The Government is being urged by MPs to carry out a “long overdue” revaluation of council tax property values in England.
The Commons Housing, Communities and Local Government Committee said the tax is becoming “increasingly regressive” to the detriment of more deprived areas.
The committee said change should be part of a wider programme of reform to set local government finances on a sustainable footing.
Town hall budgets, it said, had been “strained” since the coalition government’s austerity cuts in 2010 with three councils – Northampton, Croydon and Slough – having to admit they had run out of money.
The “single biggest threat” to the financial resilience of local government is the continued failure to properly fund adult social care, although the Government has promised to bring forward proposals for reform before the end of the year.
However the committee said giving councils greater fiscal autonomy and widening their funding base could also improve the situation.
It said councils should be allowed to retain 75% of business rates from 2022 and council tax should be reformed with the revaluation of properties and the introduction of additional bands.
In the longer term it said the Government should consider replacing council tax and business rates with a new “proportional” property tax.
Successive governments have shied away from major change to council tax – introduced in 1993 after the debacle of Margaret Thatcher’s poll tax – fearing the backlash from the people who would lose out.
Committee chairman Clive Betts said: “Council budgets have been stretched for several years and the social care funding crisis is at the heart of financial pressures for many councils.
“Covid-19 has also hit councils hard and, while the Government responded to the pandemic with substantial financial support, they now need to come forward with a long-term sustainable way of funding councils and the services they provide.”