Council tax is the new poll tax. It’s time for reform

A poll tax protest, Hackney, March 1990. Image: Getty.

Rummage around in the “too difficult to touch box” of policy issues and somewhere near the bottom you’ll find a slip marked “council tax reform”. But as that tax is increasingly becoming as unfair as the poll tax it replaced, politicians need to be bold and reform this failing tax. Here’s why.

The poll tax was a political disaster which is widely credited with precipitating the downfall of Margaret Thatcher as Prime Minister. In response to the failed poll tax, the current council tax system was introduced in 1993 as a pragmatic fudge. Now politicians fear touching the issue again.

But council tax increasingly resembles the unpopular poll tax which it replaced. A new report by the Institute for Public Policy Research (IPPR) out yesterday highlights how this system of taxation is failing.

It is increasingly a regressive tax, with those living in the lowest-value homes paying a higher proportion of council tax with regard to property value, than those living in the highest value homes. A household in a Band A property in London would on average pay nearly five times what a Band H household would pay as a proportion of property value.

The council tax system also takes too little account of people’s ability to pay and punishes the poorest. The devolution of council tax benefit in 2013, together with the cut in the funding provided for it, means that people on the very lowest incomes are paying council tax for the first time since the poll tax – and bills are rising.

IPPR research found that the burden of council tax on London’s poorest households is more than six times greater than those on the highest incomes – and that was before the latest round of increases. At the same time, the number of those in arrears and facing prosecution has also dramatically risen.


Furthermore, the current system is an increasingly unsustainable source of local government finance, not least due to its regressive features, discounts and exemptions. Meanwhile, upward pressures on local government spending are rising.

Council tax, like the poll tax before it, is punishing those on the lowest incomes, and it’s time for an overhaul. There is public appetite for fundamental reform and politicians should no longer ignore the issue. Council tax needs to be reformed to create a more progressive, fair and sustainable system.

In our report focused on the system in London, we propose that the first step should be to devolve council tax to London’s government, as also proposed by the London Finance Commission. London’s unique housing market and strong sub-national governance make it well suited to a pilot devolution deal which could later be rolled out across the country. A reformed system needs a sub-national approach, rather than the current overly centralised one.

Second, action should be taken urgently to protect those on low incomes. A capital-wide council tax benefit system is needed to support London’s most vulnerable households. This will ensure no minimum payment is required of those on the lowest incomes and restore eligibility for support to at least their pre-2013 levels.

Third, in the long-term council tax should be replaced with an annual flat-rate tax proportional to present day property values. This should be levied on owners rather than occupants. A rate of 0.25 per cent would raise the same funds for London as the current system, but 80 per cent of households would benefit from paying lower tax.

Any reforms should also be accompanied by an improvement in public services to ensure the reform commands political and public support.

Reform of council tax will not be easy: there’s a reason why it has remained unreformed in England for nearly three decades. But it’s time that politicians abolished this failing tax, just like the poll tax before it.

Luke Murphy is associate director for energy, climate, housing and infrastructure at the Institute for Public Policy Research.

 
 
 
 

What Citymapper’s business plan tells us about the future of Smart Cities

Some buses. Image: David Howard/Wikimedia Commons.

In late September, transport planning app Citymapper announced that it had accumulated £22m in losses, nearly doubling its total loss since the start of 2019. 

Like Uber and Lyft, Citymapper survives on investment funding rounds, hoping to stay around long enough to secure a monopoly. Since the start of 2019, the firm’s main tool for establishing that monopoly has been the “Citymapper Pass”, an attempt to undercut Transport for London’s Oyster Card. 

The Pass was teased early in the year and then rolled out in the spring, promising unlimited travel in zones 1-2 for £31 a week – cheaper than the TfL rate of £35.10. In effect, that means Citymapper itself is paying the difference for users to ride in zones 1-2. The firm is basically subsidising its customers’ travel on TfL in the hopes of getting people hooked on its app. 

