Council tax branded 'unfair and regressive' as calls for a tourist tax mount

Ministers should overhaul “unfair and regressive” council tax as residents are paying more while their services are slashed, MPs warn today.

Cash-strapped town halls are being forced to deliver more with less funding, leading to rising unhappiness from voters, the Housing, Communities and Local Government (HCLG) Committee warned.

The report said council tax is “the most unfair and regressive tax in use in England today”, and said councils should be allowed to set their own forms of local taxes, such as tourist levies, to help make the local government system fair and effective. MPs on the committee said local councils’ financial issues are “exacerbated by the over-centralisation of government”.

Tourist taxes are common in other countries or cities including Barcelona and Paris. A similar levy already exists in Scotland, and the Welsh Government is also in the process of introducing a tourism tax. They are set by local government and are often based on a percentage or fixed rate per night of stay in a hotel or other accommodation.

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No10 yesterday said there are “no plans” to introduce a tourism tax in England. It comes amid reports that Angela Rayner is pushing for local authorities to be able to impose tourist taxes but was rebuffed by the Treasury.

Rachel Reeves is said to have blocked the move for fear it would reduce revenues for businesses struggling with higher national insurance contributions and a rise in the minimum wage already brought in by the Government.

Ms Rayner earlier this month told MPs she wants to see “more push” in the direction of local authorities having increased tax and spending powers.

A group of mayors, including Greater Manchester ’s Andy Burnham and London’s Sadiq Khan, last month called for a visitor levy to be introduced to make money from tourism. In a letter to Culture Secretary Lisa Nandy and Chancellor Rachel Reeves, they suggested local authorities be given the power to introduce a tourist levy in the Government’s devolution bill.

Council tax bill rises hit 5% in April for the third year in a row, as almost all councils increased bills up to, or close to, the maximum permitted.

As a first step to reforming council tax, the committee’s report calls on the Government to give local authorities more control over the council tax in their areas, including the power to revalue properties in their area, define property bands and set the rates for those bands.

Florence Eshalomi, chairwoman of the committee, said: “When residents are paying more and more in taxes but seeing less and less in regular, everyday services, such as libraries and fixing potholes, then trust in local democracy is at risk of being undermined.

“Councils are trapped in a straitjacket by central government, with local authorities lacking the flexibility or control to devise creative, long-term, preventative solutions which could offer better value-for-money. Reform of council tax should be a greater priority for the Government.

“In the long-term, HM Treasury should devolve tax-setting powers to local authorities, allowing them to set their own local taxes, such as tourist levies.”

A Ministry of Housing, Communities and Local Government spokesman said: “The government is taking decisive action to fix the broken council funding system, so local leaders can deliver the vital public services their communities rely on.

“We have announced over £5billion of new grant funding for local services on top of the £69billion already made available this year to boost council finances, and we will go further to reform the funding system to make it fit for the future.”

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