Children's Hour

Now then children, are you sitting comfortably? Then I'll begin. Uncle HW is going to try to explain why Mr McConnell cannot be permitted to get away with adding new bands to the council tax without having a property revaluation. I appreciate that this is not as exciting as the usual fairy tale but it is important. So stay awake.

The amount of council tax that a householder pays depends upon the capital value of his or her property. If you live in a big expensive house, you will pay more than if you lived in a small cheap house. All the houses in Scotland are classified - according to their value - into one of eight categories, known as bands A to H, with A being the cheapest and H being the most expensive. (The amount of council tax a householder will actually pay also depends upon other factors, such as his or her income and whether he or she lives alone, but the fundamental basis of the system is the value of the property.) OK so far? Not that difficult, is it?

Now, let us consider the bands A to H. If your house was valued at less than £27,000, then you fall into band A. If your house was valued at more than £212,000, then you fall into band H. My humble flat is in category F, which means that it was valued at between £80,000 and £106,000. You may think that these figures are on the low side. After all, the current average value of a house in Scotland is reckoned to be well over £100,000. That is because the valuations used to assign houses to the bands are based on the values of the properties before the council tax system was introduced, namely as at 1 April 1991 (more than 15 years ago).

Accordingly when the system was introduced, it was roughly a fair system. But, even in those days, it was not entirely fair. For example some people lived in houses worth well over £500,000. Was it fair that they should be paying the same as somebody who lived in a house worth only £250,000? Furthermore, the rich householder in band H paid only three times as much as the poor householder in band A; given that the former's income could be many times more than that of the latter, was that fair? But at least the system was fairer than the previous system (where everybody paid the same).

Yes, Jimmy, you have a question? What about houses built since 1991? Well, property valuers are clever people. If you have a new house, the valuers will calculate the value of the house as if it had existed in 1991 and assign it to the appropriate band. ( Yes, I appreciate that it is nonsensical, but that is the way it is done - get over it.)

Since 1991, the system has become more unfair. This is because houses have increased in value at differential rates. Thus my humble flat in the Edinburgh New Town has soared in value while ex-council houses on the outskirts of the city have only seen a modest increase. This is unfair because I should be paying more while others should be paying less. After all, there is no obvious reason why my - or anyone else's - tax burden should be based on 1991 property values. The obvious answer to this problem is to start again by revaluing all the houses and re-assigning them to updated bands (and doing such a re-valuation at regular intervals). But the politicians don't like doing this because people like me would lose out by having to pay more council tax while others would gain by having to pay less. As the losers would complain loudly (and the winners would sit tight and keep their mouths shut), the politicians always find an excuse to postpone revaluation, even though the system grows more unfair with every year that passes.

So what is Labour planning to do? Well, they propose to introduce a new band at the bottom and a new band at the top. So the very, very rich will pay a little bit more and the very, very poor will pay a little bit less. Is this a good thing? Well, it won't do any harm (unless you're very very rich, in which case you can afford it). Does it address the essential unfairness in the system? No, especially if they are not prepared to consider a property revaluation. So the unfairness will go on getting worse? Afraid so...


For a more scholarly analysis of the council tax system, see here.