This article first appeared in The Yorkshire Post on November 24th 2021, written by Andrew Dixon, Chairman and Founder, Fairer Share.
What exactly does the Prime Minister have against homeowners in the North?
For some time households in Yorkshire and beyond have been served up a rotten deal by our outdated and unjust council tax system. And now the Government made matters even worse with a social care cost cap that will hit Northern households hardest.
But as Boris Johnson stands accused of betraying the North, he still has an opportunity to get back in the good books of Northern voters. If he wished to do so, the Prime Minister could deliver serious cash savings to voters across the North just by fixing our broken council tax system ahead of the next general election.
For now, after a week of negative headlines in the North, the pressure is mounting on Ministers to do something that will work quickly and effectively. With the scaling back of the long-trailed Integrated Rail Plan, the Prime Minister found himself at odds with Northern MPs, regional leaders and industry figures, not to mention voters. But the rail plan was only the half of it.
With less fanfare the Government also quietly slipped out details of a new social care cap on home and care costs that will hit Northern households the hardest. The move to amend the cap will save Government hundreds of millions of pounds as subsidised care will not count towards the lifetime maximum.
It is argued that this means people with fewer assets – especially in this region – will end up losing a larger proportion of their wealth than better off people. Essentially, those who live in areas where house prices have not sky-rocketed in recent years stand to lose most.
According to Labour analysis, two thirds of poorer Northern homeowners will pay more towards their care under the changes. Don Valley, where the average property value is £155,000, is one of the constituencies expected to be hit hardest, while homeowners in the North East will be particularly badly affected, with average prices under £186,000 in nearly 90 per cent of constituencies. Meanwhile London and the South East will be less adversely impacted.
“The absurdity of the current council tax system is such that residents of Bradford East face a council tax burden nine times higher than people living in Westminster.”
That would be bad enough if households in the North and Midlands were doing well out of other Government policies. Yet the same households are also the biggest losers under our current outdated property tax system based on house price values that are a year older than the very first text message and four years older than DVDs.
Presently, the average household in London presently pays out 0.24 per cent of their home’s value in council tax every year. Meanwhile, the average household in Yorkshire pays out 0.76 per cent and the figure is even higher in the North East. The absurdity of the current council tax system is such that residents of Bradford East face a council tax burden nine times higher than people living in Westminster.
There is no justification for the current unfair system. Especially when there is a straightforward and pain-free solution at hand. Unlike social care, the council tax problem can be easily solved without spending more money – by simply killing off council tax and stamp duty and bringing in a fairer system of proportional property tax.
Under the model proposed by the Fairer Share campaign, property owners would pay 0.48 per cent of their property value each year and this tax would bring in exactly the same amount of revenue as stamp duty and council tax.
A proportional property tax would mean lower bills for 19 million households across England, with households in the Midlands and the North seeing the biggest savings. In Don Valley, 98 per cent of households would see lower bills, with an average annual saving of £550. In Barnsley East, 100 per cent of households would see lower bills, with an average annual saving of £700. Across the ‘red wall’ some 97 per cent of households would pay less.
Unsurprisingly, a proportional property tax has been backed by a number of red wall Conservative MPs. Despite the pressure from his own side and Commons rebellion on Monday night, the PM is still sticking with the status quo when it comes to council tax. But with a cost of living crisis gripping the UK, and a social care cap and council tax system that together look like a double whammy of levelling down, it is surely time for the Prime Minister to change course.
Ultimately, if Johnson is committed to pushing through his rail and social care reforms against the interests of the North, then the least he can do is make property taxes fairer for households from Barnsley to Bishop Auckland.
He should accept that the game is up on council tax and seize the opportunity to move forward with a fairer system, delivering lower bills for millions of people in the North of England. By doing so, the Prime Minister could finally give Northern voters something tangible to celebrate.
Andrew Dixon
Chairman and Founder
Fairer Share