CRAVEN District Council is (proposing) raising its share of your council tax this year by £5 per annum for an average household. North Yorkshire County Council, with a much larger cost base, will be raising its share by £48 (nearly 10 times as much) (Council tax rise still ‘good value’, 11 February 2021). But what is an average household and is it paying its fair share?

The Institute for Fiscal Studies tells us that the poorest 10 per cent of the population (even after taking into account council tax support for low income families) pay 8 per cent of their income in council tax, while the next 50 per cent pay 4-5 per cent and the richest 40 per cent pay only 2-3 per cent.

The combined income tax and national insurance system, on the other hand, is a progressive form of taxation in that the fifth of the population with the highest incomes pay about four times as much as a share of income as the poorest fifth, and 20 times as much in cash terms.

Why is council tax, unlike income tax and NIC, comparatively so unfair?

Maybe it has something to do with the concept of an ‘average household’. In council tax terms households are in tax bands established 30 years ago.

A lot has changed to property prices since then. Even in the same town separate households living in similar properties in different streets may pay very different rates of council tax.

In a time of a housing shortage for low-income families single people get a 25 per cent discount even if they are living in a property that could house a family of five. Every government has shied away from either updating and rationalising the current system or replacing it with something completely different that recognises the fact that across a local authority housing type and household income do not have direct correlation.

This problem matters now, probably more than at any time since council tax was introduced. Most council funding comes from central government, but for Craven District Council questions still remain over funding, as you describe in your article last week, which must make budget setting difficult. A decade of austerity, in which local authorities in England lost 27 per cent of their government income while demand increased, has left councils with no leeway in the management of their budget.

As North Yorkshire County Council says on its website: “As a result, every £1 we had to spend on services at the start of the decade will have fallen to around 60p by the end of austerity.” Despite the headlines it generates once a year, council tax is a small proportion of any council’s overall budget, government grants being the greater, but it still makes a significant contribution to local council services.

It is a sad fact that this tax, which is paid by local people directly, is a regressive tax in which the poorest pay proportionately the most. This may be ‘good value’ for the ‘average household’ but it isn’t fair.

Geraldine Reardon