Council tax valuations have been around since Chesney was No. 1
This article first appeared in The Big Issue on August 21st 2021, written by Fairer Share Founder, Andrew Dixon.
Council tax has been with us since The One And Only was No. 1, but it's pushing the poorest deeper into hardship, says Andrew Dixon. Property tax needs reformed, urgently.
To say our current property tax system is out of date would be a major understatement. Council tax is based on property valuations from 30 years ago, undertaken when Chesney Hawkes was No. 1. Perhaps The One and Only was simply a reference to your first, and so far only, council tax evaluation.
Partly as a consequence of being so behind-the-times, council tax is also deeply unfair. People who live in modest homes get a worse deal than those living in the wealthiest areas, while struggling renters are hit just as hard as their, often older, counterparts who have made it on to the property ladder. Too often, council tax works for the millionaires rather than the millions – and works against the drive towards intergenerational fairness.
That’s why the Fairer Share campaign is pushing our parliamentarians to back a fairer system that works for everyone. Our analysis shows that if the government were to scrap council tax and stamp duty and bring in a simple proportional property tax, this would bring in exactly the same amount of revenue as the current arrangement. Set at a flat rate of 0.48 per cent of a property’s value, and a proportional property tax would mean lower bills for 76 per cent of households in England and average savings of £435 a year. Furthermore, 99 per cent of the households in the most deprived 10 per cent of constituencies in England would benefit from the change.
Of course, inflated prices mean the value of some homes may not always tally with the finances of those who own them. For that reason, there would be safeguards in place to protect those who live in valuable properties yet do not have a lot of disposable income. Under a proportional property tax, the so-called “asset rich, cash poor” who cannot afford to pay it would have the option to defer payments and pay instead a modest interest rate until they sell up and settle the balance.
For 30 years council tax has been writing its own obituary. But, since the pandemic hit, changing the financial outlook for millions of people, the case for abolishing council tax and bringing in a fairer property tax system in the UK has only become more compelling.
"Council tax is one of the household bills on which millions are falling behind, creating debt and forcing people out of their homes"
Earlier this year, Citizens Advice revealed that council tax debt was the number one debt issue they were dealing with, seeing people racking up millions in arrears as a result of Covid-19. This month, we also learned that
2.5 million people are behind on their broadband bills, with 700,000 of them falling into the red during Covid. It comes at a time when people are more reliant on broadband for work and for helping their children with school work, with UK adults spending an average of 22 hours online each week.
At the same time, charities have reported a sharp rise in benefits issues, rent arrears, court action and potential eviction and homelessness since the onset of the pandemic. As protections put in place for renters came to an end in England in May this year, polling showed that almost one-in-10 private renters were behind on their rent, equating to more than 350,000 tenants across the country. That polling coincided with a 17 per cent increase in people coping with issues around being evicted from their private rented accommodation, compared to the same period one year previously.
As The Big Issue’s campaign to Stop Mass Homelessness shows, these big bills for those struggling to get by cannot go on. Council tax is one of the household bills on which millions are falling behind, creating debt and forcing people out of their homes.
And, as The Big Issue’s Today for Tomorrow Campaign has rightly stated, the pandemic has shown we need more long-term planning in government. By building momentum behind Lord Bird’s Wellbeing of Future Generations Bill, the campaign is hopefully helping to make this happen and deserves to be widely supported, as it currently is by a range of organisations and MPs from all parties.
If passed, the bill will require the UK Government to work to prevent problems, including poverty, from happening. It would also require ministers to give current and future generations a voice in decision-making.
This is exactly the kind of approach that we need if households across the country are to receive the fairer property tax system they deserve. By scrapping council tax and stamp duty and introducing a fairer system of property tax, the government could deliver real ongoing savings to millions of people who have been pushed towards poverty and homelessness during the pandemic.
Instead, 30 years since it was drawn up, we are still stuck with “the one and only” regressive council tax system which unfortunately has more staying power than Chesney Hawkes.
Andrew Dixon is founder of Fairer Share, which works to reform out-of-date property taxes. #TaxHomesFairly
Answering HM Treasury's questions on the Proportional Property Tax
Throughout our campaign, we have been excited by our engagement and interaction with leading MPs from across the political spectrum. After receiving a constituent's email about Fairer Share, Colleen Fletcher MP, the member for Coventry North East, kindly put her constituent's questions to HM Treasury.
We welcome the review of our policy undertaken by HM Treasury and feel it is only fair to them and also to our many supporters, who will want to make sure they are backing the right horse, that we examine any concerns in detail. We have responded in a Q&A format below:
HM Treasury
The Government notes your constituent's concern about the valuation of domestic properties for council tax. As your constituent is aware, in England homes are put into one of eight valuation bands based on their capital value on 1 April 1991, and newly constructed properties are also assigned a nominal 1991 value. This is designed to ensure that all properties are valued on a fair and consistent basis. The Government has no plans for a revaluation, which would be very complex and expensive to undertake.
