Is it time to abandon a tax based on house values from 1991?

Battersea power station offered no prospect of luxury living when Tony Belton became a local councillor in 1971. The coal-fired behemoth was nearing closure after 40 years of belching soot over London, and would spend almost as long in dereliction and blight as a result of false starts at redevelopment.

- Richard Partington

By 1991, most people visiting the area were there for the dogs' home or council rubbish dump. Squatting pigeons were the power station's only residents, and steel bracing protected its 48-metrehigh brick walls from collapse.

"It was largely completely flat, derelict land... It was a desert, really," says Belton, strolling through the glitzy shopping centre and apartment complex that now fills the old boiler rooms, where penthouses can change hands for more than £30m ($38m). "It's unimaginable."

However, 1991 is the point in time that the government believes should still be used to determine the council tax paid by Battersea's new multimillionaire inhabitants - which leaves the residents of some of London's most expensive homes paying less than an average household in Blackpool, Stoke-on-Trent or Nottingham.

With councils across England in financial crisis after years of central government austerity, calls are growing to reform council tax. Most authorities increased the levy by the maximum allowed 4.99% this month, raising about £2bn and adding about £100 to average household bills.

Local government leaders say this is not enough to prevent more councils from going bust without wholesale reform to a system that has barely changed since its hurried introduction under John Major to replace Margaret Thatcher's controversial poll tax.

"New valuations are based on 'how much would this property have been worth in 1991', which is a fairly nonsensical discussion," says John Merry, the deputy mayor of Salford, who chairs the group Key Cities, a cross-party association representing large councils.