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If you think your council tax bills are going up too fast, wait to see what happens in two years. The Conservative-controlled London borough of Wandsworth is warning of possible rises of over 30 per cent across the board as a result of the council tax revaluation exercise that is happening now and comes into effect from April 2007. This would mean average increases of £200 per property in Wandsworth and similar hikes in other places that have seen soaring house prices since 1991, the valuation date on which council tax bills are currently based.
Of course Wandsworth has the lowest council tax in the whole of the UK, and is likely to be a target if the government decides to direct more of the money it provides to councils in poorer regions. Other council tax payers are likely to find their bills dropping, as the government has promised that the revaluation process will not increase revenue. If some are paying more council tax, others will inevitably pay less.
Council tax finally jumped into the election headlines last week when Conservatives promised to scrap revaluation. Conservatives and Lib Dems fought for votes with promises to restrain or axe the tax. Labour is waiting for the results of a council tax review - the Lyons inquiry - due this autumn, before it says what it will do, although local government minister Nick Raynsford was forced last week to reaffirm that Labour intends to reform rather than scrap the existing system.
Cash has got together some facts, figures, views and predictions about council tax to help readers understand what could be in store and to give them useful information if they want to tackle parliamentary candidates in this election.
Why council tax could rise by £200
All 22 million English homes are now being revalued by the government's Valuation Office agency to pave the way for a rebasing of charges from April 2007.
When the exercise was done in Wales, the country was treated as one unit, so areas in which house prices had soared got much higher increases in council tax. In Cardiff, 64 per cent of homes went up one or more bands - compared with less affluent areas where under 10 per cent went up. The same could happen in an even more pronounced way in England - hence the warning from Wandsworth, which wants to see regional banding introduced so that London, for example, could be treated as one unit and not compared to areas of the country where house price growth has been lower.
Why individuals carry more of the burden than business
'Non-domestic rates' are the business equivalent of council tax - but have been going up far more slowly than the charges on individuals. While council tax rose 93.6 per cent (on band D properties) between 1994 and 2004, non-domestic rates went up just 26.9 per cent, according to the Chartered Institute of Public Finance and Accountancy (Cipfa).
Non-domestic rates have been set nationally by the government since 1990 - but many lobbyists want local authorities to take back control for setting them, with the probable result that businesses will be treated on a parallel basis to residents.
Why bills are set to grow faster next year
In general, council tax only accounts for about 25 per cent of the money spent by local councils. The government makes up the rest. This year's council tax rises (averaging 4.1 per cent, according to the Office of the Deputy Prime Minister) are the lowest for 10 years - achieved only after the government paid an extra £3.5 billion to local councils. Steve Freer, chief executive of Cipfa, says: 'Prospects for 2006/07 hinge, as ever, on future decisions about government support. Budgets for 2005/06 rely heavily on special one-off funding announced by the Chancellor ... If that funding is not repeated in 2006/07, we could see the return of higher increases next year.'
Increases in the last decade have averaged 7.2 per cent - and peaked at 12.9 per cent in 2003/04. A 7.2 per cent increase next year would mean an extra £87 per year on bills, bringing the average band D bill to just over £1,300.
Why council tax benefit is underclaimed
Council tax benefit (CTB) is the least claimed benefit among pensioners. Even the government estimates that about 60 per cent of eligible owner-occupiers are not claiming.
CTB is administered by local authorities, while most benefits are handled by the Department of Work and Pensions. So local authorities do not have such easy access to the clues - the claiming of Pension Credit, for instance - which suggest that someone is likely to be entitled. Many people, particularly homeowners, are unaware of their eligibility.
Alternatives
The Liberal Democrats and Cipfa suggest a local income tax to replace council tax; this would produce winners and losers too. Charles Kennedy was admitted last week that a firefighter-and-nurse couple would end up worse off under the Lib Dems' proposed system.
Local income tax would be administered by employers through the Pay As You Earn system - but some tax experts think the mechanics would be unworkably complicated.
The Conservatives have promised to scrap the ongoing council tax revaluation and Michael Howard has denounced the tax as 'the most punishing of all Labour's stealth taxes', even though he introduced it in 1993 as a replacement for the infamous poll tax. The Conservatives also promise a 50 per cent reduction in council tax for those over 65, subject to a maximum discount of £500.
Land value tax is being suggested as a tax that reflects investment in transport, schools and the local infrastructure (www.landvaluetax.org).
The poll tax - where tax is payable per head - is unlikely to be revived: it taxed large families, rewarded singletons and was seen to be unfair.
The government-instigated review of council tax by Sir Michael Lyons is due by the end of this year - and is likely to suggest the retention of a modified council tax (perhaps with more discounts, bands and a better CTB system) and possibly other changes at the margin (such as the localisation of the setting of non-domestic rates).
What council tax pays for
Local authorities provide a range of services, from street cleaning to social services to cultural events. Parts of their budget are ring-fenced (education, for example) and so they cut back on other areas if they are short of cash.
When threatened with council tax capping last year, Shepway council in Kent said it might need to close some of the public toilets in Folkestone and stop cutting the grass. In the event, this has not happened - since the authority has restructured some of its services, moved some of its staff to the county council and, it would seem, become more efficient.
Council tax bills include charges from a range of bodies, not just the authority that sends the bill. In London boroughs, an average band D bill includes £254 from the Greater London Authority, the police and fire authorities, as well as £905 from the billing authority.
In many English shires, the balance is very different - £142 for the billing authority, £1,078 for the county council, police and fire and £24 for parish and community councils. Charges vary substantially around the country - with, ironically, Sedgefield, Tony Blair's constituency authority - charging the most.
Conservative councils have often aimed for small government and small bills, while many traditional Labour authorities charge more and provide more.
Highs and lows
*2005 tax bill £
Sedgefield 1,428
Newark & Sherwood 1,418
Rutland 1,410
Easington 1,404
South Bedfordshire 1,396
*2005 tax bill £
Corporation of London 806
Newport 772
Pembrokeshire 734
Westminster 618
Wandsworth 614
*Average band D bill in 2005/6
Source: Cipfa
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