Council tax was born in a rush, after the disastrous failure of the poll tax. A bastardised combination of the house value-based rates system and the per-person community charge, it is riddled with problems and anomalies.

Many of the problems it faces have been amplified by two factors. Firstly, the level of council tax has shot up well above inflation, from an average of £470 in 1993, to a figure of £1,456 this year – even despite a few years of capped increases. This makes it a significant factor in people's finances.

Secondly, the values used for calculating the band of council tax to be paid are based on house valuations in the 1990s. Although this was supposed to be revalued periodically, this has never happened in England. The absurd consequence of this is that when a new property is built, someone has to work out what it would have sold for 22 years ago.

It also means that any council taxpayer who looks at their bill will see astonishingly low house prices by today's standards.

These are practical issues, but the principle is also flawed. Council tax is regressive – the very smallest house would pay a third the value of a vast mansion, although the difference in values is far larger. It also takes no account of ability to pay, although council tax benefit slightly corrects for this.

How can we improve this system? One option would be to increase the number of council tax bands, so that the system becomes more progressive. Another is to finally do a revaluation, so that houses are taxed based on their present value, rather than their value 22 years ago.

We in the Liberal Democrats have long proposed a mansion tax, targeted at very high-value homes. A 1% levy on the value of a home over £2m would raise significant sums of money, but only from those who are asset-rich.

It would mean that someone with a house worth £2.1m would pay an extra £1,000 per year – probably under half as much as their existing council tax. The owner of a house worth £3m would pay £10,000 per year. We would also allow people who do not have the money available to pay to defer their payment, so that they are not forced to sell their homes as a result of this charge. This would create a far more progressive system, with the richest paying a higher proportion.

I would also like to see local government more involved in benefitting from business rates and economic growth in their area. For too long, councils have borne the costs of economic growth, as they have to build infrastructure, schools and community facilities, without having a direct financial return from this work. It is impossible for them to borrow against future cashflows to kickstart this development, if they never receive the returns.

The new homes bonus set up by this government is very helpful, and provides support for growing areas – but the government must not sabotage that great idea by slicing the money away to go to Local Enterprise Partnerships. This makes it hard for councils – which were expecting the money – to budget sensibly.

City deals, such as the one being worked through at the moment by Greater Cambridge, are an excellent model, allowing councils to have access to some of the fruits of success, so that they can afford to sustain it.

Lastly, we should look at local income taxation, allowing councils to benefit from those who earn well in their areas. It is simple, clear and cheap to run.

Let's move from a system botched together, to include more income and wealth taxation – and less council tax.

Jullian Huppert is MP for Cambridge.

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