A new housing development in Larbert and the well-heeled Mayfair district in central London have little in common at first glance.
The Bellsdyke Meadow estate of four and five bedroom homes was completed last year and is popular with families, attracted by the area’s transport links and well-regarded schools. A typical property is on the market for offers over £340,000.
Mayfair has long been viewed as a playground for the global super-rich. A refurbished eight bedroom town house in Charles Street would set you back a staggering £39,500,000. Around the corner, a slightly more modest seven bedroom home in Bolton Street commands an asking price of £11,500,000.
Despite such a vast difference in respective values, many of the homes in these two very different areas fall under the same council tax bracket.
In Bellsdkye Meadow, a band H household is expected to pay £2140 per year in council tax. In Mayfair, a band H property is charged just £755.48.
The reason for such a discrepancy is that council tax is calculated on property prices from April 1, 1991.
There are eight council tax brackets, with the lowest, A, for homes valued up to £27,000. The highest, H, covers any property valued at more than £212,000 - which covers an increasing percentage of new build homes, which are bracketed according to contemporary market rates when they were completed.
A house in Larbert can thus be valued in the same bracket as a palatial Victorian pile in Westminster.
It’s a situation that equality campaigners and the Scottish Government want to change.
Finance secretary John Swinney has branded the system “unfair” and previously pledged to introduce a local tax system based on the ability to pay.
A recent report from the Joseph Rowntree Foundation claims that council tax is regressive, taking a larger proportion of money from low income households.
“Property values have risen substantially since they were last assessed in 1991, but they have grown at different rates between different parts of the country, said Chris Leishman, co-author of the report.
“The design of the council tax means it taxes a higher proportion from cheaper properties than expensive ones, so is regarded as being both unfair and inconsistent.”
Critics of the council tax system claim it was badly designed and introduced in a rush by a Conservative government reeling from the public backlash against the poll tax, which was scrapped in 1993.
While local authorities must be funded somehow, Falkirk Council receives only 15.87 per cent of its 2014/15 budget from council tax. The majority comes from Scottish Government funding and non-domestic rates.
And despite its stated wish of scrapping the council tax, the Scottish Government remains noncommittal on what could replace it, despite comments from First Minister Alex Salmond on a radio show this week that he would like to see the introduction of a local income tax.
“In the long term I’d like to see us move to a local income tax because it’s based on the ability to pay.” he said.
But Scottish Labour warned such a move would lead to massive cuts to local authorities.
Reform calls are growing
Council tax rates have been frozen by the Scottish Government since the SNP was first voted into power in 2007. It’s a policy that has proved popular with voters who had grown accustomed to steep hikes each year.
But equality campaigners say that while the freeze has stopped householders in cheaper properties from paying an even greater proportion of their budget on council tax bills, it fails to address the need for a longer-term replacement.
Political opponents of the council tax freeze also argue that the policy most benefits wealthier households who face the biggest bills, while local authorities, including Falkirk Council, have claimed it is unsustainable and is depriving them of much-needed funds to protect vital services.
“Freezing bills is a treatment but a long-term cure is needed,” said Kathleen Kelly, research manager at the Joseph Rowntree Foundation.
“This is a difficult reform to carry out, and one which requires courage from all the main political parties. But the problem will not go away and failing to plan for alternatives is storing up trouble for the future.
“Politicians need to start planning for the long-term replacement of council tax. It was a hasty replacement for the hated poll tax 25 years ago. It was never designed to last and has not been revalued for over 20 years. Without reform, it will wither and die.”
Scottish Labour’s local government spokeswoman, Sarah Boyack MSP, said the party believed that a property based tax remained the best option.
“Under the SNP local government finance has been broken resulting in job losses, increased charges and service cuts,” she said. “The underfunded council tax freeze has reduced local accountability while disproportionately benefitting the well off.
“Now Alex Salmond has recommitted his party to the widely criticised local income tax with no explanation of how public services would be protected in the event of future economic downturns and reduced tax revenues. The last time the SNP raised this issue, their proposed rate would have left a massive funding gap, putting local services at even greater risk.
“Addressing the systemic underfunding of local government will be one of the key challenges of the next Parliament and we believe that a property based tax remains the best option. We need to have a rational discussion about the way forward and are committed to building a cross-party consensus.”
A spokeswoman for the Scottish Government said: “The current council tax system is unfair, which is why the Scottish Government has frozen the tax at 2007-08 levels.
“That policy has proved overwhelmingly popular with people across Scotland. The Scottish Government has fully funded the council tax freeze in Scotland since 2008-09 and we are committed to doing so for the lifetime of this Parliament, by which time the policy will have saved the average household around £1200.”