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Last Updated: Tuesday, 21 March 2006, 16:29 GMT
Student towns 'paying extra tax'
Householders in England and Wales are paying 80m extra council tax a year to subsidise students, an MP claims.

The government pays students' council tax but Tory Grant Shapps says it gets the numbers wrong - leaving residents to plug the gap.

He says six million people are affected, with Nottingham residents paying 19 a year extra, rising to 37 for Band H properties.

Ministers have pledged to review the alleged loophole.

The student exemption scheme will be examined by Sir Michael Lyons in his review of local government finance, the office for the deputy prime minister said.

'Cash-strapped'

Mr Shapps, who is launching a national campaign on Wednesday to highlight the issue, said he welcomed the government's apparent change of heart on the issue.

But he said he hoped the loophole would be closed by the time next year's council tax bills were sent out.

"Barely a day goes by without receiving letters from cash-strapped OAPs battling to pay inflation-busting council tax bills from their already stretched pensions," he said.

"Now to add insult to injury, the government has come clean and admitted that a sloppy loophole means that local taxpayers, like my pensioners, are effectively footing the bill for students.

"In my area this problem alone is adding 2.2% to the council tax bill and people are rightly asking why the government has taken so long to wake up to this crisis."

'Short-changed'

According to research by the Welwyn Hatfield MP Whitehall routinely undercounts student households.

As a result, compensation pay-outs are too small, forcing local authorities to increase the council tax burden on other residents.

Hertfordshire's County Council's finance director Chris Sweeney said: "We've been aware of this problem for years, but the new grant settlement was supposed to fix it. Sadly it has done nothing of the sort.

"This year we're short-changed by one million pounds, that's money that we could have urgently used to restrict the increase in council tax."

Chief Finance Office of Welwyn Hatfield Council, Bob Jewell went further: "The loss in revenue to Welwyn Hatfield District Council equates to 2.2% on the Council tax rise. This is equivalent to almost half of the Council tax increase for our area."




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