Fairer Share
The last revaluation of Council Tax was in 1991, before the invention of the internet, which makes it absurd to suggest that “all properties are valued on a fair and consistent basis”.
If it were the case that properties are valued consistently and fairly under the current system, why does Colleen Fletcher’s constituents of Coventry North East pay 0.76% of their property value in Council Tax each year whereas Michael Gove’s constituents in Mole Valley pay just 0.44%? Even within Coventry North East there is great discrepancy between Band A which pays 0.99% and Band B which pays 0.35%.
These figures would indicate property values are in fact entrenching the inequalities of Council Tax.
At some point the Government will have to undertake revaluation. Using 1991 house values will just entrench and worsen existing inequalities and seem ever more outdated and ridiculous.
If the Government thinks that valuation is politically difficult, then surely the best reason to undertake a valuation is to introduce a better system that brings with it serious political upside by putting cash in the hands of 76% of households. Letting this problem slip into the future is short-termist and will be harmful to the Government and the Conservative Party’s manifesto commitment to level up
We commissioned the well-respected International Property Tax Institute (IPTI) to write a 200-page deep dive into the issue of valuation. Other jurisdictions manage to provide accurate valuations of the capital values of their properties – Netherlands, New Zealand, British Ontario, New York. For a country that prides itself on data analytics and AI your concerns around valuation are insufficient.
In IPTI’s view, the introduction of PPT poses no insurmountable technical or valuation issues. Much of the rest of the world operates similar systems and they have proved reliable and sustainable.
There are implementation costs to be considered but, in comparison with the potential revenue to be derived from PPT, they would appear to provide good value for money in terms of cost/yield ratio. The Government already collects the requisite data at the VOA. To undertake a PPT it is a case of using the data correctly.
The IPTI points out “the biggest problem likely to be encountered in connection with PPT will be at the political level. Experience has shown that many UK politicians and governments have regarded council tax reform as an area to avoid but, in IPTI’s view, the present system does not operate as effectively or as equitably as many other property tax systems around the world, so there are sound arguments in favour of reform.”
HM Treasury
The Government also notes your constituent's concern about Stamp Duty Land Tax (SDLT). SDLT continues to be an important source of government revenue, raising several billion pounds each year to help pay for essential public services.
Fairer Share
Our policy is revenue-neutral. Revenue from the Proportional Property Tax (£36.7 billion) recoups lost revenue from the abolition of SDLT for primary homeowners (£4.2 billion), removal of Council Tax (£31.9 billion) and miscellaneous adjustments (£0.6 billion). In addition, HM Treasury (and local authorities) will have flexibility to increase or decrease the tax take in future years by adjusting the 0.48% rate.
HM Treasury
At Autumn Budget 2017, the Government announced further changes, which increased the price at which a property becomes liable to SDLT to £300,000 for first time buyers. This relief means that 80 per cent of first-time buyers will not pay SDLT, and 95 per cent of first time buyers who pay SDLT will benefit from the change. As you may know, the Chancellor of the Exchequer recently announced a temporary increase in the nil rate band of residential SDLT from £125,000 to £500,000. This was effective immediately and runs from 8th July until 31 March 2021.
Fairer Share
Yes, the first-time buyer's SDLT discount is indeed helpful but it does nothing to facilitate young families moving up the property ladder nor does it incentivise older generations to downsize to property sizes more appropriate for their life-style. Stamp duty stops families moving because it taxes at the point of transaction, thereby making the housing market less efficient. Helping people move has huge economic and social benefits, a point repeatedly made by the Chancellor.
Our response to Sir Paul Beresford's review of Fairer Share
We have appreciated the support and encouragement of leading think tanks and academics. We have been excited by our engagement and interaction with leading MPs from across the political spectrum.
Feedback has been extremely positive. And we welcome a review of our policy undertaken by Sir Paul Beresford, Conservative MP for Mole Valley.
We feel it is only fair to him and also to our many supporters, who will want to make sure they are backing the right horse, that we examine Paul Beresford’s concerns in detail. We have responded in a Q&A format below:
Sir Paul Beresford MP
Thank you for your campaign email about council tax and the proposal by a lobbying group to impose a new house price tax on homes.
Fairer Share
To be clear, this is not a new tax on homes. The Proportional Property Tax is a replacement for the regressive Council Tax and the punitive Stamp Duty.
Sir Paul Beresford MP
Council tax is a local charge for the use of local services. The current banding system reflects that larger homes make slightly greater use of local services, but intentionally, it is not a poll tax nor a wealth tax.
