Rachel Reeves urged to hike top bands of council tax in Budget
Rachel Reeves should cut council tax for the majority of payers by hiking the top three bands in the Budget, an influential Labour-linked think tank has said.
The Institute for Public Policy Research claims this would cut bills for 80 per cent of households, while increasing spending on council-run public services.
The authors of the research described the current council tax model as “outdated and regressive”, with some of the poorest parts of the country paying higher rates than the wealthiest.
The various bands are based on housing values from 1991 and have not been updated since.
In April, everyone in Yorkshire had their council tax bill hiked, in Bradford by almost 10 per cent.
IPPR says that bands F and G should be hiked by 50 per cent, and the top band H, which includes homes likely to be worth more than £1.5m, should be doubled.
These homes are worth more than £600,000 now, and are largely concentrated in London and the South East.
However, there are almost 40,000 households in the top three bands in North Yorkshire, some of which have already been hit by the local authority’s policy of double council tax on second homes and holiday lets.
Researchers claim the changes would raise £3.9bn, with around £1bn of this used to cut council tax bills for bands A to D.
This would give an average saving of £45 to four in five households, IPPR says.
Aditi Sriram, economist at IPPR and lead author of the paper, said: “The current council tax system is unfair, inefficient, and long past its sell-by date.
“Our proposal cuts bills for the vast majority of households while asking those with the greatest property wealth to pay a fairer share.
“It’s a reform that supports working families, strengthens local services, and lays the foundations for a fairer tax system.”
This is the latest call for reform of the council tax system, which has repeatedly been described as “outdated and regressive”.
It comes after a report by the cross-party Housing, Communities and Local Government Committee called for councils to be granted greater powers over setting their council tax rates.
Whether Ms Reeves wants to touch such a contentious issue in what is already proving to be a tricky Budget remains to be seen.
It is likely she will have to hike one of income tax, employee national insurance or VAT, breaking a manifesto pledge, to fill the black hole in the public finances.
Ms Reeves was handed more bad news yesterday as the latest growth figures showed the economy shrank by 0.1 per cent in September after the cyber attack on Jaguar Land Rover hit activity in the manufacturing sector.
This will mean the Chancellor will have to find more money to fund day-to-day government spending from tax rises.
She said: “We had the fastest-growing economy in the G7 in the first half of the year, but there’s more to do to build an economy that works for working people.
“At my Budget later this month, I will take the fair decisions to build a strong economy that helps us to continue to cut waiting lists, cut the national debt and cut the cost of living.”