Realist, not conformist analysis of the latest financial, business and political news

But Why Would Council Tax Revaluation Be So Difficult?

Standard English house, boringly normal – Klaus Hausman

There’s an assumption in here which doesn’t work given the way in which local authority finances work. One that is making the idea of council tax revaluation appear much more difficult than it is:

A revaluation of council tax bands – though logical – would be similarly difficult. Homeowners would presumably be able to challenge what band they had been placed in. Millions, particularly in the South East, would be asked to pay much more. Cue mass complaints, council computers crashing, protests outside town halls and furious letter-writing to MPs.

Well, no, not really.

Yes, obviously, SE property prices are much higher than they were back in the 1990s when the current valuations were set. But it’s important to understand that council tax is not a national tax. The business rates – UBR – is national, in that revenue goes off to government and is then returned/doled out across council boundaries. Domestic rates/council tax is not national.

The money raised goes to and finances the council in whose area the tax was raised from. So, a general rise in the valuations of housing in a locality doesn’t mean a rise in council tax at all.

Well, OK, the council might use it as an excuse but that’s another matter.

Consider, it costs £100 to run the council. Local properties are worth £1,000. OK, that’s a 10% per year tax on valuations to finance the council. Property prices double to £2,000. It still only costs £100 to run the council. The revaluation just means that the rate can fall to 5%.

And here’s the thing. Sure, there have been very large relative changes in property valuations over the past 30 years. But they are mainly – near exclusively in fact – within local authority areas. All of Maidstone has gone up in value, all of Bradford has fallen (say) and as we don’t reallocate domestic rates between Bradford and Maidstone that doesn’t matter a damn. We’re still trying to collect the cost of running Maidstone from housing in Maidstone, for Bradford from Bradford.

The big – extreme even – changes in property values have near no implication at all for domestic rates bills. So why not get on with doing it then?

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Addolff
Addolff
3 months ago

Bin the council tax and impose a poll tax instead. Why should the cost of running a council and all its’ services fall on the shoulders of homeowners only? Edit: I should mention that that was my opinion when I was living in a rented council maisonette and before the council tax came into being.

MrVeryAngry
MrVeryAngry
3 months ago
Reply to  Addolff

Noooooo. Bin CT and UBR (and VAT and IT and corp tax) and apply LVT – why? Because it’s landowners that benefit most.

jgh
jgh
3 months ago
Reply to  Addolff

Council Tax doesn’t fall on homeowners only. It’s an occupancy tax, not an ownership tax. The occupier of a domestic property pays it, not the owner.

Addolff
Addolff
3 months ago
Reply to  jgh

It may be an occupancy tax but it doesn’t necessarily fall on the shoulders of the occupants – my son and daughter ‘occupied’ the property with me but it was my name on the council tax bill, and no doubt, the summons if I didn’t pay. Hence the attraction (and hatred) of the Poll (head) Tax.

FrankH
FrankH
3 months ago

If it doesn’t make any difference, why bother?
If the result is that everybody pays roughly the same amount of council tax, why spend the money on the revaluation?

jgh
jgh
3 months ago
Reply to  FrankH

Because of the nonsense of a bill for your £500,000 property saying “your property is Band A because it was worth less than £40,000 in 1992” and your identical next-door neighbour’s says “your property is Band D because it was built last month and is worth £500,000.

Plus, the whole principla of a tax on X requires the value of X to be determined.

djc
djc
3 months ago
Reply to  jgh

Yes, its just the old rating system really. That worked so long as most properties were rented so the ‘rateable value’ could be determined by relation to real rents, once owner-occupation was widespread and with rent controls on what was left the ratebale value became a fiction. So it is with council tax bands, the relation to actual house prices is a fiction; the valuation office is just classifying houses into a one-to-five scale.

FrankH
FrankH
3 months ago
Reply to  jgh

That’s not how council tax bands are calculated. If my £500,000 house (I wish) was assessed as worth less than £40,000 in 1992, your £500,000 house, if identical, would also be assessed to have been worth less than £40,000 in 1992 no matter when it was built so it would be in the same band.

john77
john77
3 months ago

But New Labour chose to effectively transfer council tax paid in Conservative-controlled boroughs to Labour-controlled boroughs – a belated whistle blow by a former employee of the Ministry of Housing and Local Government (as it then was) revealed that New Labour required them to try dozens of different formulae for the grants from central government to local authorities until they found one that maximised the penalty for electing a Conservative Council. One element in this formula is the proceeds of a penny rate – so if you live in an area with high rateable values (coincidentally this has a high… Read more »

john77
john77
3 months ago
Reply to  john77

*built* in the last couple of decades

Spike
Spike
3 months ago

Charlatans exist even in small towns. Every new program foisted on my town has had grifters who said it would “cost nothing” – compared to a phony baseline. So home prices doubled? A budget that taxes you at 9% rather than 10% (that is, has your payment less than doubling) means that you are “winning.” It is a “tax cut.”

