Christmas time for councillors means the time of the year when we have to face up to the difficult and unpopular task of setting next year’s budget and Council Tax. Council Tax is just about the most unfair and unpopular tax on this planet, and so now is an opportunity to make some comments – without giving away any secrets.

Firstly, Council Tax is completely different to the old rating system. The old system depended on the rental value of a house, and although the formula used by the government’s district valuers was highly artificial, it was roughly related to income and ability to pay, because it depended on the value of the property the ratepayer lived in.

By contrast Council Tax grew out of the Poll Tax. The Poll Tax required everybody to pay the same – with very little regard to income and ability to pay. It was what I would call a “single band” Council Tax. Council Tax merely increases the number of bands, so that different amounts are charged for residence in different banded properties.

This has led to outrageous contradictions. The rich man in a mansion worth many millions pays no more than any one else in the top Council Tax band, while those whose income is only just above the benefit threshold in a house within the lowest band have to pay the same tax as everyone else who lives in the lowest banded properties, whether they can afford it or not. The farmer, who works all hours for little reward, and lives in a large farm house, which is in one of the top bands, has to pay the same (or not much less) Council Tax as the millionaire in his mansion, whether the farmer can afford it or not.

This is very important for a district like Ryedale, where, in spite of apparent prosperity, 64% of residents have an income which is lower than the national average. For many, Council Tax can be as serious a monthly commitment on their finance as their mortgage.

Secondly, it used to be possible for Councils to rely on the considerable income they received from rates on businesses to balance the books. Councils are no longer able to do this. Business rates are now collected and paid into a central pool. Money from the pool is then shared out by Government to all Councils. The result is that, to a certain extent, money received from domestic Council Tax has to be used to subsidise services to businesses and industry, in those districts where less money is received from the central pool than is paid into it.

Thirdly, local government is heavily dependant on funding from taxes paid to Central Government. Every year every council is told how much government grant it will receive. Our Whitehall mandarins are very clever at coming up with formulas for calculating the grant, which seem to have the effect of benefiting most those councils where the government of the day seems to have most political support – although they will always deny this.

Further, the Government knows that it doesn’t have to put up income tax, if the grant given to councils does not cover inflation and the cost of other impositions which the Government forces onto them – with the result that the UK’s most unfair tax has to rise, so that the government can keep its “promise” not to increase income tax.

In fact Central Government has become so adept at intervention in local affairs that it has adopted a “carrot and stick” approach to bully and bribe councils into doing what the Government wants. If a council wishes to participate in an expensive government initiative, it is given large sums of money to cover capital costs – but usually none or very little to cover the revenue costs. If a council does not wish to participate in such an expensive government initiative, there is a veiled threat that it will lose browny points or even grant money or be beset with extra time consuming and expensive inspections or even be taken over by a Whitehall appointed “commissioner” on the grounds that the council has not achieved what is euphemistically called “Best Value”.

So, when the Council Tax goes up higher than the rate of inflation to cover the revenue costs of these impositions, the voters would be right to ask how many of these schemes are reasonably necessary for the performance of the Council’s duties and confer real benefits on taxpayers, or whether or not they are extravagant luxuries dictated merely by political fashion.

Abolition is the answer to the Council Tax. Instead of collecting council tax, every council should be given the right to levy a precept on its local income tax office. Then the Tax office would calculate Income Tax to take into account not only the requirements of central government, but also local council requirements. Then everybody would be taxed according to their ability to pay. Then there would be less need for central government grant, and less justification for central government interference with local democracy.

Now at last the Audit Commission has confirmed what we always knew, and Central Government has at last been blamed for being mainly responsible for the rise in Council Tax. Now at last there is a debate about keeping the Council Tax. The Liberal Democrats have been advocating abolition of the Council Tax and its replacement by a Local Income Tax for years. It is time the other political parties followed the LibDem lead.