The Conservative Party today proposed a reform of council tax in England. Their policy is to give a 50% discount, up to a maximum of £500 per year, on council tax bills (net of council tax benefit) for households in England in which all household members are aged 65 or over.

We estimate that, if all council tax rates rise only in line with inflation1 in 2005–06 and 2006–07, then the reform would cost £1.3 billion in 2006–07.2 The Conservatives have stated that their first Budget immediately after a general election would cut taxes by £4 billion,3 so this reform would leave them with scope for a further £2.7 billion in cuts. Extending the council tax discount to the rest of Great Britain would cost a further £0.2 billion.

Assuming that council tax rates rise in line with inflation, we estimate that approximately 3.8 million households, comprising 5.3 million individuals, would gain from the reform, each household gaining £341 per year (£6.56 per week) on average. This represents 89% of eligible households (i.e. households in England in which all household members are aged 65 or over), or 90% of individuals in such households. The remainder are households whose council tax bill is fully covered by council tax benefit (CTB); they would be unaffected by the reform since they already pay no council tax. 68% of English households containing a pensioner – 58% of British households containing a pensioner, since the policy only applies to England, or 15% of all British households – would gain from the reform. 73% of individuals aged 65 or over in England (62% of those in Britain) are in households that would gain.

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