Andy Burnham, widely anticipated to become the next leader of the Labour Party later this week, is facing significant pressure to introduce additional council tax bands for England's most expensive properties. This recommendation comes from a new report by the All-Party Parliamentary Group (APPG) on Local Government, which advocates for a comprehensive reform of the local taxation system.
The cross-party report suggests that creating new bands would make council tax more progressive and better reflect contemporary property values, which are currently based on outdated 1991 valuations in England. This move, according to the APPG, would modernise the existing system rather than creating an entirely new tax, ensuring that those with greater housing wealth contribute a fairer share towards local services. Similar additional bands are already in operation in Wales, while Scotland plans to implement higher council tax charges for properties valued over £1 million from April 2028.
Beyond new bands, the APPG's report also calls for the removal of council tax referendum limits. These limits generally require local authorities to hold a public vote if they intend to increase council tax by more than 5% in a single year. Removing these caps would grant councils greater autonomy in setting local rates, potentially leading to more significant increases in some areas without direct public consultation.
However, the proposals have drawn criticism from groups like the TaxPayers' Alliance. John O’Connell, representing the organisation, warned that allowing councils to "hike tax as much as they like and slap new bands on family homes would be little more than a blank cheque for local bureaucrats." He argued that scrapping referendum protections would be an "obvious cash grab" that would allow councils to avoid accountability while burdening local taxpayers with even higher bills.
For UK households, these proposals could mean a shift in the financial burden of local services. Those owning higher-value properties could see their council tax bills increase significantly if new bands are introduced with higher rates. Conversely, a more progressive system might offer some relief to those in lower-band properties, though this is not guaranteed and would depend on the specifics of any future reforms. The broader economic impact of increased local taxation could affect disposable incomes, potentially influencing consumer spending and local business activity. For investors, particularly those in the property sector, changes to property taxation could impact valuations and investment decisions, though any direct FTSE 100 impact would likely be diffuse rather than concentrated.