The injustice of our council tax system demands redress

Advice from the European Commission (EC), one may imagine, does not reach very far inside No 10 Downing Street. The dustbin, perhaps. “Too big, too bossy, too interfering” was how the Prime Minister described Brussels just a week ago. The latest EC sally into British affairs offers a critique of government housing policy – and is particularly peremptory on the failure of the council-tax system to keep up with booming prices.

It contains much sound counsel. With every passing month, and the property-price rises they bring, Britain’s council-tax system turns a degree more regressive. Simply put, bands of property valuation set in 1991 – A to H – no longer map to the UK housing market. Huge numbers of properties, especially in the South-east of England, have clustered into the top band, H, established at £320,000 – and rocketed far beyond it. But HMRC can ask only for the same return from a home that creeps into the bracket as from one worth 10 times as much.

Additionally, a Band H property pays just three times the amount of council tax as one in Band A, right at the bottom of the market. So in effect the bills of an oligarch in One Hyde Park are being subsidised by the poorest in Westminster. At the same time, cuts to council-tax benefit – introduced in April last year – are driving ever more families into debt. That the top of the property ladder extends so far beyond the reach of HMRC, while the poor get clobbered, is an injustice in need of redress.

Change will be tricky, but not impossible. In 2005, Labour shelved plans to revalue England’s properties – aware of the political costs attached (those bumped up a tax bracket would complain, vocally, while those who ended up paying less would take the gains for granted). The prospect of a national revaluation is now so deep in the political long grass it may as well not exist. Yet the Liberal Democrat Treasury minister Danny Alexander has backed an easier solution – simply adding two new brackets to the top end of the 1991 system. This would add a measure of fairness – while avoiding the connotations of “class war” that attend a straightforward mansion tax. Mr Cameron is known to object. The EC won’t change his mind. Let us hope Mr Alexander can, or 2015 resets the agenda.