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Council taxpayers may be shocked to discover how little scientific finesse went into determining the property values on which their bills for the past 12 years have been based. The property valuations, which took place in 1991 in readiness for the introduction of the tax two years later, were done on a drive-by basis, according to Gary Watson, chair of the local taxation and revenues faculty board at the Institute of Revenues, Rating and Valuation (IRRV). "Valuations involved 'third gear valuation'," he explains. "You drove down the road slowly and you would look at a tower block and say: 'that is all band C'. What you did not know was what was at the back of the property."
The decision to introduce eight property bands is seen by some as a result of a rushed effort to do away with Margaret Thatcher's ill-fated poll tax. They feel that the bands pay scant regard to proportionality: a property in band A is at least eight times the value of the property in band H, but the council tax is only three times higher. Furthermore, a single occupier of a million-pound home is eligible for a 25% tax reduction, meaning they pay just twice as much as someone living in a house worth just £125,000. The scope of each band is also significant: the owner of a £1.5m property pays no more than someone in the same area living in a house worth just £321,000, for example.
For more than two years, there has been growing revolt by residents clamouring for a fairer tax, particularly those on low, fixed incomes such as pensioners, who may be "asset rich" in terms of their property, but "cash poor". Yet more than a year after a government-commissioned inquiry into local tax reform was set up under Sir Michael Lyons, we are no nearer knowing what exactly will change, and when. Frustration increased following the government's jaw-dropping announcement last month that it would extend the review by a year and postpone the long-awaited revaluation of properties indefinitely.
Mr Watson says its members are concerned, though not surprised, by the government's u-turn on revaluation, particularly as the original valuation in 1991 was, in his view, a "quick and dirty" exercise. But he sees the delay as misguided, and says it plays into the hands of a general public convinced that revaluation will mean a banding jump for the majority, despite the government insisting revaluation will be "revenue neutral overall". He says: "There is this myth people are going to pay more and we have lost public engagement already on this. We should have gone ahead with revaluation. My fear is that when we finally do it, it is going to be worse."
The IRRV has another view of revaluation altogether, however. It proposes scrapping the band in favour of "discrete capital values". This would mean undertaking individual house valuations using computer-aided techniques. They could then be revalued every year, so that tax bills were based on current values, rather than historic ones. Northern Ireland, which still has the old rates rather than the council tax, is using such a system on its 700,000 homes in time for 2007, its first revaluation since 1976.
"You would know the prices have gone up by x amount locally. If you move into a house today, you have to base it on what it was worth in 1991", explains Mr Watson. "That's the problem. As long as the system is not revalued you are basing it on an old tax."
To ensure the asset-rich, cash poor contingency do not pay more than they can actually afford, the IRRV also wants the council tax benefits to be reformed. This would also put an end to what is currently open season for tax evaders. The ease with which a resident can get away with paying less by bending the discount system is just one reason why tax reforms are sorely needed, says Wilson. "You can be married and say you live alone and we cannot prove it," he explains.
Revenue officers are hampered by data protection laws, which prevent them accessing other records to catch fraudsters out and people often do not register on the electoral role, making it difficult to prove the number of people living under one roof. Additionally, there is no requirement to review discounts every year. In one London borough where Mr Watson used to work, he says 45% of residents were claiming the single-occupier discount.
The IRRV believes a change of terminology would improve take up among different groups, with the term "benefit" replaced with "rebate.' The government has recently picked up the phone to 1.8 million pensioners to make them aware of their eligibility for council tax payments. However, the threshold level of assets people are entitled to have to qualify for relief has not changed in years, and is still just £16,000.
The IRRV is also recommending a package of other locally raised taxes, such as a share of the lottery tax which currently goes straight into central government coffers, and a tourist tax. But until the Lyons review reports at the end of next year, the IRRV, local government and council tax payers alike, will just have sit on their hands and wait to see which of their ideas are reflected in the final report.
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