Britain’s inefficient and unfair property levies need reform
“As long as the status quo with council tax, stamp duty and business rates remains in place, the UK will be a more unequal, less productive, and lower revenue-raising country.”
Britain’s inefficient and unfair property levies need reform
In this article by the FT Editorial Board, the authors delve into the shortcomings of Britain's property tax system, touching upon the principles of taxation set forth by Adam Smith and emphasizing the need for reform to address issues of fairness, certainty, convenience, and efficiency. The article references "Fairer Share" in proposing solutions to these problems.
The current system of property taxes in the UK, including council tax, stamp duty, and business rates, is criticized for failing to align with the four principles advocated by Adam Smith. These taxes collectively generate substantial government revenue, close to 9 percent of the total, but they are considered poorly designed and detrimental to both economic equality and productivity.
Council tax, a tax based on property values from 1991, is highlighted as regressive due to significant changes in house prices since then. This tax places a disproportionate burden on residents, with those in the north-east and south-west regions paying the highest percentages of their wages. In contrast, residents in London, where incomes and property values are higher, pay significantly less in proportion to their income.
The article suggests replacing council tax with an annual proportional property value tax based on current house valuations, with local councils retaining access to the revenues. Tax rates would be adjusted to ensure each authority raises a similar amount as it did with council tax, and central funding to local authorities would be modified accordingly. The transition would be phased in to prevent abrupt changes in bills, and safeguards such as caps, reliefs, and deferred payment options would be implemented to support those in vulnerable financial situations.
The discussion then turns to stamp duty, a transaction tax that discourages property owners from downsizing and hinders the fluidity of the housing market. This, in turn, affects labour mobility and exacerbates skill shortages in various regions. The article proposes a gradual reduction and eventual elimination of stamp duty, potentially replaced by a 0.5 percent tax on current property valuations, as proposed by us, while maintaining revenue neutrality.
The article acknowledges the political challenges and resistance to these reforms, emphasizing the inertia within the current property tax system due to potential winners and losers from change. It calls for a phased approach, cost mitigation measures, and planning reforms to incentivize development. The central message is that maintaining the status quo with council tax, stamp duty, and business rates will result in a more unequal, less productive, and lower-revenue-raising UK, ultimately benefiting no one.
Click here to read the full article.
Andrew Dixon | Living longer with the Proportional Property Tax
This article appeared in CapX on June 29th 2023, written by Andrew Dixon, founder of Fairer Share
The debate surrounding tax reform options is intensifying ahead of the next General Election, compelling both the Government and Opposition to grapple with the challenge of maintaining fiscal balance in the face of higher inflation, growing inequality, and aging populations. Inheritance tax, income tax, corporation tax have all become topics of daily discussion but there is one area that deserves more attention: property tax. Stamp Duty and Council Tax have become outdated and are having a significant impact in the marginal seats that will be at the centre of the election battle.
Stamp Duty is restricting the opportunity for families to get onto the housing ladder, exacerbating the housing crisis by discouraging house purchases, contributing to under-occupation of certain properties, and slowing down the overall market. And Council Tax is in dire need of reform. Research conducted by the TaxPayers’ Alliance revealed that the average band D Council Tax bill in England has more than tripled since its introduction 30 years ago, representing an increase of 79% in real terms. The consequences of this rising and regressive tax are far-reaching. It diminishes disposal income, adds to already high housing costs, and exacerbates inequalities in local government funding. Disturbingly, all these issues have a knock-on impact on health and life expectancy as well.
A new report from Fairer Share released this week with WPI Economics highlights a startling correlation: even a 0.2% increase in the burden of Council Tax is associated with a one-year reduction in average life expectancy. The impact of this in practice can be seen in the comparison between County Durham and Westminster. In the former, Council Tax bills average 1.15% of property value, while in the latter, it is a mere 0.06%. Life expectancy in County Durham is seven years lower for men and six years lower for women compared to the area surrounding Parliament.
Amidst the ongoing cost-of-living crisis, politicians are overlooking a revenue-neutral tax reform that could make a difference. This reform involves abolishing both Council Tax and Stamp Duty, replacing them with the Proportional Property Tax, which would primarily benefit those residing in the poorest and least healthy areas. Under the new system, 18 million households would pay less compared to the current Council Tax rates, resulting in £6.5bn in savings for Council Tax payers outside of central London. Every region in the UK except London would experience savings on property tax, ranging from £143 per year per household in eastern England to £615 in Yorkshire, Humber, and the north-east.
By increasing the disposable incomes of those most in need and poorest in health, this shift in tax policy has the potential to reduce inequality and improve health outcomes. It is crucial that a transition to the Proportional Property Tax be included in party manifestos. Voters should no longer be expected to endure the burden of regressive property taxes, particularly when these taxes have the potential to compromise the health, the well-being, and the financial stability of both themselves and their families.
Simon Fell's Letter to Andrew Griffith MP
Andrew Griffith MP
Economic Secretary to the Treasury HM Treasury
The Correspondence & Enquiry unit 1 Horse Guards Road
London SW1A 2HQ
26 May 2023
Alternatives to Council Tax and Stamp Duty
Thank you for attending the Westminster Hall debate on Wednesday 17th May. I appreciate your recognition of the cross-party support for reform and your acknowledgment of the unfairness inherent in our country's property taxes.
I thought it prudent to write to you, post-debate, to address some of the concerns that you raised at the debate.
You expressed concerns about the impact on low and fixed incomes, particularly the "asset- rich, cash-poor"individuals. As mentioned in my introductory remarks, during the transition to Proportional Property Tax (PPT),any increase in local property tax would be capped at £100 per month (£3 per day) for primary residences. This transitional protection would cease upon sale, but buyerswould benefit from the removal of Stamp Duty.
Additionally, a deferral mechanism could be implemented for owners genuinely unable to pay, allowing them todefer tax payments with a modest interest charge. The deferred amount could be paid later or upon the sale of the home,avoiding debt-related issues associated with Council Tax collection.
It is important to note that this reform aims to address the inherent unfairness of Council Tax rather thanimposing wealth taxes. Council Tax, in essence, acts as a wealth tax for low and middle-income families. While it istheoretically based on a property's value, the valuations are outdated, relying on property prices from 1991.
