Council Tax Reform

Grahame Morris Excerpts

Wednesday 19th March 2025 Commons Chamber

[Mr Brash]

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.

[Grahame Morris (Easington) (Lab)]

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?

[Mr Brash]

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.

Elsewhere, the scandal in children’s social care is slowly bankrupting local authorities. Private providers, often owned by faceless hedge funds, are profiting on the backs of vulnerable children. The costs are staggering. In Hartlepool, the top four private providers charge an average of £12,000 per child per week. That is £624,000 a year for just one child. For Hartlepool, that is the equivalent of more than a 1% rise in council tax for one child’s care. Local councillors face the impossible choice: protect the most vulnerable or impose even more council tax pain on their residents.

The most pernicious thing about this regressive tax is the impact it has on trust. “No taxation without representation” is the saying, but as council tax bills go up, services are cut. Residents are no longer receiving the representation their money is supposed to deliver. Most people, thankfully, do not need social care, but they do need bin collections, clean streets, well-maintained parks, green spaces, museums, leisure centres and libraries —all things that make somewhere a place—yet these are repeatedly cut because of this failed system.

This is breaking the bond between councils and the public, and when people feel they are paying more but getting less, they stop believing in the system. When voters feel ignored and abandoned, they do not stop voting; they will vote for anyone with easy answers. Populist politicians with no real answers will step into this gap and exploit this frustration. I warn Ministers: fix council tax or face the electoral consequences.

There are alternatives. Andrew Dixon and the Fairer Share campaign have advocated for a proportional property tax that would ensure contributions were based on actual property values. Some 70% of households in the north-east would be better off. Nearly a third would save as much as £1,500 a year—money that could help struggling families put food on the table, heat their homes and buy their children the things that they need. Yes, some would lose out, but it would, and should, be the wealthy in our society shouldering that burden. If we are not prepared to make the wealthy pay so the poor can pay less, what exactly are we for?

--- Later in debate ---

[Jim McMahon]

I think that after the last 14 years, roads in quite a lot of England are falling apart. That is why we injected another £500 million into pothole repairs this year, because we know that local people feel that issue acutely. We also recognise, as I said before, that this will take longer than seven months.

On financing, we are clear that the current formula needs to be reviewed. It is not good enough any more to keep on having a formula that is not fit for purpose, and which is supplemented by top-ups that change depending on the whim of the Government of the day. If this is a genuinely fair funding formula, it must be fair when tested. That means that wherever someone is in the country, and whatever their local circumstance, they know that those issues have been taken into account. Some of that will involve deprivation or the ability to raise tax at a local level, but some of it will involve demand on services, including rurality. We must ensure that in the review we rebuilt trust and confidence as well as sustainability, and the hon. Gentleman has my commitment that we are determined to ensure that that work is done with integrity.

We recognise the urgency to fix the foundations, and to tackle the underlying issues that we have talked about. For all the criticisms of the current council tax system—many of which are completely legitimate—it has some advantages. First, it is a settled tax that taxpayers understand, and notwithstanding the uncollected element that was mentioned earlier, pound for pound it has a high collection rate. On that basis, revenues are relatively predictable, which means that local authorities have greater certainty for their financial planning. Council tax is genuinely local. The money is collected locally, retained locally, and authorities will make decisions on the band D level based on their local requirements and delivery priorities.

[Grahame Morris]

Reforming council tax is an enormous problem and I do not underestimate the scale of the task, but does the Minister recognise that council tax is even more regressive than the poll tax it replaced? The system particularly affects my constituency, Hartlepool and the north-east, and other regions as well, where people are paying a premium for living in the poorest communities with the fewest services and facilities. Does he accept that council tax is widening inequalities in our country?