The case for reform: developing a council tax fit for the 21st century

In the face of intense financial pressure and soaring demand, the local government sector has innovated relentlessly and proved itself capable of creativity, collaborative working and simply doing more with less.

Against that backdrop local taxation has taken on a new prominence. The reduction in central government funding in recent years has made council tax and business rates critical sources of revenue, and an ambitious programme of reform to the local government funding system has fueled a debate over how best to meet the complex and varied needs of councils across the country.

The question is whether council tax, already under immense pressure, is up to the task. The regressive nature of the tax has been amplified by the significantly out-of-date property values on which it is based. Similarly, there are serious questions over the ability of council tax support to meet the needs of those on the lowest incomes.

Recent political history illustrates the peculiar sensitivities of local tax reform. However, there is an important role for finance professionals in the public sector to provide the evidence, the expertise, and above all the insight on which a more progressive and sustainable system can be built. 

This Insight looks at the background to council tax and the environment that any reform needs to work within.