In my constituency of Barrow & Furness, the average household pays 0.80% of the property value in Council Taxannually, significantly impacting their disposable income. Such a tax rate would be deemed unpalatable in affluentareas like London. Therefore, we must question why it is accepted in constituencies like mine.
You rightly noted that a property tax on residential properties alone would not be comprehensive, but it is a positive step to tax immovable and easily valued assets, considering how simple it is to shift financial assets offshore.
Furthermore, local government finance has long been a subject of concern and debate. Local authorities face thechallenge of balancing their budgets while providing essential services to their communities. However, existingmechanisms like Council Tax has limitations that result in imbalances and unfairness. Fairer Share proposes asolution to these challenges through the implementation of Proportional Property Tax (PPT). This innovative approachaims to create a fairer and more progressive system of local government finance. The PPT addresses thelimitations of existing mechanisms by aligning tax payments more closely with property values and ensuring a more equitable distribution of resources.
Under the PPT, properties would be regularly revalued based on their current market value, reducing disparities andensuring that households with similar properties pay a fair share of taxes. Additionally, the PPT introduces aprogressive structure, meaning that individuals with higher-valued properties contribute more, while those withlower-valued properties pay less.
Crucially, Fairer Share's PPT still upholds the principles of local referenda, allowing local residents to have a say inmajor financial decisions. The PPT would provide local communities with a fairer and more transparent tax system as the basis for their decision-making.
Implementing Fairer Share's PPT would bring several benefits to local government finance. Firstly, it would create afairer and more progressive system, reducing inequalities in tax burdens across households and communities. Thisenhanced fairness would contribute to greater social cohesion and address the long-standing issue of disproportionate tax contributions.
Secondly, the PPT would provide local authorities with a more stable and predictable revenue stream. By basing taxes on property values, which tend to be more stable than other economic indicators, local authorities can better plan and allocate resources to meet the needs of their communities.
Lastly, the PPT promotes local autonomy and decision-making. By granting local authorities’ greater revenue-raising powers, they can become more self-reliant and responsive to local needs and preferences. The PPT enableslocal authorities to have the financial means to invest in infrastructure, public services, and other initiatives thatdirectly benefit their communities.
I understand your concerns regarding the challenges of valuation. Fairer Share approached the International Property Tax Institute (IPTI) for advice on implementing Proportional Property Tax (PPT) inthe UK. IPTI, drawing on its expertise in property tax systems worldwide, provided guidance on various valuationissues related to the potential implementation of PPT.
It is worth noting that several countries already have property tax systems similar to the proposed PPT, which haveproven successful. Countries like the Netherlands, British Columbia (Canada), and New York City (USA) employ property tax systems closely resembling PPT, utilizing local property taxes based on annual revalued capitalvalues. Some parts of Australia also employ local property tax systems with similar characteristics. Other jurisdictionslike Ontario (Canada) and New Zealand use capital values but revalue them every 3 to 4 years.
Many countries worldwide conduct regular revaluations of capital values for their property tax systems.
Notably, these jurisdictions value all property types (residential and non-residential) on the same basis. They havefound that valuing residential properties with a high degree of accuracy is relatively straightforward, utilizingcomputer-assisted mass appraisal (CAMA) techniques incorporating automated valuation model (AVM)technology.
Ireland's unique approach to valuing residential properties for local property tax purposes is included in the study.Although based on individual capital values like PPT, Ireland's system employs self-assessment for valuations. Arevaluation is planned for later in 2021. Another similarity between the Irish system and the UK is the distinctionbetween residential and non- residential properties, involving separate processes, procedures, and valuation methods.The current UK valuation agencies do not possess the necessary technology for PPT. However, their previousexperiences with mass appraisal systems could be beneficial.
In conclusion, IPTI provided comprehensive advice on implementing Proportional Property Tax (PPT) in the UK, addressing valuation methodologies, data requirements, costs, challenges, and international examples. The report highlights the potential benefits of PPT and offers insights based on the experiences of other jurisdictions.
Thank you once again for your input, and I hope that the information provided addresses your concerns.
I look forward to hearing from you.
Yours sincerely
Simon Fell
Member of Parliament for Barrow & Furness
Watch the debate below: -
https://www.youtube.com/watch?v=-_5H85Yob-w&t=20s
Key conclusions from Westminster Hall debate on property tax reform
Proposals for Property Tax Reform: Levelling Up, Promoting Fairness and Stimulating Economic Growth
Simon Fell, MP for Barrow and Furness, led a Westminster Hall debate on the future of Council Tax and Stamp Duty in Parliament on Wednesday 17th May. There was widespread cross party support for Fairer Share’s Proportional Property Tax. Below are the key conclusions drawn from this important debate
In his speech advocating for property tax reform, Simon Fell highlights the flaws and inequities of the current property tax system and presents a solution aimed at unleashing savings, promoting equity, and stimulating economic growth. Fell acknowledges the historical challenges associated with property tax reform, referencing the poll tax riots as a cautionary tale. However, he emphasizes that the current property taxes disproportionately favour the wealthy, burden lower-value homes, discourage efficient housing use, and penalize homebuyers and sellers. These issues impact all constituencies and hinder the provision of local services and infrastructure.
Council Tax
Council tax, introduced in 1993 as a replacement for the unpopular poll tax, has become increasingly dissatisfying to the public. Surveys reveal that only 29% of people consider council tax calculations fair, with 33% supporting the status quo. The burden falls heavily on the young, low earners, and residents in less prosperous regions, while benefiting wealthy homeowners and property investors. The outdated property valuations and the band structure contribute to the unfairness of council tax. For example, a person in a £100,000 property pays roughly five times more tax relative to property value than someone in a £1 million property. Such disparities are far from a fair tax system.
Stamp Duty
Stamp duty, often considered council tax's accomplice, exacerbates the housing crisis by discouraging property transactions and hindering efficient property use. While it has progressive rates for larger transactions, it still poses barriers to homeowners looking to downsize or upsize, affecting job opportunities and overall housing market activity. Fell argues that abolishing stamp duty on owner-occupied properties would alleviate the housing crisis and promote housing stock utilization. However, he suggests retaining stamp duty for second home and non-residential buyers to address issues specific to certain communities, such as the hollowing out of villages due to second homes and holiday lets.
