New Tax Shock for Londoners
Revaluation of properties and new bands will mean significant increases in Council Tax
Many local residents may need to brace themselves for massive Council Tax rises over the next few years as new legislation on Local Government taxation looks set to get approval. The Government will now have the power to change the formula on which Council Tax bands are calculated and it is likely that the differential between the lowest and the highest tax band will rise.
Areas like Chiswick, Hammersmith, Kew and Putney are expected to be particularly hard hit due to the high prices of property.
The Association of London Government (ALG) has called on the Government to ensure everyone receives a fair council tax bill. The ALG fears that London's high property prices will leave Londoners paying disproportionately more council tax than other regions, with the revaluation pushing their homes into even higher bands. These bands use property prices to help determine the amount of council tax people have to pay.
It could also mean that London receives less Government funding for services like education, tackling homelessness and social services. Councils with more properties in the higher bands receive less money from the Government.
To investigate the full effect revaluation would have on London, the ALG commissioned a report by the New Policy Institute (NPI). NPI estimates that if the revised bands had been used this year, the average council tax bill in inner London would have risen by an additional 15 per cent and eight per cent in outer London.
The report also showed that if the current system were simply amended in line with the latest house prices - 75 per cent of Londoners would be paying more council tax than all but the ten per cent of people in the largest properties in the north.
The NPI report says that a regional banding system - with different regions having their own bands based on their area's property prices - rather than the current national banding is one way of ensuring a fairer system across the country after revaluation.
The changes in the Local Government Bill include powers for ministers to vary the relationship between the amounts paid by people in different property bands. A band H property owner currently pays twice that of someone in Band D in the same borough. This ratio could increase in future. It could also be affected by the inclusion of new bands above the current Band H. The revaluation will be carried out in 2005, with the new bands used to determine council tax bills from 2007.
Chair of the ALG Sir Robin Wales said: "Just because house prices in London are higher than most other parts of the country doesn't mean to say that all Londoners have more money than anyone else. It would not be fair to expect Londoners on low incomes to pay the same council tax as someone earning more in the North and the Midlands."
Wandsworth Council deputy leader Maurice Heaster added:"London already loses out to the north in the amount of funding it gets from central government. Tearing up the present council tax bands and increasing the share of tax paid by people in higher value properties will be yet more bad news for Londoners."
Even before this new system comes into effect big rises could be in store. Council tax bills, having risen across London by over 13.4% last year, could see an even bigger increase next time in some London Boroughs. A leaked report from Ealing Council showed that a 30% increase was under consideration by their finance department. Ealing which was rated a weak council by the Audit Commission (a decision changed on appeal) could face rate capping if they attempted to make an increase this big and may have to cut non-statutory services.
September 17, 2003