Debate on alternatives to council tax and stamp duty, House of Commons, 17 May 2023

This briefing outlines LGA policy on council tax and council tax reform and also highlights work commissioned by the LGA on council tax and alternative forms of funding for local government.

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Key messages

  • This debate is expected to concentrate on alternatives to council tax and stamp duty. This briefing outlines LGA policy on council tax and council tax reform and also highlights work commissioned by the LGA on council tax and alternative forms of funding for local government.
  • The LGA set out in its submission to the 2022 Autumn Statement that council tax increases are not the long-term solution to the financial challenges facing local government particularly during a cost-of-living crisis. In addition, increases in council tax raise different amounts of money in different parts of the country and would fall short of the sustainable long-term funding that is needed.
  • The LGA is keen to strengthen accountability to residents through reforms to council tax. The LGA supports:
    • giving councils powers to vary all council tax discounts and exemptions including the single person discount
    • charging developers full council tax for every unbuilt development from the point that the original planning permission expires
    • abolishing council tax referendum limits, or short of that, the percentage-based limit could be replaced by a threshold which allows higher percentage increases to areas with lower council tax levels
    • making it easier for councils to recover unpaid council tax without going to the courts, and removing the requirement for the entire annual sum to become payable if an instalment is missed.
  • The LGA supports the introduction of an online sales tax that could be levied on the revenues that businesses generate from online sales to UK customers and focused on sales in direct competition with those carried out through physical premises. It could broaden the range of taxes to local government and should be considered alongside the reform of business rates and other alternatives.

Further information

Council tax reform

Council tax is a significant source of revenue for councils. Collecting taxes is important so that services like caring for older and disabled people, protecting children, collecting bins and fixing roads are not affected.



The LGA set out in its submission to the 2022 Autumn Statement, that council tax increases are not the long-term solution to the financial challenges facing local government particularly during a cost-of-living crisis. In addition, increases in council tax raise different amounts of money in different parts of the country and would fall short of the sustainable long-term funding that is needed.



To strengthen accountability to residents, the LGA calls for:

  • council tax referendum limits to be abolished so, when the time is right, councils and their communities can decide what increase in council tax is warranted to help protect or improve local services.
  • councils to be given powers to vary all council tax discounts including the single person discount which is worth around £3 billion a year.
  • to improve the build-out rates of homes with planning permission and reduce the number of stalled sites, councils should be able to charge developers or landowners full Band D council tax for every unbuilt development.
  • it should be made easier for councils to recover unpaid council tax such as removing the need to go to the courts and removing the requirement for the entire annual sum to become payable if an instalment is missed. Enforcement agents should only ever be used as a last resort by councils. Before it gets to that stage, people will have been encouraged to apply for financial support by their council. Anyone having trouble paying their council bills should get in touch with their local authority for financial help and advice as soon as possible.

The LGA also previously commissioned WPI Economics to carry out an objective review of the current and alternative sources of local government revenue financing and an assessment of their strengths and weaknesses against the principles set out by the LGA: sufficiency, buoyancy, fairness, efficiency of collection, predictability, transparency and incentive. The (2022) report, Reforming revenues, contains a summary of a number of potential council tax reforms:

  • Changes to exemptions and discounts. These include ending the mandatory single-person discount and increasing the funding for local council tax support schemes, allowing councils to implement their own support schemes for vulnerable adults.
  • Charge developers full council tax for every unbuilt development from the point that the original planning permission expires. LGA analysis in 2020 found that more than one million homes granted planning permission since 2010 have not been built.
  • Change referendum limits to pounds rather than percentages. This would be an alternative way of allowing overall increases in council tax.
  • Revaluation. This would mean assigning properties to council tax bands based upon up-to-date values. The Institute for Fiscal Studies (IFS) has suggested ‘proportional revaluation’, where council tax payments are made proportional to the median price with bands.
  • Additional bands. These bands could be added above the current highest bands and/or below the current lowest bands.

Online sales tax

An alternative source of funding for councils that could be considered is the introduction of an online sales tax, as it would help to spread the range of the taxbase for business taxes. However, this should not be at the expense of business rates income.



As we said in our submission to the Business Rates Review call for evidence; while an online sales tax would not replace business rates, it could still provide a sustainable and meaningful revenue source for vital public services. The LGA went on to say that while the scope of an online sales tax would need further consideration, it could be levied on the revenues that businesses generate from online sales to UK customers and focused on sales in direct competition with those carried out through physical premises.

Contact

Arian Nemati, Public Affairs and Campaigns Adviser

Email: [email protected]