Middle-class households at risk of rocketing council tax bills
A cross-party housing committee, led by MPs, said that councils should be given more control over the council tax system, which is still based on house price valuations from 1991.
This would include giving individual authorities the right to revalue properties in their area, define property bands and apply or remove discounts.
The review, led by the Commons Housing, Communities and Local Government Committee, said the current council tax system was 'highly regressive' and 'extraordinarily unfair,' thanks to the outdated valuation system and the fact that lower-value properties pay a larger share of council tax relative to their house price.
Updating these values would likely result in higher bills for households in wealthier areas where property prices have risen the most.
Currently, homes in band H are valued at more than £320,000, but pay just three times as much council tax as band A properties valued at less than £40,0000.
The committee urged the Government to 'begin the process of overhauling or replacing council tax', and devolve powers to local authorities while it does so.
It also recommended that councils should have the power to impose a 'tourist levy' on holiday hotspots – a policy favoured by deputy Labour leader Angela Rayner but opposed by Chancellor Rachel Reeves.
Elliot Keck, of the TaxPayers' Alliance campaign group, said: 'While there is a case for revaluation and for giving councils some flexibility, households are already being clobbered annually by inflation-busting rate rises on top of the catastrophic tax raid launched in last year's Budget.
'Any council tax reform should focus on how to reduce the overall burden of council tax on families.'
Currently, local authorities have the power to set their own council tax rates for each band up to a government-imposed maximum.
This has meant large differences in tax bills for properties across the country. Some 46pc of households, or 11.6 million homes, paid more than the £1,828 band H council tax rate charged on Buckingham Palace last year. This is up from 32pc of households – some 7.5 million homes – in 2011-12.
The average levy imposed on a typical band D home rose by £109 to £2,280, according to official data.
Many local councils are under severe pressure to raise revenue because of rising costs driven by increasing demand for vital services such as social care and special educational needs provision.
Nine in 10 town halls opted to raise council tax in April after Ms Reeves approved a rise up to a maximum of 4.99pc in her inaugural Budget last year.
The Institute for Fiscal Studies has warned that Britain should brace for council tax to rise at its fastest rate in 20 years, which would mean half of local authorities facing increases of at least £500 by 2030.
A spokesman for the Ministry of Housing, Communities and Local Government said: 'We have announced over £5bn of new grant funding for local services on top of £69bn made available this year to boost council finances, and we will go further to reform the funding system.
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