The unashamedly unpopular council tax system has remained unchanged for almost 20 years despite a £2.3 million review, a string of major demonstrations and an army of grey guerrillas willing to go to jail to fight the levy. But this is no great British institution. Almost four million people are paying too much to their town hall because of a failure to update council tax housing bands.

The future of funding for police officers, schools and rubbish collection deserves serious policy reform, writes Lawrence Marzouk.

If paying your hard-earned cash to the Treasury feels like having a tooth pulled, at least income tax comes with an anaesthetic.

Because as long as you don't stare too hard at your pay slip you can almost miss the Chancellor's mucky prints.

Council tax, on the other hand, comes with no laughing gas as it is wrenched from your bank account.

That is one reason why increases to the local levy have been met with such vociferous opposition in recent years. That and the annual, above-inflation rise.

Given the scale of protests, it is surprising the Government has been so averse to change.

Sir Michael Lyons published his long-awaited recommendations for the future of local government funding in March 2007.

It was to be the saviour of the council tax system. An impartial road map to rate-raising Valhalla.

Unfortunately for the legions of council tax protesters, the Government had already taken the wind out of the longboat's sails.

Two year's earlier, then local government supremo David Miliband decided to shelve plans to revalue every home in the country.

Without a full set of new house prices, any change to council tax would be unthinkable. So why did the Government employ the timeold technique of commissioning a report, delaying and then virtually ignoring the recommendations?

Mr Miliband said the time-out had been ordered because "there are big changes in local government relating to education, health and social services and devolving power down to local people."

Quite what these big changes were, or are, isn't clear but it seems 2010 will be the earliest that the Government will complete this sweeping transformation.

A more credible explanation is that any revaluation was likely to throw up thousands of winners and losers, making it far from palatable with key elections scheduled for 2005 and 2007. But this prevarication means council tax bills are still based on 1991 prices, which fundamentally undermines the credibility of the entire system.

Sir Michael's report makes it clear he is uncomfortable with the delays. He writes: "While I understand the Government's reasons for postponing the revaluation exercise, it is my view that there are advantages to revaluing the property base that have not been adequately explained so far.

"It is my view that the Government has a responsibility for maintaining the foundations of such an important revenue stream, since an out-of-date tax base will mean the credibility of council tax as a property tax will gradually be eroded.

"It is worth noting that postponement itself created winners and losers as 3.7 million households that would have been moved down the bands by revaluation are arguably paying too much council tax, subsidising those who would be paying more because their properties had grown in value."

In other words, because the Government did not see fit to update the council tax banding, almost one in five households in Britain is paying too much.

In Wales, where bands have already been revalued, a quarter of households ended up losers.

Both methods throw up many losers and winners so why not update this antiquated system with up-to-date prices which actually reflect people's ability to pay?

The answer appears to be purely political. Any change to the council tax system, or wholesale reform, will lead to clearly identifiable winners and losers, as bills will change from one moment to another.

While those currently being overcharged are blissfully unaware.

And an electorate oblivious to their misfortune is far more manageable than voters who have had misfortune rubbed in their face.

Alarmist headlines have also warned that the South East, where price rises have been higher, will suffer more than anywhere else and that the Government is planning a "tax on conservatories".

But a tax on conservatories is nothing more than a general attack on council tax. If you create a property- based tax then the cost of your home, including conservatories and hot tubs, will have to be taken into account.

And there is no reason why council tax property bands cannot be based on regional prices, removing the South East problem.

There appears to be no reasonable argument not to revalue council tax bar politically motivated manoeuvres. Leaving millions of households paying too much and destroying the credibility of the council tax system because of a better-the-devil-you-know attitude smacks of cowardice.

The Government should finally do the right thing and begin serious work on a modern and fair taxation system.

  • Should council tax be scrapped?