Panellists at an Institute for Public Policy Research event agreed that the system must be overhauled as it increasingly resembles the poll tax.
The IPPR was lauching a report A poor tax: reforming council tax in London, which recommended devolving and reforming council tax in London and introducing a capital-wide council tax benefit system.
Luke Murphy, IPPR’s lead on housing and infrastructure, said today’s council tax “fundamentally resembles poll tax” but the effect is not as noticeable as the change is being done “by stealth” through the devolution of council tax support schemes.
The current system is “regressive” on both property value and income and is “inefficient”, said Murphy.
The report, authored by Murphy, claimed there is a “clear case for a customised and piloted solution in the capital due to London’s unique housing market, the overly centralised system in the UK and because the public are more likely to support a subnational approach”.
But Laura Gardiner, panellist and research director at the Resolution Foundation think-tank, warned that devolution of council tax should not mean extra revenues remain in London.
Gardiner said the money staying within the capital would be a “massive disservice” to the rest of the country and added: “We need to raise more in London but it cannot stay there”.
She highlighted some key issues with the current system including wide council tax bands and small differences in the rates charged between them. She also noted that the system is “generationally unfair” as today’s housing market means younger people are more likely to be concentrated in lower council tax bands.
An official commission resembling the Turner Commission on pensions should be set up to encourage a rethink of the council tax system, she suggested.
Tom Copley, London Assembly member and chair of its housing committee, agreed that the council tax system is unfit and politicians have “left it to get out of control”.
The issue of reform has previously “been put in the ‘too difficult’ box” but there is now much more cross-party support for change, he noted.
Copley recommended piloting a land value tax, which he said would “raise vital revenues for local government”. He also said that “there is work to be done” on the perception of what council tax is for.
The IPPR report also recommended that council tax exemptions for second and empty homes should be abolished and that council tax support be restored to 2013 levels – before it was devolved to local authorities.