The Proposal
Proportional Property Tax (PPT) System To address the inadequacies of the current property tax system, Fell proposes a move to a proportional property tax (PPT) system. He cites the Fairer Share methodology as a concrete solution, replacing the convoluted band system with a simple flat tax of 0.48% of property value, with a 0.96% surcharge for second homes, empty homes, and non-residential properties. The benefits of such a system would be significant: 18 million households would experience a tax reduction, with an average annual saving of £556 per household. Additionally, council tax payers outside central London would save £6.5 billion annually, providing a substantial boost to local communities and economies. The reform would also exempt over 750,000 house buyers from paying stamp duty, simplifying, and reducing the cost of house buying. The increased housing market activity is estimated to contribute to a £3.27 billion boost in GDP per year.
Impact on Second Homes and Empty Homes:
Moreover, the PPT system would ensure that 1.4 million second homes, empty homes, and undeveloped properties contribute their fair share of tax, with the generated revenue used to lower bills for all taxpayers. This would incentivize owners to rent, sell, or develop these properties, thereby increasing the housing supply. Fell highlights that the reform would generate an annual surplus of £5.4 billion through surcharges on second homes, empty homes, and foreign-owned homes. This surplus can be utilized by the government to address various pressing needs. Shifting the tax burden to owners aligns with international practice and also eases administration for local councils.
Mitigations for Potential Impact:
Fell acknowledges that any wide-ranging reform will have winners and losers. To address concerns about potential higher taxes for individuals, he proposes several mitigations to soften the impact. These include the introduction of a transitional period, extending the period for any tax increase over a certain threshold, and allowing homeowners to defer payments until a property is sold. Additionally, the government could explore options such as a temporary subsidy for certain groups to ensure a fair transition and alleviate any short-term financial burden.
Local Government Finance and Redistribution:
Regarding the impact on local government finance, Fell proposes central government grants or funds redistributed from councils generating higher PPT revenue to supplement the shortfall for councils generating less revenue. This would ensure that no local authority faces significant financial challenges due to the reform. Additionally, a portion of the generated surplus could be allocated to local authorities to support community projects, infrastructure development, and public services.
Political Support:
Fell noted that politicians from various parties, along with think tanks like Bright Blue, IFS, IPPR, and campaign groups such as PricedOut, Generation Rent, and Intergenerational Foundation, have endorsed the transition to a proportional property tax. He went on to say that prominent economists from respected publications including The Financial Times, The Daily Telegraph, The Economist, and The Guardian have given their endorsement to this reform.
The proposed property tax reforms have gained support from multiple Members of Parliament across party lines. Aaron Bell, MP for Newcastle-under-Lyme, sees the alignment of the reforms with the government's levelling-up agenda and supports the proposal's potential benefits for his constituents.
Tim Farron, MP for Westmorland and Lonsdale, describes the current council tax system as regressive and ineffective, supporting the use of sliding scales and surcharges to ensure a fair contribution based on property value and ability to pay.
Jill Mortimer, MP for Hartlepool, highlights the unfairness of disproportionate council tax costs in her constituency compared to her London flat and supports the proportional property tax proposal.
Some MPs go even further in their criticisms. Mary Kelly Foy, MP for the City of Durham, criticizes the regressive nature of council tax and calls for a more progressive system that adequately funds local governments.
Peter Gibson, MP for Darlington, criticizes the fundamental flaws of the council tax system and advocates for alternatives, emphasizing the potential savings for his constituents.
Richard Burgon, Labour MP for Leeds East, calls for more progressive alternatives to council tax and suggests implementing real wealth taxes on the super-wealthy.
Kirsty Blackman, SNP Member of Parliament for Aberdeen North, notes that in Scotland, they have a different system with council tax known as the land and buildings transaction tax (LBTT), which was introduced in 2015. Blackman highlights that the LBTT is more proportionate to property prices compared to stamp duty in England. In Scotland, 40% of homebuyers do not pay any LBTT, and for properties below £175,000, which is the range for many first-time buyers, no LBTT is payable.
Responding to Helen Morgan's suggestion of linking stamp duty and similar taxes to the energy performance of buildings to encourage retrofitting and meet carbon targets, Blackman finds the idea novel and worthy of consideration.
Blackman mentions ongoing discussions in Scotland regarding council tax reform, acknowledging that the current system is not as fair as it could be. The Scottish Greens, SNP, and the Convention of Scottish Local Authorities are working on short-term and long-term reforms for council tax. Blackman notes that council tax in Scotland is significantly lower than in England, with an average difference of £600 for a Band E property. While Blackman acknowledges that Scotland's system is still not as fair as desired, she emphasizes the commitment to making necessary changes and ensuring a more equitable tax system.
However, not all MPs are fully on board with the proposed reforms. Chris Loder, Conservative MP for West Dorset, calls for a review of the revenue support grant and supports a comprehensive review of council tax and its contributing factors.
James Murray, MP for Ealing North, emphasizes the need to address the cost-of-living crisis and criticizes the government's handling of council tax and stamp duty, calling for fairer and more effective alternatives.
Andrew Griffith, the Economic Secretary to the Treasury, acknowledges the concerns raised and highlights the importance of council tax and stamp duty as fundamental taxes. He expresses caution regarding the potential consequences of certain reforms on local authorities and suggests exploring solutions that promote downsizing. Griffith assures that the government will continue to listen and consider the various proposals and concerns raised.
Conclusion:
The proposal for property tax reform, presented by Simon Fell, provides a compelling case for transforming the current property tax system. The Proportional Property Tax (PPT) system offers the potential to unleash savings for millions of households, promote equity by ensuring a fairer distribution of the tax burden, stimulate economic growth through increased housing market activity, and address the inefficiencies of the existing council tax and stamp duty regimes. While concerns and opposition exist, the support garnered from MPs across different political affiliations underscores the urgent need for a comprehensive review and reform of property taxation in the United Kingdom. The government's commitment to considering alternative proposals and engaging in further dialogue represents a positive step toward achieving a fairer and more effective property tax system.
MP calls for fairer council tax system for Furness residents
- Simon Fell, the MP for Barrow and Furness, is to hold a debate in the Westminster Hall Committee Room on Wednesday this week, to put forward council tax reforms for the UK.
