovered billions of pounds of taxpayers’ money wasted at council-level, including bumper salaries, expenses and bonuses, flights abroad and risk-laden investments, to name just a few examples.
In the longer term, politicians should consider a new funding model for local authorities, as proposed in our landmark publication, The Single Income Tax. But for the immediate future, councils should be doing their utmost to cut out all unnecessary expenses to spare households the burden of ever-increasing council tax bills.
Image credit: Vitalii Vodolazskyi / Shutterstock.com