'Clear relation' between income and property

Tuesday, 24 May 2005 12:00 AM

A new study for the Economic and Social Research Council (ESRC) has suggested that property values do have a clear relationship with the income of the owner.

It also found that the problem of people on low incomes living in high value properties may also be less common than often assumed.

The report's conclusions are sure to feed into the debate on council tax - and local income tax - ahead of the publication of the council tax review being conducted by Sir Michael Lyons.

The researchers found only one exception for the earnings-value link; pensioners. It found that fewer than one-fifth of all UK properties were in the top four E-H council tax bands, and only six to 10 per cent of owner occupiers in these properties had a low income.

The majority of these were pensioners, often who had seen the price of their house dramatically rise; with a significant proportion having savings of at least £20,000, many do not qualify for any council tax benefit.

It also concluded that people on middle and low incomes spent proportionately more of their income on council tax than people on high incomes.

Dr Michael Orton from the University of Warwick, who led the study, said: "The implication of this new research is that there needs to be debate not only about the small number of people with low incomes living in high value properties, but also the fact that much larger numbers of people in middle and lower value properties are paying more than their fair share of council tax."

But Dr. Orton cautioned that individual factors such as "inheritance, unemployment, 'downsizing' and growing older all mean that trying to determine a 'perfect' relationship between income and property is misleading".

The survey was seized on by Liberal Democrat shadow cabinet newcomer Sarah Teather who speaks on communities and local government.

Ms Teather said: "This survey demonstrates what we have known for some time that council tax is fundamentally unfair and hits the poorest hardest.

"The only fair tax system is one based on the ability to pay, that means a local income tax."

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