Richard Harbord: Post election council tax – revaluation and referendums

One of the more interesting questions of “what happens now”, concerns the future of council tax.

Central government is being urged by the Local Government Association and others to allow authorities the ability to set their own levels of tax without central control. This is, of course, how it was under General Rates where large percentage increases were not unusual. The expectation then was that accountability would sort out, and control, the levels as the ratepayers would pass judgement at the ballot box. It was also interesting that some high-increase authorities were voted back in with the suspicion that the residents were actually willing to pay more for better services.

At the Local Government Conference last year Eric Pickles told delegates how he had been disappointed at the lack of council tax referenda. Referendums, he said, were the correct and democratic way of deciding council tax increases and it had been his expectation that authorities would use them to gain the views of residents on priorities and important services.

I have to say, I always took the view that it was a singular waste of time and money running a referendum to ask residents if they would like to pay more tax. However, as I never put it to the test I have to accept that the secretary of state may have had a point.

But the first ever council tax referendum has just been held in Bedfordshire. At first sight it would seem to agree entirely with Pickles’ point. The referendum was for the police and crime commissioner and the deal was a 15.8% increase in precept for 100 additional police constables. There was a very good turnout for the referendum of around 65% and the result was approximately 70% of votes against the increase.

This could be the start of a more general attempt to seek higher tax increases to fund particular services as more savings are made over the next two years.

Some uncharitable people would say that this rather limits the decision making of elected councillors. That is to say residents have elected people to take these sort of decisions for them without asking for specific guidance on individual policy issues.

There are also greater matters of principle around the future of council tax. Mansion tax has gone but it is time that the system was brought up to date . It is difficult to explain to people that the banding is based on values 25 years ago. It somewhat discredits the tax because people find it difficult to understand. The system needs to have a revaluation. It practice no tax should be brought in without legislation stating the dates for future revaluations and government should be encouraged to stick with them regardless.

There also needs to be an extension of bands. Although mansion tax was not well thought out the basic principle of higher value houses paying higher tax is a sound one.  I know that I have bored people endlessly with the example of the locality where I live in which  several houses sold in excess of £20m pay only one band higher than I do in my modest dwelling. This cannot be right.

I was amused to learn that in New Zealand the domestic property tax on revaluation receives around 60% of appeals. The significant thing is that most of these appeals are to raise values as this is seen as being very important to the residents.

The system here needs a thorough overhaul and updating and with additional bands may well produce more income to finance local services. Wales did have a revaluation but the political risks are perceived to be high and therefore the only time to do it is at the beginning of a five year parliament.