When Rishi Sunak was drawing up the Budget, he had a golden opportunity to begin a wholesale review of one of the biggest blocks in the way of the Government’s levelling up agenda. By pledging to look again at our outdated and unfair property taxes, the Chancellor could have sent a clear signal to millions of households that levelling up was going to work for them.

Instead, council tax was the elephant in the room when the Chancellor delivered the Budget. While he set out economic support packages for those worst-hit by Covid-19, there was no such respite for the millions of modest and low-income households facing crippling council tax bills.

Throughout today’s address to the Commons, Sunak stressed the theme of fairness. But the truth is that the Chancellor’s silence on council tax sits awkwardly with talk of fairness and levelling up. The current council tax system is based on property valuations from 30 years ago, dating back to just before Nirvana released their breakthrough album Nevermind and Tim Berners-Lee released files describing his idea for the World Wide Web.

Furthermore, recent research has showed that residents of constituencies in the north and midlands clearly get the worst deal with council tax. While the average household in England presently pays out 0.47% of their home’s value in council tax every year, residents of Easington and Hartlepool must pay out more than 1.3% on average every year. Across the ‘red wall’, households must pay out an average 0.84%.

Thankfully, while he may have kept quiet about council tax in the Budget, the Chancellor has not yet closed the door on a review of property taxes. After Sunak spoke a lot about fairness today, the Government could still show its commitment to fairness and levelling up in a way that matters by announcing a wholesale review of property taxes.

What takes the place of council tax would then be a matter of debate but support is growing for the campaign to replace both council tax and stamp duty with a simple proportional property tax set at a flat rate of 0.48% of a property’s value.

Work by Fairer Share has shown that this tax would be revenue neutral for the Treasury while leading to lower bills for millions of people. Across England, around 76% of households would benefit under the new system, with households paying £435 less property tax a year on average. Across all the 44 so called ‘red wall’ seats in England which the Conservatives gained from Labour in 2019, 97% of households would be better off as a result of the policy with an average saving of £660 per year.

To ensure there do not have to be any losers on day one, there would be a deferral mechanism until point of sale on a low interest rate, so that nobody has to pay out immediately if they cannot afford to. For those who wish to stay in their high value home and pay the new tax, losses would be capped so that, at the point of transition, no household sees an increase of more than £1,200 per year (£100 per month) on what they currently pay.

However it is replaced, the reality is that council tax is a bizarrely regressive tax which ensures that people who live in more modest houses and areas end up paying a higher tax rate than those living in wealthier areas and more valuable properties. On top of this, council tax also taxes tenants rather than owners and clearly does not take into account the ability to pay, leading to rising levels of council tax debt.

Having framed the Budget around fairness, the Chancellor should now show that he means action by looking again at our outdated and unjust system of property taxation. By signalling his desire to kill off council tax, Sunak would be sending the clearest possible signal that the levelling up agenda will definitely deliver for millions of households across the country.

Andrew Dixon

Fairer Share