So what's the company’s gameplan? After a painful, two-year long attempt at a joint minibus and taxi service – known variously as Smartbus, SmartRide, and Ride – Citymapper killed off its plans at a bus fleet in July. Instead of brick and mortar, it’s taken a gamble on their mobile mapping service with Pass. It operates as a subscription-based prepaid mobile wallet, which is used in the app (or as a contactless card) and operates as a financial service through MasterCard. Crucially, the service offers fully integrated, unlimited travel, which gives the company vital information about how people are actually moving and travelling in the city.

“What Citymapper is doing is offering a door-to-door view of commuter journeys,” says King’s College London lecturer Jonathan Reades, who researches smart cities and the Oyster card. 

TfL can only glean so much data from your taps in and out, a fact which has been frustrating for smart city researchers studying transit data, as well as companies trying to make use of that data. “Neither Uber nor TfL know what you do once you leave their system. But Citymapper does, because it’s not tied to any one system and – because of geolocation and your search – it knows your real origin and destination.” 

In other words, linking ticketing directly with a mapping service means the company can get data not only about where riders hop on and off the tube, but also how they're planning their route, whether they follow that plan, and what their final destination is. The app is paying to discount users’ fares in order to gain more data.

Door-to-door destinations gives a lot more detailed information about a rider’s profile as well: “Citymapper can see that you’re also looking at high-profile restaurant as destinations, live in an address on a swanky street in Hammersmith, and regularly travel to the City.” Citymapper can gain insights into what kind of people are travelling, where they hang out, and how they cluster in transit systems. 

And on top of finding out data about how users move in a city, Citymapper is also gaining financial data about users through ticketing, which reflects a wider trend of tech companies entering into the financial services market – like Apple’s recent foray into the credit card business with Apple Card. Citymapper is willing to take a massive hit because the data related to how people actually travel, and how they spend their money, can do a lot more for them than help the company run a minibus service: by financialising its mapping service, it’s getting actual ticketing data that Google Maps doesn’t have, while simultaneously helping to build a routing platform that users never really have to leave


The integrated transit app, complete with ticket data, lets Citymapper get a sense of flows and transit corridors. As the Guardian points out, this gives Citymapper a lot of leverage to negotiate with smaller transit providers – scooter services, for example – who want to partner with it down the line. 

“You can start to look at ‘up-sell’ and ‘cross-sell’ opportunities,” explain Reades. “If they see that a particular journey or modal mix is attractive then they are in a position to act on that with their various mobility offerings or to sell that knowledge to others. 

“They might sell locational insights to retailers or network operators,” he goes on. “If you put a scooter bay here then we think that will be well-used since our data indicates X; or if you put a store here then you’ll be capturing more of that desirable scooter demographic.” With the rise of electric rideables, Citymapper can position itself as a platform operator that holds the key to user data – acting a lot like TfL, but for startup scooter companies and car-sharing companies.

The app’s origins tell us a lot about the direction of its monetisation strategy. Originally conceived as “Busmapper”, the app used publicly available transit data as the base for its own datasets, privileging transit data over Google Maps’ focus on walking and driving.  From there it was able to hone in on user data and extract that information to build a more efficient picture of the transit system. By collecting more data, it has better grounds for selling that for urban planning purposes, whether to government or elsewhere.

This kind of data-centred planning is what makes smart cities possible. It’s only become appealing to civic governments, Reades explains, since civic government has become more constrained by funding. “The reason its gaining traction with policy-makers is because the constraints of austerity mean that they’re trying to do more with less. They use data to measure more efficient services.”  

The question now is whether Citymapper’s plan to lure riders away from the Oyster card will be successful in the long term. Consolidated routing and ticketing data is likely only the first step. It may be too early to tell how it will affect public agencies like TfL – but right now Citymapper is establishing itself as a ticketing service - gaining valuable urban data, financialising its app, and running up those losses in the process.

When approached for comment, Citymapper claimed that Pass is not losing money but that it is a “growth startup which is developing its revenue streams”. The company stated that they have never sold data, but “regularly engage with transport authorities around the world to help improve open data and their systems”

Josh Gabert-Doyon tweets as @JoshGD.