Transitional relief creates council tax anomalies: In some boroughs higher band houses will pay less than lower band households, Paul Gosling reports

CHRIS JEFFREY'S new council tax charge will be pounds 583.65, for his small end of terrace house in Plumstead, Greenwich, south-east London. Occupants of the most expensive houses in the borough, in some cases worth more than a million pounds each, will pay pounds 12.29 less - just pounds 571.36.

The council tax was introduced last year as a supposedly fairer replacement of the poll tax. Yet in some instances people will be paying less council tax simply because they live in more expensive properties.

Occupants of large Georgian villas opposite Greenwich Park, in band H - valued at more than pounds 320,000 - will be paying less council tax than Mr Jeffrey, whose house is in band E - worth between pounds 88,001 and pounds 120,000.

What is more, Mr Jeffrey, having improved his house by adding a bedroom, will pay a few pence a year less than his neighbours, who are in band D.

Mr Jeffrey, who is employed as assistant to local Labour MP John Austin-Walker, said: 'I wish I could understand it. How it works that someone in bands D or E pays more than a house worth a third of a million pounds is beyond me. Yet it was said to be a fairer and more understandable tax. It's incomprehensible. When I first saw this I thought it had to be a mistake.'

The situation in Greenwich is unusual, but not unique, and comes about from the complex method by which transitional relief is calculated. The relief was designed to cushion the impact of council tax bills, by limiting the extent to which they can exceed previous poll tax bills.

The amount of transitional relief for the new tax year is based on that given in the year just ending, but the end result can be very different because the reliefs will be applied to possibly very different tax charges. This is especially true in cases where the council tax is being substantially cut - on average by pounds 150 in Greenwich, following a big increase in government grant to the borough.

The London borough of Wandsworth is similarly affected. A two- person household in one of the borough's most expensive properties, in band H, will be charged pounds 143 if it is eligible for transitional relief. Those living in band G houses will pay pounds 149.34, and those in band F, pounds 145.89.

The same situation could face people in Sheffield, Ealing and Brent, where councils are expected in the next few days to set much reduced council tax bills.

In other authorities, the result of transitional relief can be narrow gaps between charges for different bands. For example, in Rochester there is only pounds 6 extra to pay for being in band H rather than G. In Westminster, the difference is pounds 7.

These effects are most likely to be seen in London and the South-east, where property prices are higher, and will only happen where council tax bills are being cut. In London, most bills will be 4.6 per cent lower than last year, but on average in England and Wales there will be a 2.1 per cent increase next year.

A spokesman for the Department of the Environment said the situation in Greenwich resulted from a much higher level of government grant going to the council for the 1994/95 year. Once the anomaly had been discovered it was decided that changing the system would cause more problems than living with the results.

'On the whole we believe that Greenwich residents will prefer the approach we've taken to one delivering less relief. It produces a good outcome for Greenwich.'

Originally, transitional relief had been introduced just for the introductory year of council tax, but was extended for a second year in a slimline form. In some councils transitional relief is only available to band H, the top band, while in others it extends down to band D. About 3.75 million households were eligible for transitional relief last year, but only 1.4 million will benefit in the new financial year. No decision has yet been taken on whether to extend the scheme into 1995/96.

(Photograph omitted)