In recent years, the idea of having a 'Mansion' tax has gained considerable traction with both the Lib Dems and then the Labour Party picking it up. This has been criticised by some because it won't raise very much money and because it will have to be paid by elderly, impoverished ladies living in modest houses who have the great misfortune to live in the more expensive parts of London. Nine years ago, The Public Accounts Committee of Lewisham Council proposed reforming Council Tax in ways that would make it much more progressive and potentially raise more money than would the introduction of a simple 'Mansion' tax. It produced a report that formed the basis of its submission to the Lyons Inquiry into Local Government Funding. The report makes interesting reading, given the pressures on Local Government finances we are experiencing today. Below is a section from its submission which summarises its main recommendations:
The Committee supports the New Policy Institute (NPI) version reforming the council tax which includes changing the number of multipliers of the bands particularly splitting bands A and H, which are currently very wide, and sub dividing band G so that the progressivity of the tax could be improved. We believe that this system will be fairer for low income families as well as pensioners as they are, on average, more likely to pay a greater proportion of their income in council tax than average and high income families.
We also support the NPI’s proposal for sub national variation (regional banding) so as to take into account the house price divergence throughout the country. Also this would prevent a redistribution of central government resources from areas with relatively high house prices to regions with low house prices. Regional banding would work well in this system, however, we are concerned about the ‘cliff edges’ debate which was discussed at the Balance of Funding Review where taxpayers in a neighbouring region are paying different council tax levels for houses of the same value. This problem could arise if the neighbouring borough to Lewisham, Bromley, which is an outer London borough compared to our status being an inner London one could potentially pay different levels of taxation despite having similar house prices. We also believe that revaluation should be more frequent (10 yearly) as to give integrity to the system.
An important aspect that the Committee urge the enquiry to look at is the whole scale reform of the council tax benefit system. The stigma of take up must be removed. This can be done by turning it into a credit, as to appeal to pensioners. The complexity of filling the application is another reason why people are put off it.
It’s a shame that the debate on the whole issue of the iniquitous regressiveness of the current system of the Council Tax has been driven up the cul de sac of a Mansion Tax proposal. The calls for a Mansion Tax, although well intentioned, have framed the current debate in terms of those who want to protect vulnerable old people in expensive houses paying more tax and those who want to pursue the class war by bashing millionaires. We need to broaden out the discussion to explore ways of making the Council Tax more progressive and fairer. Creating more bands at both the top and bottom would seem to be an easy way of doing this, as it would not necessitate a wholesale national revaluation of properties. It is disappointing that in the nine years or so since this report was published, the issue of root and branch reform of Council Tax has disappeared into the long grass. Sadly, I wonder whether it will ever re-emerge.
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