Updating your property's value Although work on revaluation had already started this is now on hold until after the next election. The Government's Valuation Office was originally due to publish its new figures in September 2006 with the changes affecting council tax charges from April 2007. Why do new council tax bands matter? Properties are currently grouped into eight bands, with A for the lowest values and H the highest. The higher your band, the more you pay in council tax. People in band H currently pay twice as much as those in Band D and three times as much as householders in Band A. The council was concerned that as a result of revaluation many properties in the borough would move into a higher band. This is likely if the rise in value since 1991 has been above the UK average. Revaluation could also lead to changes in the current ratios between the tax amounts paid for each band. The Government was considering options for setting bills for the highest band at (say) five times that for the lowest. There would be corresponding increases for other high band properties. The 2007 Lyons Report (www.lyonsinquiry.org) on local government finance recommends consideration of new council tax bands for both higher and lower value properties. Changes in government grant Broadly speaking, local authorities with more properties in the higher bands will lose grant. This is calculated at an amount equivalent to the extra council tax they could charge for these properties - based on national average tax amounts. Because Wandsworth's council tax is half the national average this grant loss could be exceptionally damaging for local taxpayers. The result of these changes will be a shift of grant from areas with above-average price increases to areas with below-average increases. Perversely, this redistribution will penalise councils with low taxes.
A wider review of Local Government finance A report on this review was originally expected by the end of 2005 with Government proposals following in Spring 2006. This review (led by Sir Michael Lyons) was subsequently widened to include the impact of revaluation. The report (www.lyonsinquiry.org) was finally published in March 2007. The original Lyons review had already been looking at other options for council tax. These are on top of any changes to the banding system:
The final 2007 Lyons Report is available from www.lyonsinquiry.org Why use property valuations for the council tax? The council believes such taxes have to be applied with care to stay within the bounds of public acceptability. Just because house prices in London are higher than the rest of the country, it does not follow that residents are better off. For people with mortgages, higher house prices will invariably mean higher housing costs. Repair costs are also higher in London. Elderly residents on fixed incomes and working families in rented housing are particularly vulnerable. In London people on lower incomes are already in a council tax band which is on average 1 1/2 times higher than their counterparts outside the capital. In 2005 the average London house price was £263,000 compared to £191,000 in the rest of England.
Council tax bands in Wandsworth Of these just over 23 per cent are in band D. This compares to 15 per cent in the rest of England. Ten per cent are in band F - compared to five per cent nationally. Just below five per cent are in the lowest band A - compared to 25 per cent nationally. As an inner London authority Wandsworth therefore already has considerably more properties in the higher bands than areas outside the capital (1991 values). Band A - up to £40,000 - 5,921 homes
What does this mean for London taxpayers? This was based on the effects of revaluation using a model which introduced two new bands - one at the lower end and one at the top. In this model, a new band I household would pay more than five times as much as someone in the new bottom band A. This increased taxbase for London would lead directly to a loss of £400m in government grant for the capital's local authorities. However the ALG study shows that if ministers kept to the same number of bands - and then set them at different levels in each region to reflect variations in property price rises - London need suffer no overall loss of funding. How does this compare with the rest of the country? In all cases inner London authorities had experienced the biggest property price rises for every type of council over the period 1991 to 2004. The results are slightly different to the ALG exercise although there remains a clear pattern of disadvantage to inner London. Again the loss of government grant could be mitigated by keeping to the same number of bands and then setting them at different levels in each region. The growth in the taxbase for inner London councils and the corresponding reduction in government grant is set out below for each option: Revaluation (no new bands): tax base up 27 per cent - grant down six per cent.
Implications for Wandsworth In the same way, additional bands and bigger differences in the amounts paid between the lower and higher bands would work against councils like Wandsworth with higher property values. These would see a loss of grant. And because the grant loss for Wandsworth would be based on an assumed national council tax (which is twice that currently set by the council), local people would lose out even more. According to the 2003 survey by the Association of London Government, the combined effect of all these adverse changes on Wandsworth could mean a government grant cut of £20m - equivalent to almost an extra £200 on each council tax bill. Taking the steps identified by the ALG - keeping the number of bands the same and setting them at different levels in each region - would reduce this loss in Wandsworth to £6m. Protection for Wandsworth residents The council wants to see proper protection for residents of Wandsworth and other inner London boroughs. The Government does not have to introduce extra tax bands - the current A-H range could remain. Nor does it have to increase the ratios which currently require people in band H to pay twice as much as people in band D. The cut-off points between the different bands could be varied on a regional basis. This would limit the movement of properties from one band to another so London councils would not be unduly being penalised for having 'too many' properties in the higher bands. At the very least, the Government should guarantee that under any revaluation system no property would go up by more than one band. The Government should also provide further transitional protection to individual tax payers by limiting the size of the extra tax payable as a result of revaluation. And this calculation should take full account of the excessive grant loss imposed on low tax areas.
A property tax - but not too crude Ministers should recognise that while there may be wide variations in property prices between regions, the differences between household incomes will be much less marked. There should be no assumption that people in high value areas like London are that much better off than those in other parts of the country. Join the debate Let us know what you think on any aspect of the council tax system and the revaluation process. 16/12/2005 Inquiry rules out extra council tax bands National news links 07/11/2005 Anger over council tax 'U-turn' - BBC news |
Revaluation and your Council Tax bill