- The motion presented is: that the House of Commons considers Alternatives to Council Tax and Stamp Duty
- Simon Fell MP supports and calls for council tax and stamp duty reforms to introduce a ‘Proportional Property Tax’
Simon Fell, the Member of Parliament for Barrow and Furness, is to host a debate in Parliament this week where he plans to call on the Government to consider reforms to council tax and stamp duty.
Mr Fell is calling on the government to scrap the current council tax and stamp duty system in favour of a proportional property tax.
In theory, council tax is a fair and progressive system which is based on a property’s value. In essence, if your property is worth more, then you pay more. The challenge, Simon says, with the current system is that the valuations are based on the property market of the early 1990’s. As a result, Mr Fell and MPs of all political persuasions are joining ‘Fairer Shares’ calls for a modern, reformed taxation system on property through proportional property tax.
Commenting, Simon said:
“I’m delighted to have been drawn in the ballot to hold this important debate on council tax reforms.
“It can not be right that the owner of a £30 million mansion in Westminster pays a council tax burden of just 0.06%, meanwhile the owner of a £120,000 home in Barrow pays a council tax burden of 0.80%.
“The current system is out of date, and unfair for Furness residents, and many others across the UK. That is why I am calling for reform to the way we tax properties in the UK.”
The Furness MP says that the ‘council tax conundrum’ has a ‘fair and simple solution’, which has the support of MPs from many political parties in Parliament called ‘Proportional Property Tax’ (PPT). PPT would see homeowners (and not renters) pay a flat rate of 0.48% based on current valuations, updated annually, rather than 1991 figures.
Fairer Share, the independent organisation calling for PPT, own analysis shows this would lead to significant tax cuts for 76% of families, saving £6.5 billion per year for households outside central London and the southeast (or £556 per household), helping to level up communities and boost local economies.
Commenting, Simon said:
“Not only will PPT save Furness households an average of £556 a year, but this reform would bring the treasury an extra £5.4 billion per year. This could be put toward the additional deficit created by the pandemic and the energy crisis. Or it could also be used to alleviate the cost-of-living crisis facing hard-working families.
“This is not about more tax. These reforms are about fairer tax. Households are finding the cost of living a real challenge right now. Westmorland and Furness council has hiked Furness residents council tax by almost 5%, and we’re not paying a fair rate when compared to mansion owners in London and the South East. It’s time for this outdated system to be modernised so that it’s fair and equal.”
Commenting, Andrew Dixon, Chairman of Fairer Share, said:
“We are delighted that Simon Fell has secured this important Westminster Hall debate. Council Tax is outdated and unfair. Stamp Duty is punitive and hinders mobility. Both taxes are in need of urgent reform and this debate is a wonderful opportunity for MPs to discuss the various options that are available. It is time for the Government to ensure councils are sustainably funded. I encourage MPs from all sides of the political spectrum to participate.”
The Guardian becomes the latest to endorse Fairer Share's PPT
The Guardian became the latest UK news publication to editorially endorse Council Tax reform, and more specifically, replacing it with a Proportional Property Tax. The article was written by the Guardian's Economics Editor, Larry Elliot and first appeared on the 9th April 2023.
A property tax based on annually uprated values would be a gamechanger
Sunak or Starmer will win votes – and most UK households will gain – if they replace the council tax
Rishi Sunak needs a gamechanger to have any hope of leading the Conservatives to victory at the next general election. Sir Keir Starmer could do with something to seal the deal with the British public.
The conventional wisdom is that there are no easy wins available to either the prime minister or the leader of the opposition in these straitened times. But the conventional wisdom is wrong. There is one policy that would be both popular and make economic sense, and that is reform of the UK’s property taxation...
Click here to read the rest of the article.
Council Tax reform included in 'Homes For Britain' Labour plan
Council Tax reform and Fairer Share were included in a housing policy report put together by the Fabian Society, providing policy recommendations for a next Labour Government. The Council Tax reform piece was written by Tom Spencer, Research Director for Priced Out UK.
REFORMING PROPERTY TAXES
We have wasted 31 years adopting regressive models of council tax argues Tom Spencer
Harold Wilson used the slogan ‘Thirteen wasted years’ throughout the 1964 election to signal that technological development and economic growth would be championed by his Government if they were to be elected. Thirteen years on from Labour’s last term in Government we are in a very similar place. Under successive Tory Governments, growth has been slow, and as such our living standards relative to our neighbours have declined. Channelling his inner Harold Wilson, Keir Starmer has unveiled his five missions for a better Britain that seek to make the UK the fastest-growing economy in the G7.
We are yet to have visibility on the concrete plans, but ideas have been put forward. Michael Saunders, former member of the Bank of England’s monetary policy committee (MPC) and now senior policy adviser to Oxford Economics, has outlined a seven point ‘Plan for Growth.’
Reforming UK property taxes is one of his key recommendations and Saunders writes, “both the OECD and IMF have proposed the UK should shift from the current Stamp Duty system to a tax based on property values (or a Land Value Tax) that is not dependent on whether people move home.” Similarly, David Smith, Economics Editor of the Sunday Times, has argued that “we should move away from Stamp Duty, a tax on transactions, to other ways of taxing property” in his own plan for growth. To its credit Stamp Duty is at least somewhat progressive since buyers only pay on purchases over £250,000, or over £425,000 if you are a first-time buyer.
However, the tax is a disincentive to moving home. It creates a barrier for young families in starter homes to move up the housing ladder, and is also a barrier for those in under-occupied homes who wish to downsize, creating a much less dynamic housing market where people are unlikely to move as often as they and their families would like This leads to under-occupation of property by older generations and over-occupation by younger generations, especially in many of our cities.
Yet Stamp Duty, which hinders growth, is not the only property tax in need of reform. Council tax has existed since 1992 and in theory taxes houses progressively based upon their value. However, the valuations have not been updated since 1991 and the bands are not sufficiently wide.
This means that not only does the tax fail to tax people proportionate to their wealth, it also insufficiently distinguishes
between different property values. This regressive system is designed so that payments increase slower than property values, and thus the greater the property value increases, the less the share of its value must be paid. To make things worse there are vast regional inequalities in how Council Tax is levied - for example, a £30 million townhouse in Westminster will be liable for less tax this year than a modest £120,000 home in County Durham.
