UK statisticians to treat reduced council tax as rebate

LONDON (Reuters) -Britain’s Office for National Statistics said on Monday that it would treat a one-off 150-pound ($201) reduction in English households’ council tax payments in April as a tax credit rather than a reduction in their liabilities.

Britain’s government has announced a range of measures to compensate households for surging energy bills, and economists and bond investors are closely looking at whether the ONS treats them as price cuts that will lower headline inflation rates.

As well as the council tax rebate, the government has also promised a 200 pound reduction in energy bills for this autumn, followed by 50 pound surcharges in the following four years.

“The ONS has concluded there is no reduction in Council Tax liability and the Council Tax rebate in England should be classified as a payable tax credit, specifically as a current transfer paid by the central government subsector to the households sector,” the statistics office said.

An ONS spokesperson was not immediately able to say what implication if any this would have for inflation. A broader ruling on the inflation impact of government measures is due on March 23.

Council tax is not included in the main consumer prices index (CPI) measure targeted by the Bank of England, which the central bank expects to hit a 30-year high of more than 7% in April when regulated household energy bills surge by 50%.

But ‘council tax and other rates’ account for 4.50% of the basket of goods and services which goes into the longer-running retail prices index (RPI) inflation measure which is used in many commercial contracts and to calculate interest payments on 500 billion pounds of inflation-linked government bonds.

Council tax and other local authority charges also make up about 3% of the newer CPIH measure, which – like RPI – includes a wider range of housing costs than CPI.

($1 = 0.7480 pounds)

(Reporting by David MillikenEditing by William Schomberg and Andy Bruce)