Why I Want Rid Of Council Tax

SNP plans for a Local Income Tax (LIT) seems to have become the target of choice for the opposition now that the budget and council tax freeze have gone through. As if on cue, out is being wheeled by Labour and others the archetypal hard-working, 2-income family, whom we are being invited to believe will under LIT be left subsidising pensioners in big houses who live off bloated share portfolios.

First things first - comparatively few people are in a position to live off their investments, but presenting a more balanced picture wouldn’t have the desired effect in terms of trying to whip up opposition to LIT. However, as a strong supporter of LIT, I thought I’d throw two very real examples into the mix, which have resulted from my own domestic arrangements over the past few years, which help explain my complete disdain for the council tax, or for that matter any kind of property based tax.

I own a flat in Edinburgh, which when I lived there at first, I shared with my partner of the time. As a band ‘B’ property, our combined water and council tax bill came to about £1,200, or £600 each. However, after we split up, even with a 25% single person’s discount my bill shot up to £900 – or about 5% of my household income at the time. I hadn’t become any wealthier in the intervening period and made no more demands of local services than I had previously. However, purely as a result of a change in my personal circumstances, my Council Tax had increased overnight by 50%.

Fast forward a few years to the present. As work for the moment requires that I have somewhere to live in London, I rent a room in a 4 bedroom semi-detached house in Lewisham, in the south-east of the city. Nice as our bit of town is, Notting Hill or Hampstead or trendy north London it most certainly isn’t (actually, that’s probably a good thing). It’s a very diverse area, with a high proportion of young families and a large number of homes of multiple occupancy.

There are 5 of us living together in the house – myself (parliamentary researcher); an IT consultant; a banker who shares a room with his fiancée (who is also a parliamentary researcher); and another banker. Fortunately, we all get on very well, although this may be helped by our different work start times and the fact we have a big kitchen and 2 bathrooms, so it isn’t quite as cosy as it sounds!

Based on salary alone, the five of us probably have a combined annual income of between £250,000 - £300,000 (I should make clear that myself and the other researcher lag quite some distance behind the rest). However, as a band ‘E’ property, the bill for us all comes to just over £1,500 – or £300 a skull if we split it 5 ways – just 0.5% of the total household income. It’s quite a difference from the £900 I used to get stung with for living on my own in Edinburgh, and an obscenity when you consider the couple with two pre-school kids over the road who have to pay an identical bill out of just one income.

And that in the end is my beef. Council tax hits households with low incomes disproportionately. Since it is based on the value of the house, there is little correlation between this and one’s ability to pay. Worst of all, the eventual bill you end up paying hits those who live on their own the hardest.

While being young, professional and childless means we don’t make huge demands of the services of Lewisham Council, on balance, we’re happy that we’re making a contribution towards policing, parks, adult education, libraries, schools, trading standards, refuse collection, the fire brigade, social services etc in the area. Splitting the bill 5 ways makes us better off financially, but I don’t think any of us would object seriously to being asked to make a bigger contribution given that we’d all be more than capable of so doing.

There will be winners and there will be losers in any change to a tax system – something which those calling for council tax revaluations and extra bandings and additional rebates would be wise to remember. Instead of conjuring up grotesque, false spectres of families being downtrodden by the supposedly idle rich, Labour and the Conservatives should be honest enough to explain why they believe that the rich man in his castle should pay a lower marginal rate of tax than the poor man at his gate.