The Institute of Fiscal Studies calls for council tax reform

The annual cost of a band D council tax property in Barnet in 2024-25 is 3.3 times what it was in 1995-96, reports Andrew Dowdeswell, Data Reporter

Barnet people are benefiting from the ‘absurd’ council tax system, figures suggest.

The Institute for Fiscal Studies has called on the government to reform council tax, which is currently calculated using the assessed value of a property in 1991.

Property values ​​have changed dramatically in England over the past three decades and the IFS said the system was now punishing those whose house prices had not kept pace with the rest of the country.

Figures from the Department for Levelisation, Housing and Communities show that the annual cost of a band D council tax property in Barnet in 2024-25 is 3.3 times what it was in 1995-96.

Meanwhile, house prices in the area rose 6.3 times between April 1995 and April this year, meaning they doubled the rise in council tax.

Nationally, house prices were 5.6 times higher, while band D council tax saw a 3.6 times increase, meaning house prices exceeded council tax by 78%.

As a result, the people of Barnet have benefited significantly from council tax assessments which remain unchanged.

The earliest year available for comparable figures at local level was 1995-96.

Of the areas with comparable data, 10 of the 11 most benefiting are in London, with residents in Hackney, Wandsworth and the City of London topping the list.

Meanwhile, 10 of the 13 worst areas are in the North East and North West.

David Phillips, associate director at the IFS, said it was “increasingly absurd” for council tax assessments to be based on 1991 house prices.

Phillips added: “Since this one and only house assessment, values ​​have risen by very different amounts across the country, meaning at least half are now effectively in the ‘wrong band’.

“Households in the North and Midlands are often in too high a band – and pay too much – while those in and around London are in too low a band – and pay too little – compared to what they would pay under an upgraded tax .

“In other words, in its current form, council tax works against leveling.”

The annual cost of a band D council tax property in Barnet is £1,943 in 2024-25.

Meanwhile, the average house price in the area was £573,010 in April, meaning a typical household will pay around 0.3% of their property value in council tax this year.

Nationally, this rises to 0.7%. As a result, people in Barnet are paying far less than the current house value indicates they should.

Labor said it had no plans to reform council tax and was “committed to keeping taxes for workers as low as possible”.

It said it would consider the impact on councils and ratepayers before making any tax decisions.

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