Call to scrap council tax bands

Homes should be taken off council tax bands and placed on an index-linked revaluation system updated each year to make the tax fairer, town hall finance experts said today.

Gary Watson, who chairs the local tax revenues faculty board of the Institute of Revenues, Rating and Valuation (IRRV), said a major overhaul was needed of the way council tax is set for individual households.

With the inquiry into local government funding now delayed for a further year, Mr Watson laid out the pressing need for reform.

The government last month announced its decision to extend the inquiry, led by Sir Michael Lyons, for a further year to take account of changes taking place within local government.

At the same time, the government performed a U-turn on revaluation of all properties in England, due to come in force in 2007, by announcing it was being indefinitely postponed.

Revenue collectors are anxiously waiting to see the proposed changes to local government taxation recommended by Sir Michael.

"My concern is that it is so easy to put something off," he told delegates at the IRRV annual conference in Manchester today. "I want to see some action. There is a lot of talk and no action. I want to see something happen."

He called for yearly revaluations and the aboliton of council tax bands to make the system fairer.

The original property valuation carried out in 1991 ahead of the introduction of the council tax two years later was a "quick and dirty" exercise which only took a snapshot of property prices at the time, he said. The process involved "third gear valuation", whereby valuers would drive down a street and look at a property and mark it down in a given band.

The recent government U-turn on revaluation of properties would make the effect of eventual revaluation even worse, he claimed.

"You put it off at your peril," Mr Watson said. "You would not charge income tax on what you were earning many years ago".

More regular revaluation was needed, he said. The inherent unfairness of council tax bands , which see a homeowner with a property worth over a million pounds pay just twice the tax of a neighbour with a £125,000 house also needed to be tackled.

He called for the banding system to be scrapped in favour of "discrete capital value", whereby property is valued and placed on an index-linked annual revaluation programme.

Business rates should also be revaluated every year, he said.

"We are saying that banding is not really the answer," he said. "We are saying have far more regular revaluations."

The conference also heard calls for the need to tackle the levels of council fraud believed to be taking place up and down the country.

Some couples falsely claim to be single occupier households, for example, which gives them an automatic 25% discount on their council tax bill, regardless of their wealth.

Data protection legislation makes it difficult for revenue officers to check against other council records. "One does not know the level of fraud taking place, particularly council tax discounts," he said.

The IRRV has submitted its proposals to the Lyons inquiry.