MPs call for complete overhaul of council tax and introduction of tourist levies
Councils in England are being asked to deliver more than ever before, without adequate funding to allow them to do so effectively, a new report by the cross-party Housing, Communities and Local Government (HCLG) Committee has found.
The report, which was published on Wednesday (23 July), found that the broken link between tax and service quality is leading to a growing dissatisfaction among residents and risks undermining trust in local democracy in England.
The report also points to widespread cuts to preventative services over many years, having exacerbated the financial crisis in local government.
The report recommends the Government overhaul council tax, “the most unfair and regressive tax in use in England today”, and look at greater fiscal devolution, allowing councils to set their own forms of local taxes, such as tourist levies, to help make the local government system fair and effective.
“When residents are paying more and more in taxes but seeing less and less in regular, everyday services, such as libraries and fixing potholes, then trust in local democracy is at risk of being undermined,” said Florence Eshalomi, Chair of the Housing, Communities and Local Government (HCLG) Committee.
“Government in England is overcentralised. The current financial pressures on local government are also driven largely by mandatory, high-cost, demand-led services, such as social care and SEND, where councils have little control over these needs. Councils are trapped in a straitjacket by central government, with local authorities lacking the flexibility or control to devise creative, long-term, preventative solutions which could offer better value-for-money.”
Eshalomi said the reform of council tax should be a greater priority for the Government. In the long-term, Treasury should devolve tax-setting powers to local authorities, allowing them to set their own local taxes, such as tourist levies, she said.
“If, as a country, we are going to deliver growth and improve local services, Westminster needs to ease its grip and let councils have more power to control their own affairs and be accountable to their own electorates.”
As an interim step to reforming council tax, the report calls on the Government to give local authorities more control over the council tax in their areas, including the power for individual councils to revalue properties in their area, define property bands, set the rates for those bands, and apply discounts.
The report notes that devolving fiscal powers and responsibility to local authorities must be part of any fix to the local government finance system.
It also recommends that the central government’s ringfencing of funding is replaced with a rigorous outcomes-based system of accountability, so that local authorities are held accountable for achieving against a set of agreed outcomes within their overall budgets, not for meeting spending targets.
