Council tax report recommends changes

People living in the most expensive properties in England should pay more council tax, a report has recommended.

The review of local government funding, conducted by Sir Michael Lyons, recommends the creation of two new council tax bands - a new top rate band and a new bottom rate, which would reduce bills for those people living in the cheapest houses.

Launching the report, Sir Michael said: "Council tax is not 'broken', but is seen as unfair."

The report also recommended ending council tax capping, the introduction of a new power to levy a supplementary business rate, an automatic rebate for those entitled to council tax benefit, an increase in the savings limit for pensioners to £50,000, improved transparency of the tax system and new powers for councils to charge for domestic waste.

Local government minister Phil Woolas said: "Sir Michael has said that there is no magic bullet or simple solution to local government funding. We agree. We also support his conclusions that the council tax is not broken. Of course, no tax will ever win a popularity contest, yet council tax collection rates - at 96.8% - are at their highest level ever."

However, the Conservatives described the report as a "tax bombshell" for working families and pensioners. Shadow Local Government Secretary Caroline Spelman said: "Nice neighbourhoods and the rising value of homes will all mean higher council tax bills.

"I fear the elderly, struggling with soaring council tax bills, will be pressured into signing away their homes to the taxman. Vulnerable people face either forfeiting their children's inheritance or have the baliff knocking on their doors for non-payment of rising council taxes."

Liberal Democrat local government spokesperson Andrew Stunell said the report was "disappointing". He said: "Far from taking decisive action to help people, the government has been even more fainthearted and put the proposals on the shelf until after the next election. As a result, millions of pensioners and poorer families will continue to struggle to pay their Council Tax bills.

"The Council Tax should be scrapped immediately and replaced with a fair tax based on people's ability to pay."

(KMcA/JM)