People in Test Valley are losing out due to the "absurd" council tax system, figures suggest.

The Institute for Fiscal Studies has called on the Government to reform council tax, which is currently calculated using a property's estimated value in 1991.

Property values have changed wildly across England over the last three decades, and the IFS has said the system now punishes those whose house prices have not kept up with the rest of the country.

Department for Levelling Up, Housing and Communities figures show the annual cost of a band D council tax property in Test Valley in 2024-25 is 3.8 times as big as it was in 1995-96.

Meanwhile, house prices in the area saw a 5.5-fold increase between April 1995 and April this year, meaning they outstripped council tax rises by 60%.

But nationally, house prices were 5.6 times as big, while band D council tax has seen a 3.6-fold increase, meaning house prices have outpaced council tax by 78%.

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As a result, people in Test Valley have lost out due to council tax valuations going unchanged.

The earliest available year for comparable figures at a local level was 1995-96.

Of the areas with comparable data, 10 of the 11 benefitting the most are in London, with residents in Hackney, Wandsworth and the City of London topping the list.

Meanwhile, 10 of the 13 worst-off areas are in the North East and North West.

David Phillips, an associate director at the IFS, said it is "increasingly absurd" that council tax valuations are based on 1991 house prices.

Mr Phillips added: "Since this one and only valuation of houses, values have increased by massively different amounts around the country, meaning that at least half are now effectively in the 'wrong band'.

"Households in the North and Midlands are often in too high a band – and pay too much – while those in London and its environs too low a band – and pay too little – compared to what they would under a modernised tax.

"In other words, in its current form, council tax works against levelling up."

The annual cost of a band D council tax property in Test Valley is £2,089 in 2024-25.

Meanwhile, the average house price in the area was £411,247 in April, meaning a typical household will pay around 0.5% of their property's value in council tax this year.

Nationally, this rises to 0.7%. As a result, people in Test Valley pay less than their current house value indicates they should.

Labour said it has no plans to reform council tax, and is "committed to keeping taxes on working people as low as possible".

It said it would consider the impact on councils and taxpayers before making any tax decisions.