Since its introduction the average household in Westminster has paid 2.5 times less Council Tax than the average home in Hartlepool.
Reforming the punitive Stamp Duty and the regressive Council Tax would be an easy way of creating growth in a way that helps the communities who need it most. Putting more pounds in people’s pockets supports local communities and improves health and educational outcomes.
It also encourages entrepreneurs to create businesses and facilitates the movement of employees around the country. This leads to greater economic growth, and a better chance of realising the goal of becoming the fastest growing country in the G7. However, simple abolition is insufficient. We saw from the turmoil that followed Liz Truss’ leadership that fiscal responsibility is essential. The best idea available seems to be Fairer Share’s Proportional Property Tax. This is a fully-costed plan that would introduce a 0.48% tax on annualised property values as a replacement for both Stamp Duty and Council Tax.
Fairer Share’s modelling reveals the enormous benefits for households across the country. Firstly, it would mean annual tax cuts for more than 77 percent of homes with the average household saving over £560 every year.
Moreover, this will be extremely positive for growth. By eliminating Stamp Duty, the IPPR estimates that GDP will grow by more than £3.2 billion thanks to increased market activity. This would go a long way, therefore, to both ending an exploitative and unfair form of taxation and also meeting Labour’s target of becoming the fastest growing economy in the G7.
Finally, the polling suggests this would be electorally advantageous for Labour. Whilst following polls is a poor substitute for governing, when good policy polls well it simply becomes more attractive as an implementable instrument. MRP Polling conducted by JL Partners revealed that should Labour introduce a Proportional Property Tax, it could help the party gain as many as 52 seats including 43 in the so-called ‘Red Wall’. They could also make gains in Scotland and would see their vote share increase by 15% among swing voters.
Keir Starmer’s focus on growth is a sign that, should Labour win the next election, we will finally have a Government dedicated to combating Britain’s relative decline over the past two decades. The last time Labour took advantage of this messaging they won dramatically.
Labour must use this approach today, and bring an end to not just 13 wasted years of the current Conservative Party, but to 31 wasted years stuck with an inequitable and regressive system of property taxation.
IPPR Roundtable shows the growing support for property tax reform
Convened by the IPPR, a roundtable discussion entitled “Addressing the cost of living crisis through property tax reform” was held with an esteemed group of politicians, academics, economists and campaigners.
The event was attended by Shadow Financial Secretary, James Murray MP, who is currently working on the Labour Party manifesto for the next election. The discussion covered numerous elements of the cost of living crisis as well as the role that property tax reform can play in alleviating the challenges that households face.
The message was clear – Stamp Duty and Council Tax are in much need of reform.
Growth
Senior Research Fellow at the University of Oxford, John Muellbauer, made several contributions based upon his research for the OECD on the role property taxes have had on stagnating GDP in the UK. He noted that high taxes on moving and low taxes on homeownership combine to force too many people to live far from their workplaces or from their relatives. Stamp Duty is the key cause of this effect. High levels of Stamp Duty mean that few homes come on the market at any one time, restricting choice. Combined with the high cost of transacting, many people are forced to live far from their most suitable locations. The time wasted on travelling results in greater tiredness and fewer waking hours to put towards work and leisure. This has contributed to Britain having the highest commuting times in Europe. Downwind of these problems, Muellbauer noted, you end up with lower productivity resulting in lower levels of growth.
Professor Muellbauer also linked these problems to the perennial issue of climate change. Our housing stock is rife with under-occupation helped by huge disincentives to move in the form of Stamp Duty. By having a more efficient use of the housing stock there is a reduced need to heat unused rooms, and also the need for new construction is marginally reduced since the overall available stock will increase, constituting an increase in effective supply. Moreover, in the long-run this will help the cost of living by reducing carbon emissions, and thus preventing carbon related cost of living volatility.
Sam Robinson, Senior Research Fellow at Bright Blue, added to this point, noting that a proportional property tax could feasibly take carbon emissions into account, for example by tying the rate of the PPT to a home’s EPC rating.
Moreover, it was noted by many participants, such as Shreya Nanda, Chief Economist at the Social Market Foundation, that the current system provides little scope to improve land. This means that developed land, in addition to developable land due to regulatory constraints, is in a massive shortage. As such, average house prices are over three times more expensive than their cost of construction. This is worsened by the fact that when infrastructure is developed, increasing the desirability for nearby households, the public purse is not at all reimbursed for this. For example, a £3.5 billion investment in the Jubilee Line Extension, increased nearby property values by £13.5 billion. If just a small percentage of this had been taxed, then these improvements, that help to grow productivity, would fund themselves. However, it was discussed that since property valuations for the purpose of council taxation have not been updated since 1991, then such improvements will not be recognised in the tax bill, thus making investments in infrastructure harder to finance.
Unfairness
Whilst there were some disagreements in the specific type of tax that should replace our current system, there was almost universal agreement that change is needed.
George Dibb, Head of the Centre for Economic Justice at IPPR, set out how IPPR research has previously shown the unfairness of the current tax system both in terms of wealth inequality but also regional inequality. Council tax is based on 30-year-old property valuations, varies widely around the country, and is capped at relatively low property values, meaning that a multi-million-pound property in the South-East of England can attract the same tax bill as a normal family home elsewhere. Reform is clearly overdue.
Liz Emerson, CEO of the Intergenerational Foundation, commented that their preferred policy is to levy capital gains tax on the sale of primary residences, as this would feed back intergenerationally unfair gains made by wealthier older generations through the unrestrained rise in house prices. Proceeds would go to the public purse in order, they hope, to be spent on improving the prospects of the young and future generations, whether that be through reducing the cost of childcare, investing in the green transition, or removing the onerous burden of student debt, which from September 2023 will follow the young for 40 years.
Andrew Dixon, founder of Fairer Share, explained that their analysis showed that moving to a proportional property tax would not just mean lower bills for most households, it would also free up thousands of homes for people who need them. He noted that their analysis showed that 76% of households would be better off by moving to this system. Included in the Fairer Share proposals are the elimination of single person and second home discounts, and exemptions on undeveloped land. Deferral of tax payments for those with low cash incomes are a key element in their proposals.