Charles
Charles
3 months ago

Realistically, it would be expensive. To start with, you have to pay for the revaluations. Then, unless by some bizarre miracle every property is valued at its old value multiplied by a fixed factor, you’ll have some properties worth relatively more than they used to and some worth relatively less. As you point out, the same amount of tax has to be raised (though the chaos of revaluation would be an excellent place to hide a tax rise), so some people will pay more and some will pay less. Naturally, all those paying less will be happy, while many of… Read more »

Spike
Spike
3 months ago
Reply to  Charles

My state requires its towns to revaluate every 5 years, and yes, all that drama does happen every time. It might be better to allow some imperfection (and we do, over the 5-year period); in the long term, the errors accumulate, best illustrated by California’s Proposition 2½, which nearly froze valuation until a property was sold. Sensible tax limitation eventually turned into outrageous inequality.

jgh
jgh
3 months ago
Reply to  Charles

“You have to pay for the revaluations”.
No you don’t. Download the lot from the Land Registry or Zoopla. For those that haven’t changed hands since 1992, that small left-over, *then* pay for valuations. Or just get it from Zoopla.

Spike
Spike
3 months ago
Reply to  jgh

The said 5-year revaluation of my home is a public document. The on-line report of its value is only available “for free” because my neighbors and I were compelled to pay via town taxes for human beings to visit the properties. So “just look it up on the computer and we won’t have to revaluate” is myopic; you can only look it up because we did revaluate. Estimated value based on contemporary sales of properties with similar square footages is crude and error-prone.

jgh
jgh
3 months ago
Reply to  Spike

Since 19-tumpty-tum whenever a property is sold in the UK it has to be registed with the Land Registry along with the purchase price. Over time all properties will eventually have a purchase price listed. So you can get all the property valuations in a council area by just downloading them from the Land Registry for those that have changed hands since 19-tumty-tum. There will be a drag on that data, some will be last month, some will be 1992 (me!). You make a decision as to how old you want your data to be, and manually revalue the ones… Read more »

bloke in spain
bloke in spain
3 months ago

I’d echo Addolff. Go back to the Poll Tax. Council services are generally consumed on an individual basis, not household basis. So return the connection between the votes & the spending & concentrate minds. And the Community Charge was never as unpopular as they like to pretend. Actually is was very popular with people I knew in our London borough. Except with the tax & spend with abandon socialists. Most of who seemed to work in the public sector, if they bothered about working at all.

Addolff
Addolff
3 months ago
Reply to  bloke in spain

And BiS, I know it isn’t appreciated around these parts, but your comment “So return the connection between the votes & the spending & concentrate minds” would also work for those who currently do not pay Income tax etc. Skin in the game and all that.

bloke in spain
bloke in spain
3 months ago
Reply to  Addolff

No representation without taxation does have a certain ring to it.
Although, of course, that’s a Spudist policy. Joy of Tax an all that.

Addolff
Addolff
3 months ago
Reply to  bloke in spain

Fuck, if it is sensible in that mans head there must be monumental reasons for it to be wrong that I don’t have the intellect to discern…

bloke in spain
bloke in spain
3 months ago
Reply to  Addolff

Despite his Herculean daily striving he can’t be totally wrong all the time. Stopped clock etc.

Bongo
Bongo
3 months ago
Reply to  bloke in spain

Not really imv, the two biggest budget items paid from Council Tax receipts are adult social care and children’s services. By and large the consumers of these things have not been paying in.
Household waste, tips, landfilling and recycling is way back in the expenditure table, around 60-80 GBP of every annual bill. Even less for other services an individual might reasonably expect to benefit from.

Quentin Vole
Quentin Vole
3 months ago
Reply to  Bongo

The biggest line item on my Council Tax bill is paying for the pensions of 50-year-old retired police inspectors living on the Costa del Sol.

jgh
jgh
3 months ago
Reply to  Quentin Vole

That may be for your local authority, but at least where I used to live they managed to do this the right way and set up a proper contributory pension scheme 50 years ago, so today’s pensioners aren’t paid out of today’s taxes, they’re paid out of the pension scheme. Today’s taxes pay for today’s employees’ Employer’s and Employee’s pension contributions. Though the employees screamed blue murder when they were forced to up their contributions from 5% to a whopping 7.5%, back when I was putting 25% in my own pension.

john77
john77
3 months ago
Reply to  jgh

@ jgh
Quentin might just be complaining about the need to contribute £££ to fill the deficit in the LGPS caused by the negative real interest rates caused by Brown’s megalomaniac incompetence and Osborne’s attempt to patch it up on the cheap. So some (very probably just a small part) of his council tax is almost certainly paying for current pensions.

Steven C Watson
Steven C Watson
3 months ago

Tim, this is the ONLY new article here, I had mail about all the others umpty times already. You reached a tipping point a while ago: you are now spamming. Get a grip or get lost.

Spike
Spike
3 months ago

Steven, what duty of continual free content do you believe Tim owes you? As a fellow “Guest” I get mail only when someone replies to one of my posts. So I apologize for the message you are going to get. If it really bothers you, go troll elsewhere.

Addolff
Addolff
3 months ago

This council tax is demonstrably unfair. I’m paying the same as the old biddy and her husband next door but I’ve got 16 Eastern Europeans living in my three bed detached house (including 5 in a ’compact, designer living area’ up in the loft space – I know, I know, it’s disgusting, that number of people etc., but I really can’t fit any more in, I’ve tried, and when the illegals talk about complaining to the council you have to accept enough is enough). This can’t be right – my ‘occupants’ have never been to the Library or Sports Leisure… Read more »

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