As part of the Government’s commitment to transparency, Ministers have today published new figures showing exactly who pays for local government services. A new council tax ‘heat map’ shows how each resident in different parts of the country contributes in council tax, and how much they conversely receive in central government grant.
This new analysis makes it possible to compare how much councils get in formula grant and council tax per person in each area of the country. This analysis is another step towards de-mystifying the council finance system for residents.
- The figures show that London and the South contribute the most in council tax, with the most affluent areas paying the highest council tax per head. As a whole, this is not due to the individual budget decisions of the councils, but because the council tax system taxes the richest homes and wealthiest homes the most. Residents in the leafy suburb of Richmond-on-Thames fork out the most per head - £775 - followed by Chiltern, South Bucks, Elmbridge and East Dorset.
- Two of the main sources of council revenue are through a complex central government formula grant system and through council tax, which accounts for quarter of all revenue. Council tax varies according to the property values of each area - with more affluent areas and bigger homes paying more.
- The Government has ruled out a council tax revaluation in this Parliament, as it could have meant soaring bills for millions for homes. In the 2005 revaluation in Wales, four times as many homes moved up one of more bands as down.
- February’s Local Government Finance Settlement was structured so areas most dependant on formula grant received the lion’s share of that central government funding while those collecting more council tax tended to receive less. This creates a fairer system between different parts of the country - north and south, rural and urban, metropolitan and shire.
Local Government Secretary Eric Pickles said:
These new figures allow residents to go compare and see who really pays for local services. No one likes paying council tax, given it doubled since 1997. But the richest and most affluent areas of middle England already pay the highest council tax.
The new Government has cancelled a council tax revaluation because it would mean soaring council tax bills for millions of homes across middle England. Instead, we’ve frozen council tax - offering real help with the cost of living to young workers, families and pensioners.
Despite the need to pay off the budget deficit, the new Government has ensured fairness for all parts of the country - north and south, rural and urban, metropolitan and shire.
Notes to Editors
- Figures published show how the £26.5 billion of council tax requirement collected around the country is distributed per head of population. The national average is £511.
- The ten councils which contribute the most council tax per head are all in London or the South, and in order:
- Richmond upon Thames (£755 per head)
- Chiltern (£734)
- South Bucks (£734)
- Elmbridge (£729)
- East Dorset (£722)
- West Dorset (£717)
- Purbeck (£716)
- Wealden (£716)
- Mole Valley (£713)
- Christchurch (£705)
Unlike the old rates and poll tax, council tax is a local services tax based on a banded system.
Council tax per head is primarily a reflection of property values and the distribution of central government grant. To compare the tax and spending decisions of individual councils, one should contrast the average Band D per household council tax rates of each council. This is since homes in areas with lower property values have lower council tax banding and a smaller ‘taxbase’. Band D however allows for council-by-council comparisons on councils’ individual budget decisions.
A second set of figures show how the £29.4 billion of central taxpayer funding for local government distributed around the country is allocated per head for each council. The national average is £559.
One new source of income for councils this year is a central government grant for those freezing council tax. 100 per cent of eligible local authorities have signed up to the scheme, delivering an average Band D freeze across the country. Ministers have agreed to start making the freeze payments, and the first payment is expected shortly.
The Spending Review made £650 million available for the council tax freeze. The capping threshold in recent years was a 5 per cent council tax rise. Stopping such a rise this year saves a typical household up to £72 and if an average 2.5 per cent rise had occurred the saving would have been £36.
All eligible local, fire and rescue and police authorities in England have decided to freeze or reduce their Band D council tax in 2011-12 and will therefore all be eligible to receive the additional grant offered by the Government for doing so. The average Band D rate of council tax will remain at £1,439 - a change of zero per cent. As a result each council will receive a grant equivalent to a 2.5 per cent increase in its 2010-11 Band D figure multiplied by its 2011-12 tax base figure. Details of the individual grants can be found at: www.communities.gov.uk/documents/localgovernment/xls/1872076.xls.
The Government ruled out a council tax revaluation in England in this Parliament on 24 September 2010. www.communities.gov.uk/newsstories/newsroom/1723934.
Parish councils were not covered by the council tax freeze scheme, so bills in some areas may show small increases in cash terms due to parish precept increases.
A plain English guide to the Finance Settlement that cuts through the jargon is available here: www.communities.gov.uk/documents/localgovernment/pdf/1796186.pdf.
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