Sara Hall, Deputy Director at Tax Justice UK, explained that property makes up one of the biggest portions of all UK wealth but that we have a dysfunctional approach to taxing it. Under council tax, people living in lower value housing pay more in tax as a proportion of the value of their homes than people living in multi-million pound mansions. There are also big variations between different councils and regions of the country.
She went on to say that if this was replaced with a proportional property tax, paid by the homeowner, a large majority of people would be better off. Sara admitted that the other tax on residential property - stamp duty - is progressive in that the wealthy pay more. However, it’s economically inefficient as it makes it unnecessarily expensive to downsize or move house. Replacing these two taxes with a proportional property tax would be fairer and is why Tax Justice UK fully supports the proposal put forward by the Fairer Share campaign.
Vote Winner
Jacky Peacock, Head of Policy at Advice4Renters, argued that a land value tax would be her preference, but identified proportional property taxes, like that advocated by Fairer Share, as a welcome alternative that would generate more political support. This argument was joined by several of the attendees, such as Sam Robinson, Senior Research Fellow at Bright Blue, who explained that proportional property taxes would rebalance the regressivity of the current system and put more money in the pockets of those from modest backgrounds and areas. To all parties the electoral benefits of proportional property taxes constitutes a key selling point. It was mentioned that JL Partner’s MRP Polling that found that if Labour were to introduce a PPT, then they could gain as many as 52 additional seats with numerous gains in Red Wall seats and Scotland.
Final thoughts
What was clear from the discussion, despite frank disagreement over policy specifics, experts from all sides of the aisle were unanimous that property taxation in the UK, through Council Tax and Stamp Duty, is not fit for purpose and thus in dire need of reform. Whilst specific preferences of optimal improvements varied, many agreed that a Proportional Property Tax would constitute a significant improvement compared to the current system that would alleviate the cost of living crisis, assist the levelling up effort, help incentivise infrastructure investments and help make house prices more affordable.
The key question is whether these recommendations will be part of the Labour Party manifesto going into the next general election?
WATCH: Fairer Share on GB News
On February 15th, Fairer Share Chairman and Founder, Andrew Dixon, went on GB News to discuss the unfairness of Council Tax with Eamonn Holmes and Isabel Webster.
Watch the conversation below:
How Much Will Council Tax Increase In Your Area?
Council Tax will rise by 5% (on average) in 2023-24. Here is what a 5% increase would mean for Band D properties in your area:
| Local Authority | Band D Council Tax 2022-23 (£) | Band D Council Tax 2023-24 (£) |
| Adur | 2,119 | 2,224 |
| Allerdale | 2,079 | 2,183 |
| Amber Valley | 2,003 | 2,104 |
| Arun | 2,057 | 2,160 |
| Ashfield | 2,188 | 2,297 |
| Ashford | 2,000 | 2,100 |
| Babergh | 1,954 | 2,051 |
| Barking & Dagenham | 1,785 | 1,874 |
| Barnet | 1,746 | 1,834 |
| Barnsley | 1,949 | 2,046 |
| Barrow-in-Furness | 2,068 | 2,171 |
| Basildon | 1,986 | 2,085 |
| Basingstoke & Deane | 1,863 | 1,956 |
| Bassetlaw | 2,210 | 2,321 |
| Bath & North East Somerset UA | 1,950 | 2,047 |
| Bedford UA | 2,063 | 2,166 |
| Bexley | 1,923 | 2,019 |
| Birmingham | 1,816 | 1,906 |
| Blaby | 2,079 | 2,183 |
| Blackburn with Darwen UA | 2,016 | 2,117 |
| Blackpool UA | 2,064 | 2,167 |
| Bolsover | 2,111 | 2,216 |
| Bolton | 1,960 | 2,058 |
| Boston | 1,973 | 2,072 |
| Bournemouth, Christchurch & Poole | 1,955 | 2,053 |
| Bracknell Forest UA | 1,861 | 1,954 |
| Bradford | 1,857 | 1,950 |
| Braintree | 1,933 | 2,030 |
| Breckland | 2,011 | 2,111 |
| Brent | 1,815 | 1,906 |
| Brentwood | 1,912 | 2,008 |
| Brighton & Hove UA | 2,119 | 2,225 |
| Bristol UA | 2,230 | 2,342 |
| Broadland | 2,027 | 2,128 |
| Bromley | 1,737 | 1,824 |
| Bromsgrove | 2,002 | 2,103 |
| Broxbourne | 1,901 | 1,996 |
| Broxtowe | 2,188 | 2,297 |
| Buckinghamshire UA | 2,068 | 2,172 |
| Burnley | 2,154 | 2,261 |
