Reevaluation of Council Tax: A Call for Bold Action by Reeves

In the lead-up to the Budget 2025, Rachel Reeves is facing increasing pressure to initiate a comprehensive revaluation of council tax. This move comes as she prepares to unveil a new levy targeting the nation’s priciest properties. With council tax assessments originating from 1991, the existing system has become outdated, prompting calls for reform from various economic experts and advocacy groups.

The current council tax structure is based on home valuations conducted over three decades ago, in 1991. This has led to significant discrepancies in how much different properties are taxed. The Treasury is reportedly considering a revision that would focus on properties in the highest council tax brackets – Bands F to H. Under these plans, homes valued above a certain yet-to-be-determined threshold, likely between £1 million and £2 million, might incur an additional flat-rate annual charge of around £2,000 to £3,000, supplementing their existing council tax obligations.

Helen Miller, director of the Institute for Fiscal Studies (IFS), has voiced concerns about the complexity a partial revaluation could introduce. She argued, “It has the air of trying to scrape a bit more money where you need it, as opposed to just grasping the nettle.” Miller advocates for a full revaluation of the entire housing stock, questioning, “If not now, when? How many more decades do we have to be saying we’re basing council tax on 1991 valuations?”

Hannah Peaker, deputy chief executive of the New Economics Foundation, echoed Miller’s sentiments. She emphasized the need for a thorough rethinking of property taxation, arguing, “This is one of the most economically efficient ways to raise funds for our starved public services.” Peaker cautioned against a piecemeal approach that could exacerbate the inequalities inherent in the current system.

Historically, successive governments have shied away from revaluation due to fears of backlash from households that might be adversely affected. Some Labour MPs have expressed apprehension regarding the potential impact on their constituents, especially those who are “asset-rich, cash-poor.”

Reeves has maintained that those with the “broadest shoulders” should contribute fairly to the tax system. However, the specifics regarding the threshold for the proposed new levy remain undecided.

The anticipated policy change aims to create a more equitable council tax system. It is expected to form part of a broader strategy designed to generate substantial revenue without contravening Labour’s manifesto commitments on taxation.

A spokesperson from the Treasury remarked, “We do not comment on speculation.” Meanwhile, Adam Corlett, a principal economist at the Resolution Foundation, praised the government’s direction, asserting, “It’s a good thing. We have not made progress on council tax since the 90s and at the moment those in the most expensive properties are paying the least as a share of their incomes.”

Corlett further noted that the new charge could be applied to property owners instead of tenants, which would constitute a significant improvement over the current council tax model. This approach could help address the imbalance in contributions from high-value property owners.

The call for a comprehensive revaluation of council tax is growing louder as the Budget 2025 approaches. With experts urging for a bold transformation of the current system, the onus is on Rachel Reeves to respond decisively. A wholesale revaluation could not only modernize the tax system but also rectify long-standing inequalities, ultimately ensuring that public services receive the necessary funding to thrive. Time will tell if Reeves will take the bold step needed to reform this critical aspect of economic policy.