Policy report

A poor tax - Council tax in London: time for reform

22 Mar 2018

Council tax is considered by many to be in the ‘too difficult to touch’ box when it comes to reform. Haunted by memories of the community charge, better known as the poll tax, which is widely perceived to have contributed to the fall of Margaret Thatcher, the majority of national politicians daren’t even speak of reform, let alone propose any change, for fear of the political consequences.

But leaving council tax unreformed is becoming ever more unsustainable. Local authorities across the country are increasingly cash strapped as a consequence of government cuts to their core grant funding and limits on their ability to raise funds through council tax and other sources. Moreover, the direction of public policy is towards greater devolution and allowing local politicians, accountable to their local electorates, to have a greater say – not just about what services should be prioritised, but how the funds for them should be raised.

has become. Our research, focused on London, but with wider relevance for the whole system across England, demonstrates how council tax has become increasingly regressive with regard to property values – the cheaper your property, the more you are likely to pay as a proportion of your property value. What is more, our analysis shows that council tax has become substantially more regressive with regard to income too. Property taxes are not designed to be progressive with regard to income but many people believe that ability to pay is an important conception of fairness – however we conclude in this report that council tax has become more regressive for the poorest Londoners than we consider acceptable. The most substantial reform to the council tax system since its inception – the devolution of council tax benefit – is further exacerbating the regressive impact of the system on London’s poorest. IPPR will be setting out its proposals for reforming council tax later in the year but as our findings in this report make clear, the time for reform has come.

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