| Bury | 2,073 | 2,176 |
| Calderdale | 1,981 | 2,080 |
| Cambridge | 2,015 | 2,115 |
| Camden | 1,792 | 1,882 |
| Cannock Chase | 1,988 | 2,087 |
| Canterbury | 2,015 | 2,115 |
| Carlisle | 2,053 | 2,156 |
| Castle Point | 1,977 | 2,076 |
| Central Bedfordshire UA | 2,142 | 2,249 |
| Charnwood | 2,016 | 2,117 |
| Chelmsford | 1,946 | 2,043 |
| Cheltenham | 1,964 | 2,062 |
| Cherwell | 2,138 | 2,245 |
| Cheshire East UA | 2,004 | 2,104 |
| Cheshire West and Chester UA | 2,061 | 2,164 |
| Chesterfield | 1,954 | 2,051 |
| Chichester | 2,028 | 2,130 |
| Chorley | 2,048 | 2,151 |
| City of London | 1,075 | 1,128 |
| City of Nottingham UA | 2,294 | 2,409 |
| Colchester | 1,934 | 2,031 |
| Copeland | 2,086 | 2,190 |
| Cornwall UA | 2,109 | 2,214 |
| Cotswold | 1,967 | 2,065 |
| Coventry | 2,076 | 2,180 |
| Craven | 2,075 | 2,179 |
| Crawley | 1,999 | 2,099 |
| Croydon | 1,966 | 2,064 |
| Dacorum | 1,986 | 2,085 |
| Darlington UA | 2,048 | 2,151 |
| Dartford | 1,985 | 2,084 |
| Derby City UA | 1,910 | 2,006 |
| Derbyshire Dales | 2,042 | 2,145 |
| Doncaster | 1,842 | 1,934 |
| Dorset Council | 2,290 | 2,405 |
| Dover | 2,050 | 2,152 |
| Dudley | 1,749 | 1,837 |
| Durham UA | 2,203 | 2,314 |
| Ealing | 1,735 | 1,822 |
| East Cambridgeshire | 2,032 | 2,134 |
| East Devon | 2,130 | 2,236 |
| East Hampshire | 1,932 | 2,028 |
| East Hertfordshire | 2,017 | 2,118 |
| East Lindsey | 1,935 | 2,032 |
| East Riding of Yorkshire UA | 2,021 | 2,122 |
| East Staffordshire | 1,962 | 2,060 |
| East Suffolk | 1,939 | 2,036 |
| Eastbourne | 2,199 | 2,309 |
| Eastleigh | 1,911 | 2,007 |
| Eden | 2,069 | 2,172 |
| Elmbridge | 2,159 | 2,267 |
| Enfield | 1,842 | 1,934 |
| Epping Forest | 1,923 | 2,019 |
| Epsom & Ewell | 2,135 | 2,242 |
| Erewash | 1,972 | 2,071 |
| Exeter | 2,065 | 2,168 |
| Fareham | 1,878 | 1,972 |
| Fenland | 2,111 | 2,217 |
| Folkestone & Hythe | 2,119 | 2,225 |
| Forest of Dean | 2,016 | 2,117 |
| Fylde | 2,084 | 2,188 |
| Gateshead | 2,214 | 2,324 |
| Gedling | 2,182 | 2,291 |
| Gloucester | 1,955 | 2,053 |
| Gosport | 1,944 | 2,041 |
| Gravesham | 2,003 | 2,103 |
| Great Yarmouth | 2,002 | 2,102 |
| Greenwich | 1,710 | 1,796 |
| Guildford | 2,144 | 2,251 |
| Hackney | 1,671 | 1,755 |
| Halton UA | 1,937 | 2,034 |
| Hambleton | 1,990 | 2,089 |
| Hammersmith & Fulham | 1,228 | 1,289 |
| Harborough | 2,020 | 2,121 |
| Haringey | 1,880 | 1,974 |
| Harlow | 1,984 | 2,083 |
| Harrogate | 2,099 | 2,204 |
| Harrow | 2,042 | 2,144 |
| Hart | 1,978 | 2,077 |
| Hartlepool UA | 2,197 | 2,307 |
| Hastings | 2,219 | 2,330 |
| Havant | 1,922 | 2,018 |
| Havering | 1,971 | 2,070 |
| Herefordshire UA | 2,114 | 2,220 |
| Hertsmere | 1,975 | 2,074 |
| High Peak | 1,986 | 2,086 |
| Hillingdon | 1,659 | 1,742 |
| Hinckley & Bosworth | 1,989 | 2,088 |
| Horsham | 2,010 | 2,110 |
| Hounslow | 1,774 | 1,863 |
| Huntingdonshire | 2,075 | 2,179 |
| Hyndburn | 2,089 | 2,194 |
| Ipswich | 2,071 | 2,174 |
| Isle of Wight UA | 2,140 | 2,247 |
| Isles of Scilly | 1,683 | 1,767 |
| Islington | 1,710 | 1,796 |
| Kensington & Chelsea | 1,382 | 1,451 |
| King's Lynn & West Norfolk | 2,015 | 2,116 |
| Kingston upon Hull UA | 1,885 | 1,979 |
| Kingston upon Thames | 2,123 | 2,229 |
| Kirklees | 1,997 | 2,097 |
| Knowsley | 2,047 | 2,150 |
| Lambeth | 1,660 | 1,743 |
| Lancaster | 2,093 | 2,198 |
| Leeds | 1,869 | 1,963 |
| Leicester City UA | 2,078 | 2,182 |
| Lewes | 2,281 | 2,396 |
| Lewisham | 1,817 | 1,908 |
| Lichfield | 1,972 | 2,070 |
| Lincoln | 1,999 | 2,099 |
| Liverpool | 2,195 | 2,305 |
| Luton UA | 2,004 | 2,104 |
| Maidstone | 2,085 | 2,189 |
| Maldon | 1,970 | 2,069 |
| Malvern Hills | 1,984 | 2,083 |
| Manchester | 1,873 | 1,966 |
| Mansfield | 2,181 | 2,290 |
| Medway UA | 1,909 | 2,004 |
| Melton | 2,040 | 2,142 |
| Mendip | 2,045 | 2,147 |
| Merton | 1,781 | 1,871 |
| Mid Devon | 2,186 | 2,295 |
| Mid Suffolk | 1,941 | 2,038 |
| Mid Sussex | 2,038 | 2,140 |
| Middlesbrough UA | 2,168 | 2,277 |
| Milton Keynes UA | 1,943 | 2,040 |
| Mole Valley | 2,124 | 2,231 |
| New Forest | 1,988 | 2,087 |
| Newark & Sherwood | 2,252 | 2,364 |
| Newcastle upon Tyne | 2,088 | 2,193 |
| Newcastle-under-Lyme | 1,958 | 2,056 |
| Newham | 1,532 | 1,609 |
| North Devon | 2,170 | 2,278 |
| North East Derbyshire | 2,063 | 2,167 |
| North East Lincolnshire UA | 2,080 | 2,184 |
| North Hertfordshire | 2,023 | 2,124 |
