Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 5
5
Paragraph: 31
We are pleased that the allocation of the £300 million grant for social care mitigates...
Conclusion
We are pleased that the allocation of the £300 million grant for social care mitigates the distributional impact of the council tax rises, but we do not think the fairness of the funding model should be reliant on one-off, short-term grants. It is right that certain councils be compensated for low council tax bases, but this should be done through a more predictable means of funding equalisation. Council tax is also an increasingly regressive tax that again penalises those in more deprived areas. A revaluation is long overdue. In the longer term, one possibility that could be considered is a proportional property tax.
Paragraph Reference:
31
Government Response
Acknowledged
HM Government
Acknowledged
Council tax provides stable income for local authorities to deliver a range of vital local services, and predictable bills for taxpayers. This certainty is particularly important as the country recovers and builds back from the pandemic. To ensure fairness, each council has its own local council tax support scheme to provide reductions in council tax for residents in financial need. The Government has provided councils with £670 million of new funding for these schemes in 2021/22. The Government has no plans to replace or fundamentally reform council tax. A revaluation would be expensive to undertake and could result in increases to bills for many households. The creation of higher council tax bands, which in itself would require a revaluation, may penalise people on fixed incomes, including pensioners, who could face a substantial tax rise without having the income to pay the higher bill. Given that council tax is retained locally, a revaluation would not address the disparity between strength of council tax base and need. The Government recognises that councils have differing abilities to generate income from council tax and ensures that the Local Government Finance Settlement takes these into account when the distribution of funding is determined each year. It has also equalised against the adult social care precept since its introduction, ensuring that funding - including that raised through the precept - is distributed in line with its assessment of relative need.