Elliott Keck is Head of Campaigns for the Taxpayers’ Alliance.
The rumour mill is fully in motion. While the official line on the Council Tax discount for single-person households is that the government “currently has no plans to reform council tax”, there is more than a hint of ambiguity in the way that answer is constructed. They certainly haven’t ruled it out unequivocally.
One thing we do know for certain is that it won’t be in the budget, despite reports. Scrapping the single-person discount requires primary legislation and could not be enacted using the budget, which is introduced in the form of a finance bill. These bills cover only central government financing and do not include the financing of local authorities. As such, even if it’s mentioned in Reeves’ speech, this mention would lack the force of law.
That doesn’t mean single-person households are in the clear. Far from it. Instead, not quashing these stories smells like a red herring dangled in front of the media. When nothing inevitably happens in the budget, a sigh of relief will be promptly breathed and attention diverted. Instead, this will be an issue for the local government finance settlement and spending review, both of which are expected to be delivered early next year. And given this government’s voracious desire to boost revenues, it seems likely that it will be in the firing line.
Because boost revenues it certainly would. Analysis by the TaxPayers’ Alliance puts the potential for revenue raising at approximately £5.4 billion, a pretty solid boost to the coffers, equivalent to adding a penny onto the basic rate of income tax. The flipside to that is that the additional revenues raised will go into council coffers, not to the Treasury. And any abolition won’t take effect until the 2026-27 financial year, given the local government finance settlement for 2025-26 is due in December of this year, meaning too little time to change the law and to introduce major tax and IT changes across every billing authority. If the Treasury wanted to reclaim that money themselves, life becomes even more difficult.
But given the overwhelming pressure that has been placed on central government in recent years to boost funding for local authorities, it’s entirely possible that they proceed. The competing pressures on the Treasury are huge, and the government has shown a tendency so far to cough up every time the public sector comes asking for cash. A £5 billion plus boost to town hall budgets will make a difference, particularly in bankrupt Birmingham, which has the largest number of qualifying households in the country, with 174,093 benefitting from an average discount of £523 per year.
Behind these huge figures is a potential huge cost to households up and down the country. Abolishing the discount would impact 10.3 million households, adding £549 to average bills in England, £515 to bills in Wales and £353 in Scotland. Pensioners would bear £1.9 billion of this increase. We know little about Labour’s plans at the moment, but depending on how this policy is designed, it could hit some of society’s most vulnerable members.
What constitutes a single-person household under the policy is much broader than just households where only one person resides. A range of people are “disregarded” under the policy, most notably anyone under the age of 18, anyone who is a full-time student, anyone who is severely mentally impaired and anyone who is a live-in carer for someone who is not your partner, spouse or child under 18. That means significant council tax rises for widowed mothers, or infirm pensioners with carers.
This would of course, be a tax simplification. Something which generally should be encouraged. But the aim should be lower and simpler taxes. The latter needs to be accompanied by the former.
There are also very good reasons behind the single person discount. Ultimately, the UK’s local finance system swung from a property tax until the late 1980s to a poll tax for a very brief and tumultuous period at the turn of the decade. The former was essentially a wealth tax, based on the (rental) value of a property; the latter a flat tax that differed area by area but paid at the same rate by all residents within the area. The poll tax went famously wrong, but it was based on the reasonable principle that given everyone receives the same services from a council, everyone should pay the same rate. Of course, wealthier individuals usually rely on council services less, particularly if their children don’t attend state schools. Nevertheless, they have the same access if they need it.
The single person discount is a, slightly unhappy, midpoint. Council Tax is levied on the value of a property, but in recognition of the fact that a single person household will use services far less than a multi-member household they receive a 25 per cent discount. It’s had broad support ever since its introduction. If it is on the chopping block then it will be yet another case of taxpayers being asked to pay more, for nothing extra in return.