| North Kesteven | 1,990 | 2,090 |
| North Lincolnshire UA | 2,003 | 2,104 |
| North Norfolk | 2,030 | 2,132 |
| North Northamptonshire | 1,985 | 2,084 |
| North Somerset UA | 1,959 | 2,057 |
| North Tyneside | 2,004 | 2,105 |
| North Warwickshire | 2,128 | 2,235 |
| North West Leicestershire | 2,031 | 2,133 |
| Northumberland UA | 2,142 | 2,249 |
| Norwich | 2,085 | 2,189 |
| Nuneaton & Bedworth | 2,102 | 2,207 |
| Oadby & Wigston | 2,025 | 2,126 |
| Oldham | 2,128 | 2,235 |
| Oxford | 2,225 | 2,337 |
| Pendle | 2,211 | 2,322 |
| Peterborough UA | 1,856 | 1,949 |
| Plymouth UA | 2,008 | 2,109 |
| Portsmouth UA | 1,882 | 1,976 |
| Preston | 2,171 | 2,280 |
| Reading UA | 2,145 | 2,252 |
| Redbridge | 1,864 | 1,957 |
| Redcar & Cleveland UA | 2,112 | 2,218 |
| Redditch | 1,991 | 2,090 |
| Reigate & Banstead | 2,173 | 2,281 |
| Ribble Valley | 2,010 | 2,110 |
| Richmond upon Thames | 2,022 | 2,123 |
| Richmondshire | 2,085 | 2,189 |
| Rochdale | 2,110 | 2,216 |
| Rochford | 1,994 | 2,094 |
| Rossendale | 2,122 | 2,228 |
| Rother | 2,211 | 2,321 |
| Rotherham | 2,035 | 2,136 |
| Rugby | 2,082 | 2,186 |
| Runnymede | 2,102 | 2,207 |
| Rushcliffe | 2,206 | 2,316 |
| Rushmoor | 1,922 | 2,018 |
| Rutland UA | 2,300 | 2,415 |
| Ryedale | 2,083 | 2,187 |
| Salford | 2,105 | 2,210 |
| Sandwell | 1,831 | 1,923 |
| Scarborough | 2,097 | 2,202 |
| Sedgemoor | 1,988 | 2,088 |
| Sefton | 2,122 | 2,228 |
| Selby | 2,067 | 2,171 |
| Sevenoaks | 2,098 | 2,203 |
| Sheffield | 2,058 | 2,161 |
| Shropshire UA | 2,000 | 2,100 |
| Slough UA | 1,855 | 1,948 |
| Solihull | 1,792 | 1,882 |
| Somerset West & Taunton | 1,959 | 2,057 |
| South Cambridgeshire | 2,062 | 2,165 |
| South Derbyshire | 1,957 | 2,055 |
| South Gloucestershire UA | 2,086 | 2,190 |
| South Hams | 2,155 | 2,263 |
| South Holland | 1,941 | 2,038 |
| South Kesteven | 1,922 | 2,018 |
| South Lakeland | 2,061 | 2,164 |
| South Norfolk | 2,057 | 2,160 |
| South Oxfordshire | 2,133 | 2,240 |
| South Ribble | 2,064 | 2,167 |
| South Somerset | 2,027 | 2,128 |
| South Staffordshire | 1,923 | 2,019 |
| South Tyneside | 1,985 | 2,084 |
| Southampton UA | 1,956 | 2,054 |
| Southend-on-Sea UA | 1,856 | 1,949 |
| Southwark | 1,595 | 1,674 |
| Spelthorne | 2,132 | 2,239 |
| St Albans | 1,994 | 2,094 |
| St Helens | 1,972 | 2,070 |
| Stafford | 1,922 | 2,018 |
| Staffordshire Moorlands | 1,950 | 2,047 |
| Stevenage | 1,978 | 2,077 |
| Stockport | 2,142 | 2,250 |
| Stockton-on-Tees UA | 2,138 | 2,245 |
| Stoke-on-Trent UA | 1,797 | 1,887 |
| Stratford-on-Avon | 2,074 | 2,178 |
| Stroud | 2,054 | 2,156 |
| Sunderland | 1,832 | 1,923 |
| Surrey Heath | 2,177 | 2,286 |
| Sutton | 1,933 | 2,030 |
| Swale | 1,995 | 2,095 |
| Swindon UA | 1,982 | 2,081 |
| Tameside | 1,984 | 2,083 |
| Tamworth | 1,922 | 2,018 |
| Tandridge | 2,181 | 2,290 |
| Teignbridge | 2,167 | 2,275 |
| Telford and the Wrekin UA | 1,887 | 1,981 |
| Tendring | 1,923 | 2,019 |
| Test Valley | 1,899 | 1,994 |
| Tewkesbury | 1,934 | 2,030 |
| Thanet | 2,070 | 2,174 |
| Three Rivers | 1,998 | 2,098 |
| Thurrock UA | 1,735 | 1,822 |
| Tonbridge & Malling | 2,064 | 2,167 |
| Torbay UA | 2,037 | 2,138 |
| Torridge | 2,145 | 2,252 |
| Tower Hamlets | 1,520 | 1,596 |
| Trafford | 1,786 | 1,875 |
| Tunbridge Wells | 2,030 | 2,131 |
| Uttlesford | 1,966 | 2,064 |
| Vale of White Horse | 2,124 | 2,230 |
| Wakefield | 1,883 | 1,977 |
| Walsall | 2,183 | 2,293 |
| Waltham Forest | 1,940 | 2,037 |
| Wandsworth | 873 | 916 |
| Warrington UA | 1,969 | 2,068 |
| Warwick | 2,066 | 2,169 |
| Watford | 2,035 | 2,136 |
| Waverley | 2,188 | 2,298 |
| Wealden | 2,252 | 2,365 |
| Welwyn Hatfield | 2,020 | 2,121 |
| West Berkshire UA | 2,046 | 2,149 |
| West Devon | 2,231 | 2,342 |
| West Lancashire | 2,064 | 2,168 |
| West Lindsey | 2,011 | 2,112 |
| West Northamptonshire | 2,041 | 2,143 |
| West Oxfordshire | 2,103 | 2,208 |
| West Suffolk | 1,956 | 2,054 |
| Westminster | 866 | 909 |
| Wigan | 1,741 | 1,828 |
| Wiltshire UA | 2,100 | 2,205 |
| Winchester | 1,949 | 2,046 |
| Windsor & Maidenhead UA | 1,523 | 1,600 |
| Wirral | 2,053 | 2,155 |
| Woking | 2,177 | 2,286 |
| Wokingham UA | 2,053 | 2,155 |
| Wolverhampton | 2,074 | 2,178 |
| Worcester | 1,941 | 2,038 |
| Worthing | 2,033 | 2,135 |
| Wychavon | 1,909 | 2,005 |
| Wyre | 2,065 | 2,169 |
| Wyre Forest | 2,012 | 2,112 |
| York UA | 1,865 | 1,958 |