By Penny Rimmer, Senior Policy Officer at Resolve Poverty
Council Tax reform is long overdue. The current system is deeply regressive and disproportionately affects low-income households, often making Council Tax one of the largest monthly expenses after housing. Despite property prices rising dramatically since 1991, the outdated banding system remains unchanged. As a result, households in the lowest tax bands pay a significantly higher proportion of their income in tax compared to wealthier households, exacerbating financial inequality.
Local authorities are also struggling with unprecedented financial pressures. Rising inflation, wage increases, and growing demand for services have created a funding gap of £6.2 billion over the next two years. With reduced government grants, councils have become increasingly reliant on Council Tax revenue, constituting about half of local authority funding in England. This reliance pushes councils toward harsher recovery practices, further straining low-income households.
Council Tax arrears in England have grown to nearly £6 billion, with outdated collection rules adding to the burden. As councils face the difficult task of balancing support for vulnerable households with maintaining financial sustainability, raising Council Tax is often seen as the only option. However, this approach continues to place undue pressure on residents already struggling with the cost of living.
Resolve Poverty’s latest briefing calls for immediate reforms to alleviate the burden on low-income households and ensure a more just Council Tax system. Local authorities can take action now by offering more flexible payment plans, providing money and debt advice, and adopting fairer debt collection practices. These steps are essential to protecting vulnerable residents and preventing financial hardship while also easing the pressure on local governments to rely on punitive measures for revenue.
However, lasting reform requires political commitment at both the local and national levels. The national government must review and overhaul the Council Tax system as part of a broader strategy to address poverty. Reforming the outdated banding system and modernising collection practices will create a fairer, more sustainable funding model for local authorities, allowing them to implement long-term, impactful solutions rather than short-term crisis responses.
If both levels of government are serious about addressing poverty, reforming the Council Tax system must be central to their efforts, ensuring low-income households are treated fairly and local authorities have adequate funding.
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This article is featured in our 30 October newsletter.
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