- Motion made, and Question proposed, That this House do now adjourn.—(Vicky Foxcroft.)
- 7:15 pm
- Council Tax is, without doubt, the most unfair, regressive and punitive taxation system in this country. It is hammering towns such as Hartlepool. Places with high deprivation and low wages—the very areas that a fair tax system would support—are instead being squeezed to breaking point by a broken system that must be fixed. A Government that stand up for working people, promise change and have a mandate for that change cannot sit back while such fundamental unfairness continues.The numbers speak for themselves. For a band A property in Westminster, it is £648 a year. In Hartlepool, it is £1,585. A Band H property in Hartlepool pays nearly £3,000 a year more than one in Westminster.
- The hon. Member makes a good point in comparing his constituency with the situation here in London. To continue that point, on top of council tax, there is the settlement funding for councils, of which London boroughs have received roughly twice as much as shire counties. Does the hon. Member agree that that is also a problem with the current council tax regime?
- Certainly, the last 14 years—I note that none of the Conservatives are here—shifted the settlement away from areas of deprivation to more affluent areas. That has had an incredibly punitive effect.Council tax in Hartlepool represents 9% of median gross pay. Here in Westminster, it is just 2%. Someone can live in a multimillion-pound property in London and still pay less council tax than someone in a terraced house in Hartlepool. It is not right. It is not fair. It must change. An outdated system based on 34-year-old property values can never deliver fairness and has widened regional inequalities.
- Sixty-six per cent of Somerset council’s budget goes to fund social care. That budget is funded through the taxes raised on property based on prices from 1991, as the hon. Member has set out. Does he agree that that is archaic and unfair, and that we should enact real reform to the way we fund local authorities?
- I absolutely agree and I will come to social care later in my speech, so I will pick up that point then.
- May I commend the hon. Member for bringing forward the debate? He is getting himself a reputation in this House for being an assiduous constituency worker. I wish him well in continuing to do the good work that we all witness.Does the hon. Member not agree that with the cost of living crisis, working families—that is what we are talking about here—need to know that every penny of tax is wisely spent? Confidence is clearly at an all-time low. Does he further agree that greater openness and transparency as to the use of tax funds can only be a good thing throughout this great United Kingdom of Great Britain and Northern Ireland?
- I absolutely agree. I should first say that it would not be an Adjournment debate without an intervention from the hon. Member. He is absolutely right: we need transparency in the system. One of the biggest problems with council tax is that it has broken the bond of trust between those who pay it and the services that they receive. I will come back to that point later in my speech.
- My hon. Friend and neighbour makes some excellent points about the unfairness of the council tax system. My view is that it cannot be tinkered with and it is fundamentally flawed. For my constituents and my hon. Friend’s, it is nothing less than a regressive property tax. In Blackhall in my constituency, someone living in a modest band A home worth £35,000 pays almost the same in council tax as a band H property in Belgravia worth many millions of pounds. That is indefensible. Does my hon. Friend agree that if we are serious about tackling growth and improving living standards in constituencies such as mine and his, we need radical reform?
- I absolutely agree with my hon. Friend. The tinkering around the edges that has happened in some parts of the United Kingdom will not get the job done.My hon. Friend mentioned property prices, and they are at the heart of the unfairness. In Hartlepool, 53% of the properties are in band A. Here in Westminster, that figure is 1.2%. In Hartlepool, only 3.7% of the properties are in bands F to H, yet in Westminster it is almost half of all properties. Such a skewed housing base makes it impossible to raise the money to deliver the services that people need. Furthermore, council tax is not a reliable source of income. Nationally, one in 10 people in the UK have been in council tax debt, and nearly 40% of those individuals have reported being threatened with legal action as a result. Outstanding council tax debt already stands at £6 billion.This week I spoke to Caroline, a development officer in Hartlepool who supports many of the most vulnerable in our community. She told me of one working family for whom council tax, even with the reduction, is now the equivalent of more than a third of their mortgage payment. Dad works and mum is a full-time carer for their disabled son. They live in fear of not being able to pay. They do not understand where their money goes and they do not feel any benefit, only financial pain. How can we sustain such a system? How can we stand by while it punishes the very people we are supposed to represent?At the heart of this broken system is social care, as has been mentioned already. Nearly 70% of Hartlepool’s budget is spent protecting the most vulnerable children and adults in our town, and that is mirrored in areas of need across the country. No one in their right mind would design a care system funded by a regressive tax levied on small, struggling communities, yet that is exactly what has happened and it has been getting worse. In Hartlepool, officers have made a rough estimate that if social care were removed, a typical band D property would see its bill drop from £2,400 to less than £1,000.
