Council tax is one of the most outdated and unfair taxes in the UK today — and yet it continues to underpin the finances of every local authority in the country.
The system we use now was introduced over 30 years ago, and it still relies on property valuations from 1991. In that time, the housing market has transformed, but the tax bands have not. As a result, households are paying wildly different amounts of tax for properties of similar value today, simply because their homes were assessed differently decades ago. That’s not fair, and it’s certainly not progressive.
In places like North Somerset, we see the effects every day. A modest three-bedroom home in Weston-super-Mare might be paying more council tax than a far more valuable property in central London, simply because of the quirks of the old banding system (and then compounded by the government funding formulas). Families on modest incomes, pensioners, and young renters bear a disproportionate share of the burden, while those in high-value homes often pay less, relatively speaking.
Even the Institute for Fiscal Studies has called council tax “outdated and arbitrary”. And they’re right. Research shows that the poorest households pay a higher percentage of their income in council tax than the wealthiest. That’s not just bad economics — it’s bad ethics.
The Lyons Review, commissioned by the last Labour government in 2007, highlighted many of these problems and suggested a path forward. It called for regular property revaluations, new council tax bands to reflect modern housing values, and greater flexibility for councils to shape local taxation in ways that match their communities. Yet nearly two decades later, little has changed.
It’s time to revisit those ideas — and go further.
What would real reform look like? Here are steps we should be seriously considering:
- A full revaluation of properties across England and Wales, bringing council tax bands in line with today’s market values.
- The introduction of new, higher bands for very expensive homes, so that the wealthiest households contribute a fairer share.
- A shift towards an income-based local tax, such as a local income tax, which the Liberal Democrats have long supported.
- Greater devolution of fiscal powers to local councils, so they can tailor fairer funding systems to their communities.
- Stronger protections for those on low incomes, including national support for relief schemes and discounts.
And this brings me to one of the most glaring inconsistencies in the current system: Council Tax Support (CTS) or council tax benefit in the old terminology.
CTS is meant to help people on low incomes meet their council tax bills. But since the system was localised in 2013, support now depends not just on need — but on where you live. Some councils offer more generous schemes, others provide only minimal help, because the scheme is funded locally. That means two people in identical financial circumstances can receive completely different levels of support, simply based on their postcode.
It is an absurd and unfair patchwork. The rules for pensioners are still set nationally, but for working-age people, local councils are left to make difficult decisions — often with limited funding and growing financial pressures. That’s not a coherent welfare policy. It’s a postcode lottery.
Council Tax Support should be nationalised, with proper, needs-based funding and consistent entitlements across the country. No household should be penalised or protected based solely on their local authority’s budget. This is a basic matter of justice.
In North Somerset, we’re doing our best to protect essential services while keeping council tax increases as low as possible. But we’re constrained by a system that doesn’t work. Like many councils, we face rising costs for adult social care, education, and infrastructure. Without a fairer funding mechanism, we’re forced to keep going back to local taxpayers, even when many simply can’t afford more.
The Liberal Democrats have always stood for fairness and local empowerment. Reforming or replacing council tax must be part of our vision for a better Britain. We need to be bolder and louder on this issue — both in Parliament and in local government.
That’s why I’m calling on Liberal Democrat councillors, MPs, and members across the country to make council tax reform a top priority. Let’s push for it in our national manifesto, our local campaigns, and our conversations with communities. Let’s champion a new settlement that reflects today’s realities — not the property market of 1991.
If we’re serious about tackling inequality, empowering councils, and rebuilding trust in politics, we must start with the tax system that hits every household, every year. It’s time to fix council tax — or scrap it altogether.
The longer we wait, the deeper the unfairness becomes.
* Mike Bell is Leader of North Somerset Council, a long-standing councillor in Weston-super-Mare and was Brian Cotter’s Election Agent and Head of Office from June 1995 to December 2001.
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9 Comments
Interesting that you’re proposing essentially a reversal of the current system, localising tax-setting, but nationalising tax relief. Trying to envisage how that would work.
Council Tax was brought in to replace the Community Charge (poll tax) which had, itself, been an alternative to Domestic Rates. Rates was so unpopular as a form of taxation that the Tories thought the Poll Tax would be an improvement – but that ended with rioting. They then back-tracked by returning to a property tax called Council Tax.
No political party has been brave enough to change it since then for the obvious reason that the losers of any change are furious while the winners are usually not that grateful in practice.
The SNP was elected to replace the Council Tax with a local income tax in Scotland, but didn’t deliver when they realised how difficult it was to create a fair system without facing massive electoral consequences – I will be impressed if the Liberal Democrats is braver…
‘it still relies on property valuations from 1991.’
Just to clarify: that’s in England. In Wales, it’s from 2003. And The Local Government Finance (Wales) Act 2024 will mean regular revaluations every five years, beginning from 2028.
Council tax certainly needs reform given its current unfairness, but this needs to be considered alongside a major rebalancing of tax away from central government towards local government. Sam Freedman in his book published last year “Failed State” makes an excellent case for radical change away from our over-centralised government system; indeed he shows how centralisation has led to government that does not work properly at all. After almost destroying local government and increasing ministerial powers in Whitehall for the last 30 years and especially since 2010, not only is our method of governance bad but our democratic system is suffering badly.
As was shown by Andy Burnham (Manchester) and Andy Street (West Midlands) there is growing support for decentralisation but as Mike says, this must include reform of local tax.
This is certainly a ‘brave plan’.
How would we implement it and still keep the seats we currently hold many of which would be hit with huge tax rises ?
Worth pointing out that revaluing properties, while desirable, won’t prevent different householders from paying different amounts for similarly valued properties, because the issue is deeper: If average house prices in Northern-Mill-Town fall into Band A and average house prices in Sunny-Sea-View fall into band F, and both authorities need to raise the same revenue per household, then it’s inevitable that band A in Northern-Mill-Town will have to pay roughly the same as Band F in Sunny-Sea-View. Therefore – a – for example – band C house will pay less in Sunny-Sea-View than a house of the same value in Northern-Mill-Town.
Completely agree that C Tax needs urgent reform. The scale of the transfer of wealth transfer from the abolition of rates over 30 years ago is staggering and his materially contributed to the inequality and dissatisfaction we see today. Pending a thorough review of property/land taxation, I would make some simple changes almost immediately:
i) increase the multiple of Band D tax paid by bands E and upwards. This raises funds and shows the direction of travel.
ii) reband properties 5 years after home improvements/extensions rather than on resale. It is difficult to believe this would deter much improvement work – and again would lead to fairer taxation.
@Jim: Rebranding properties a few years after improvement works might not deter a huge amount of works but I’ll certainly deter some – and at a time of housing shortage bordering on crisis, should we really be seeking to deter people from doing any building works. Besides there’s a moral issue: Is it really right that if someone spends their money doing something that is worthwhile (improving their home) we penalise them with extra tax continuing for many years into the future, but if they spend their money doing something that doesn’t benefit society (like buying a foreign holiday) we don’t?
One solution is to base council tax not on property values but on land values (I suspect @Joe Bourke might like that one 😉 )
Does your proposal for a “shift towards” a local based income tax mean a half baked measure or a complete change?