POOREST PAY THE HIGHEST PRICE

FIRST PUBLISHED BY: THE GUARDIAN 

POLL TAX DEMONSTRATIONS IN 1990 HELPED KILL OFF AN UNFAIR SYSTEM. BUT ITS REPLACEMENT CREATED A NEW SET OF INEQUALITIES.

A campaign was launched this week to change the Council Tax system to make it fairer to low income families, who pay a far higher share of their income than richer households. Council Tax, as it is currently constituted, is the most unfair and regressive of Britain's major taxes, says the new Centre for Council Tax Reform (CCTR), set up by the left-of-centre independent think-tank, the New Policy Institute, to win support for a fairer, more democratic, tax.

It is the largest direct tax for low income families, says the CCTR, with the poorest one-third of British households paying more in Council Tax than income tax. Even though many low income families pay nothing as a result of Council Tax benefit, on average households in this group pay between £500 and £600 in Council Tax each year.

The tax is "deeply regressive" because households living in the most expensive properties rated in the top Council Tax band pay only three time more than those in the cheapest, bottom band properties, even though variations in house prices and family incomes are many times greater. The result is that, even taking into account Council Tax benefit, Council Tax payments average at over 6% of disposable income for the poorest third, while for the richest third the figure is around 3%. "Council Tax is an unfair tax, but there's nothing wrong with it that straightforward reform can't put right," says the centre's coordinator Andrew Harrop. "It hits hard at some of Britain's poorest families and it does not treat like with like because Council Tax valuations are so out of date.

"The solution is both revaluation and comprehensive reform to increase the gap between top and bottom rates of Council Tax. Revaluation may have to wait for legislation, but making a start on change would be easy. There is nothing to stop ministers simply increasing the gap between the highest and lowest rates of Council Tax in time for 2002 bills which land on our doormats next April. Council Tax reform could be a quick and efficient way to redistribute income from some of Britain's richest families to some of the poorest, without breaking Labour's election pledges on income tax," he says.

But critics say the idea of simply upping the amount of Council Tax paid by families living in high-priced properties and reducing that paid by families in low-value homes could unfairly penalise people who work and, therefore, have to live in property "hotspots" such as London, where house values are high and virtually all homes fall into the top Council Tax bands. "The jury is still out on whether the government needs to do something specific about places like London and the South east," says Mr Harrop. "Research is needed into whether the income variants are in fact smaller than the house value variants. But owning an expensive property means you have a valuable asset and, in principle, it is right to tax assets of that value."

The CCTR, supported in its work by local authorities through the Local Government Information Unit and by the public service union PCS, has set up a website www.counciltaxreform.org to keep people informed on Council Tax and the state of the Council Tax debate. The centre is not alone in campaigning for Council Tax reform. In the last year the Commission on Taxation and Citizenship, the Local Government Association and Unison have all called for reform. And earlier this year 65 MPs signed a motion calling for change.

How Council Tax works

Council Tax is levied according to the value of the home each household occupies and is payable by households who rent as well as by owner occupiers. All homes are allocated to one of eight bands, with lowest value homes in Band A and highest value in Band H. Each year local authorities set the level of Council Tax for their area by determining the charge payable by households in Band D. In 2001/02 the average English council's Band D Council Tax is £901. The tax for households in each of the other bands is a fixed proportion of the Band D Council Tax for the local authority as follows:

Band / Value of home estimated at April 1991 / Proportion of the tax due for a band D property

A Under £40,000     -     66.6%

B £40,001-£52,000     -     77.7%

C £52,001-£68,000     -     88.8%

D £68,001-£88,000     -     100%

E £88,001-£120,000      -     122.2%

F £120,001-£160,000      -     144.4%

G £160,001-£320,000      -     166.6%

H Over £320,000      -     200%

Households with only one adult and those where a person has a disability are eligible for discounts on their Council Tax. Student households pay no tax at all. Households with low incomes can claim Council Tax benefit which covers some or all of the cost of Council Tax.

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX.

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