- I pay tribute to my hon. Friend the Member for Hartlepool (Mr Brash) for securing this incredibly important debate, and I agree with every word he says. Does he agree that a reformed system would reduce the cost of living for ordinary people and, depending on how the Government wanted to reform it, actually increase revenues for the Government to spend on better public services?
- Absolutely. A properly balanced system could provide the services we need and put more money into the pot to ensure those services are delivered. That is partly the problem with this system: it is so broken that it punishes people in deprived areas, and it still does not deliver those services.I know Ministers have said they are not looking to reform the council tax system in this Parliament, but even if an overhaul of the entire system is not possible, there are still ways to improve things, and I hope the Minister will advocate for them. The Casey review of social care should recommend taking social care out of local authorities. The Children’s Wellbeing and Schools Bill, by promoting regional co-operation, can create economies of scale to take the burden off council taxpayers. Under the English devolution proposals, financial devolution must be part of the discussion. If we are to have larger authorities that are more remote from the taxpayer, the residents must see the benefit in their pockets.This Government promised change and to fix the foundations, but the public’s most direct contact with government is through local councils, whose foundations are crumbling. If Ministers ignore council tax reform, they do so at their peril. We can fix a broken system, ease the burden on working families, and restore trust in government at all levels. We have a moral duty to right a 34-year-old wrong, find a sustainable solution to this injustice, cut council tax bills and deliver real change for the people we represent.
- 7:26 pm
- I congratulate my hon. Friend the Member for Hartlepool (Mr Brash) on securing the debate. He is absolutely right that the system is outdated, regressive and in desperate need of change, and our region is disproportionately impacted.My constituency is split between two local authorities: Middlesbrough to the west, and Redcar and Cleveland to the east. They are two distinct areas with their own local challenges, but they face similar issues when it comes to council tax. Loftus in Redcar and Cleveland will have a band D council tax rate of more than £2,500 for the next financial year. That means a multimillion-pound property in East Sussex can attract a lower council tax bill than the average family home in our region. That cannot be fair. In fact, owner-occupiers in our region can expect to pay a percentage of their property value that is 2.5 times higher than the average London resident. That is another example of an unfair system based on three decade-old valuations, hammering local residents in areas of high deprivation.Over 50% of dwellings in Middlesbrough are designated as band A—a much higher percentage than other local authorities—forcing Middlesbrough council to have the 19th highest council tax rate in the country. One way in which that could be helped is if Valuation Office Agency powers were devolved further to local authorities to allow them to more rigorously assess whether a property is incorrectly banded. That measure would just be tinkering around the edges of a system that needs fundamental reform.As my hon. Friend said, one solution would be to replace the current system with a proportional property tax, removing the antiquated 1991 bandings and instead asking residents to pay a percentage of their up-to-date property value every year. That would create a more progressive system, preventing those in lower-value homes from paying disproportionately higher rates, while ensuring that wealthier property owners elsewhere in the country contribute a fairer share.
- 7:29 pm
- I congratulate my hon. Friend the Member for Hartlepool (Mr Brash) on securing this Adjournment debate on the important issue of council tax. I am grateful for the work and research that he and the all-party group have put into their argument for council tax reform.The Government take seriously the issue of how councils are funded, and the impact on local taxpayers. Council tax is an important part of the funding that councils require to deliver a range of over 800 vital services. For 2024-25, council tax makes up over half of councils’ core spending power. Individual councils are responsible for setting their own level of council tax, taking into account their local circumstances. Indeed, council tax is the balancing item in the local council budget.As my hon. Friend will know, the ability to raise revenue from council tax is determined by the number of domestic properties within a local authority area, and by the value of those properties in 1991. That means that places with a high number of more valuable properties are often able to raise more than an area with lower-value properties, despite setting the same or commonly a lower level of council tax. However, as he said, the Government have ruled out a revaluation of council tax in this Parliament. That means that we must find other ways to address the discrepancies in tax-raising ability through other means.The last Conservative Government committed to improving and updating the way in which councils are funded, through the fair funding review, but that work was not delivered. We will make good on that commitment and implement long-awaited funding reforms through a multi-year settlement in 2026-27—the first in over a decade. We have recently consulted on the proposed objectives and principles for local government funding reform. In that consultation, we propose to update the way we account for council tax in determining local authority funding allocations, so that future allocations more effectively account for the differing ability to raise council tax income across the country.
- Somerset council is in the position of having to raise council tax this year, but a recent external assurance review reported that a significant proportion of the council’s budget shortfall was attributable to decisions taken by the previous Conservative Administration, who recklessly froze council tax for a record six-year period. In the light of the pressures on councils across the country, will the Minister commit to giving us a timetable for reform so that councils can plan well ahead and deliver essential services?