Conflict feared over council tax: Higher than forecast bills may bring appeals against valuations from 1.5 million householders angered by falling property prices

AS MANY as 1.5 million householders are expected to appeal against council tax valuations of their homes from next April, Michael Howard, Secretary of State for the Environment, has been warned by officials.

Critics of the tax - on both sides of the Commons - see the makings of another poll tax debacle, with ministers caught in a crossfire between the Treasury and backbench Tories protesting about the impact of the tax on their constituents. Mass appeals from householders could aggravate that conflict.

Jack Straw, Labour's local government spokesman, said last night: 'The council tax is about to blow up in the Government's face almost as spectacularly as the poll tax. The Tories will be trapped in a vice between the reality of falling property prices, and the expectation of higher council tax bills.'

Falling house prices will not be taken into account in the council tax valuations, and Mr Straw said that that omission would fuel people's sense of grievance.

But the council tax system also gives householders an inbuilt incentive to appeal against valuations, with possible savings of more than pounds 100 a year.

April's poll tax replacement is to be based on eight property value bands, and appeals are expected from householders caught near the margins between one band and another.

The eventual national level of council tax bills, which will be subject to wide regional and local variations, hinges on the outcome of negotiation between the Department of the Environment and the Treasury as part of next year's fraught spending round.

When the poll tax replacement was announced last year by Michael Heseltine, then Secretary of State for the Environment, he spoke of average bills of pounds 400. The independent Chartered Institute of Public Finance and Accountancy (Cipfa) has warned that the average bill could rise to pounds 539 if the pounds 1.25bn Community Charge (poll tax) Reduction Scheme money is not switched to the councils' Revenue Support Grant.

Even if, after the spending round, the Government were able to afford to add in that pounds 1.25bn, the average council tax bill for England would still be about pounds 460. The inner London average could be as much as pounds 600, and about pounds 500 in outer London and the rest of the South-east.

The Cipfa calculations, carried out by Rita Hale, an expert in local government finance, show it could cost the Exchequer as much as pounds 2.3bn to bring the average bill down to the pounds 400 forecast by Mr Heseltine - unlikely in the current economic climate.

John Major promised Tory backbenchers earlier this month that cash would be made available to ease the tax in, and it is possible political pressures will force a concentration of relief on the Tory heartlands of the South-east.

But Cipfa's authoritative report, Illustrative Council Tax Levels for 1992-93, said: 'So far, ministers have appeared reluctant to offer such discounts. If ministers are, nevertheless, concerned by the impact of the new tax on individual local taxpayers, the regional variations may add to the pressure for a substantial transitional relief scheme.'

The scale of expected valuation appeals gives an indication of the grass-root 'teething problems' anticipated by Whitehall. Even on the basis of Mr Heseltine's optimistic council tax projections, the average bill for a home valued at pounds 119,999 would have been pounds 488. If that same property were to be valued a pound higher at pounds 120,000, it would automatically move up to a pounds 577 bill. With no transitional relief, those averages would increase to pounds 566 and pounds 670 in the two tax bands - a difference of more than pounds 100 a year.

The valuation system, already criticised for its hit-and-miss quality, is ripe for challenge. Ministers have been told the expected workload of the Valuation and Community Charge Tribunals could require the employment of a further 150 tribunal staff - compared with a 1991-92 figure of 245.

The latest annual Ministerial Information System analysis from the Department of the Environment says tribunals face a backlog of 590,000 non-domestic rating appeals from 1990. That will not be cleared until April 1994.

Council tax valuations of Britain's 21 million homes, based on April 1991 estimates, will be sent to councils in November. Appeals will open in April, with the deadline set at 30 November 1993.

----------------------------------------------------------------- PROPOSED COUNCIL TAX BANDS ----------------------------------------------------------------- Property value Percentage Estimated bill: 92-93* of props. (Govt's 91-92 est) Band A Up to pounds 40,000 19 pounds 361 (pounds 266) Band B pounds 40 - pounds 52,000 16 pounds 419 (pounds 311) Band C pounds 52 - pounds 68,000 20 pounds 479 (pounds 355) Band D pounds 68 - pounds 88,000 17 pounds 539 (pounds 400) Band E pounds 88 - pounds 120,000 13 pounds 658 (pounds 488) Band F pounds 120 - pounds 160,000 8 pounds 778 (pounds 577) Band G pounds 160 - pounds 320,000 6 pounds 900 (pounds 666) Band H Over pounds 320,000 1 pounds 1,078 (pounds 800) -----------------------------------------------------------------

The bills are national averages, based on standard spending by individual councils. The bracketed 1991-92 government estimated bills would, according to Cipfa, now require an Exchequer subsidy of pounds 2.3bn.

*The 1992-93 estimates assume there is no switch of the pounds 1.25bn Community Charge (poll tax) Reduction Scheme money into Revenue Support Grant to ease the impact of next April's new tax.