FactCheck: how unfair is council tax?
Updated on 18 September 2007
Is Vince Cable right when he says Britain's richest man would pay the same as a pensioner in a bungalow?
The claim
"It's a system where you have people like Mr Mittal in a £30m house and they can be paying the same council tax as a pensioner couple in a bungalow."
Vince Cable, Liberal Democrats' shadow chancellor, 18 September 2007
The background
The Lib Dems today repeated one of their familiar war cries, demanding the abolition of council tax. Cable outlined the inequalities of the current council tax regime by saying a pair of put-upon OAPs could be faced with the same bill as Britain's richest man, Lakshmi Mittal. But is he right?
The analysis
It is doubtless true Britain's council tax system has its flaws.
After all, it is based on the value of homes in 1991 - and everyone knows there has been a significant shift in prices since then.
At present council tax is broken down into eight bands, with anyone owning a property valued at over £320,000 falling into the highest tax bracket, band A.
Cable's implication is that property values have so distorted since 1991 that billionaires and now finding themselves in the same upper council tax bracket as pensioners.
Even new homes are valued on what they would have been worth in 1991. It does sound a bit bonkers but that's how it works.
It is true there are some bungalows in the UK which now go onto the market at £320,000 or more, even though the UK's average house price is around the £200,000 mark.
However, there is a key technicality to note.
The Valuation Office, which decides which band a property should be in, values a home on the basis of its value at 1 April 1991.
Even new homes are valued on what they would have been worth in 1991. It does sound a bit bonkers but that's how it works.
So given the average price of a house (let alone a bungalow) in the UK was £73,000 in 1991 you'd be very hard pushed to find the sort of bungalow Cable was referring to being in the £320,000-plus bracket in early 90s, even in Lakshmi's illustrious Kensington.
Money expert Martin Lewis agreed, he said: "Although Cable's sentiments are correct, I think it is stretching the point.
"The council tax bill now could be the same as a pensioner living in a nice house - but it would have to be quite a big bungalow!"
It's worth bearing in mind too that if it was a particularly hard-hit pair of pensioners - even though their home would be worth £1m in today's market - they could apply to their local authority for a council tax rebate.
The verdict
There is a lot of support for the Lib Dems' stance on council tax, but Cable was pushing his luck when he compared the bill being paid by Britain's richest man and a pair on pensioners.
Factcheck strongly doubts whether there was a bungalow in the UK worth £320,000 by 1991 estimates.
FactCheck rating: 4
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The lower end of the scale indicates that the claim in question largerly checks out, while the upper end of the scale suggests misrepresentation, exaggeration, a massaging of statistics and/or language.
In the unlikely event that we award a 5 out of 5, our factcheckers have concluded that the claim under examination has absolutely no basis in fact.
