Harry Fairhead is a Policy Analyst at the TaxPayers’ Alliance.
It probably won’t come as too much of a surprise to learn that you pay more in Council Tax today than you did in the 1990s.
But the stark extent of the increase is laid bare in new TaxPayers’ Alliance research which shows that the average Band D Council Tax in England has risen from £646 in 1996-97 (the first year for which data is available) to an eye-watering £1,484 in 2015-16.
That represents a 58 per cent real terms increase, further demonstrating what we have taken to calling the “cost of government” crisis.
Of course, many councils have frozen rates since 2011-12, so the real terms rise between 1996-97 and then amounted to a staggering 71 per cent. Between 1996-97 and 2010-11 there were 4,471 separate Council Tax rises across the country compared to just 149 cuts and 161 freezes. Indeed, 90 per cent of councils raised the Band D rate every year.
The Coalition’s introduction of a grant to councils which froze or cut Council Tax went some way to easing the direct burden, but in the vast majority of cases this was insufficient to wipe out the prior rises. Since 2010-11 there have been 1,161 Council Tax freezes, 406 increases and a relatively paltry 203 cuts.
Naturally, there are councils which have kept rates down better than others, and so credit should go to Southwark, Harlow, Hackney, Islington, Hammersmith & Fulham and Wandsworth which (excluding precepts) have lower Council Tax in real terms today than they did in 1996-97. And when all precepts are included, Hammersmith & Fulham residents pay 2.9 per cent less than almost 20 years ago.
Similarly, since 2010-11, 45 councils have not raised Council Tax even once and 17 of these have also made at least one cut. And Windsor & Maidenhead residents have seen their Council Tax cut by an impressive £89 since 2010-11. This is excellent news for those residents who will no doubt appreciate the work their council does to keep costs down and should be seen as an example of good stewardship by other councils.
However, good news is by and large the exception that proves the rule. Weymouth & Portland residents pay the most: Council Tax on a Band D property is a whopping £1,756 (compared to the lowest in Westminster of just £674), and since 2010-11 Nottingham Council has raised the Band D rate by £127. Even though no council raised rates in 2011-12, a third of them have raised the Band D rate in each of the past three years and there are ten councils which raised Council Tax in 18 of the past 19 years: Allerdale, Epsom & Ewell, Gravesham, Lichfield, Middlesbrough, Stockton on Tees, Surrey, Tonbridge & Malling, Tunbridge Wells and West Devon.
Many local authorities try to argue that they have no choice but to raise Council Tax rates in order to balance the books, but they would do well to remember the additional burden they have already placed on their residents in the recent past. Rates have risen often and quickly, and raising them again should not be viewed as a panacea to financial uncertainty.
Instead local authorities should look closely at their existing budgets to eliminate wasteful spending and curb any excesses. For example, the TaxPayers’ Alliance’s latest Town Hall Rich List found almost 3,500 council employees enjoying annual remuneration of more than £100,000, with 537 costing us more than £150,000 and 23 on packages worth over £250,000.
Alternatively they could consider raising cash by selling off some of the assets they have built up over the years. In doing so they could build reserves or pay for restructuring (such as developing shared services with a neighbouring council) which ought to result in lower costs in subsequent years – as well as getting these assets back into the private sector.
Maybe the most effective way of raising additional cash would be to approve more housing development. Although perhaps unpopular in some quarters, this would broaden the Council Tax base rather than further squeezing existing residents. And if done with sufficient vigour across the country, this could help to reduce the upward pressure on house prices and rents. In effect this may help councils maintain their finances, reduce the burden on existing home-owners and renters and make ownership a more viable option for others – a real triple-whammy.
Compared to the preceding decade, some councils have done well recently, but it will require many more years of freezes (and cuts if we are lucky) before Council Tax rates return to anything near to what they were just 20 years ago.
That 58 per cent increase we have suffered over the last two decades should serve as a salutary reminder to civic leaders across England that it would be wrong for them to be thinking of increasing the Council Tax burden further at this juncture.