Fairer Share
Within your constituency of Mole Valley someone living in a modest band A property pays 0.88% of their property value in tax every year. However, someone in a higher band H property pays just 0.16% of the property value. In other words, it would appear that Council Tax is a wealth tax that perversely places the greatest burden on those with the least wealth. We have been inundated with stories from supporters who are struggling to find the money to pay their Council Tax bills. So, on top of the disparity between bands, Council Tax is a rising wealth tax for low and middle-income households.
The Proportional Property Tax is not a wealth tax. The Daily Telegraph’s Economics Editor Russell Lynch wrote: ‘this is not a “mansion tax” or anything like it.’ Neither is it in keeping with a wealth tax, which is generally understood to be imposed upon an individual’s entire net wealth.
We all want to live in a fair society, and paying the same rate of 0.48% of the property value is surely better than the current system, where someone in Barnsley pays 1% and someone in Battersea pays 0.1%.
Sir Paul Beresford MP
For the past decade, the Government has ensured that local taxpayers are able to veto excessive council tax increases in a local referendum. The 2019 manifesto, upon which I stood, re-affirmed support for this democratic check and balance, which has helped ensure that council tax remains lower in real terms than a decade ago.
Fairer Share
Council tax bills have rocketed up in many areas over the past decade. To take one example, Band D council tax in the City of Nottingham has gone up from £1,562 to £2,226 in this time - a rise of 42.5%.
It is for this reason we have a fixed national component which would go to central government for redistribution and an initial floating local component which would go to the local authority and could subsequently be moved up or down by that authority. In this way local authorities retain flexibility over taxation and voters can still judge them on value for money. As happens now, there could be limits on how this flexibility to set local rates is used, including the requirement to hold a local referendum if it is proposed that the local share of the tax was to be raised above a certain limit. The Local Government Chronicle covered these important issues in this review.
Sir Paul Beresford MP
I would note under the proposals by this lobbying group, many hard-working families and pensioners would see soaring bills, both within local authorities and across the country. In particular: the existing single person discount would be abolished, hitting widows and widowers the hardest. Such a house price tax fails to take into account that single person homes make reduced use of local services.
Fairer Share
Please can you provide your analysis to show that hard-working families and pensioners would see soaring bills from this reform?
With our proportional property tax, those living in houses valued at £500,000 or less (90% of all households in England) are likely to see a reduction in their tax bills because the future tax will be less than their current Council Tax payments. Therefore, low-income households are likely to benefit from a very real reduction in their bills.
In the rare situation of low-income households living in high value homes the increase in tax would be capped, so that at the point of transition, no household would see a rise of more than £100 per month (£3.29 per day). And we would provide these households with the option to roll over the tax payment, at a modest interest rate, until point of sale or change of ownership.
Therefore, those living in a modest home will see a reduction in their tax bill. Those owning a larger property can either choose to pay the additional charge, which even for the largest and most valuable homes would be capped at a £1,200 increase per year or they can choose to defer payment until they sell the property. This means that those widows or widowers, to whom you refer, will not be particularly impacted by the change.
You are right to point out the hardship of low-income households but Council Tax has become a wealth tax for modest and low-income households and remains a simple service charge for the wealthy.
Sir Paul Beresford MP
Annual revaluations would mean home improvements would be taxed, punishing people for doing up their home. Under the council tax system, material improvements are only taken into account when the home is sold.
Fairer Share
With a flat tax of 0.48%, this equates to less than 1/200th of any increased value from home improvements. Such a payment would be much less than the 20% VAT rate charged on materials, so a proportional property tax at 0.48% per year is certainly no more of a disincentive to improve one’s home than VAT, which is charged at 20% and is paid upfront.
Do you really think that the Council Tax system takes into account material improvements when the home is sold? Why has a property revaluation in England not been carried out since 1991? This is one of the main reasons for the inequity between constituencies and within constituencies.
Sir Paul Beresford MP
There would be no limit on the increase in taxes. When house prices rise, it would be very easy for a government or council to use that increase to hike the overall tax take by stealth, as bills would be based on house prices.
Fairer Share
The increase in tax take would be determined by a fixed value of an asset, not by stealth. As the rate is only 0.48%, this means that a homeowner would keep 99.52% of any increase in their house price. Therefore, an increase of £100,000 in house value would return £99,520 to the homeowner. This is certainly not an unlimited increase.
Do you feel the same way about Fuel Duty and VAT? They could also be viewed as stealth taxes especially as wages in many parts of the country have struggled to keep up with inflation.
It should be noted that many other jurisdictions around the world use annual or regular valuations to base their annual property taxes. These include the Netherlands, British Columbia, New York City, Ontario, parts of Australia and New Zealand.
Sir Paul Beresford MP
I also note that the Government has stated it does not support such a policy, and has criticised proposals for such house price taxes in a Parliamentary debate.
Fairer Share
Please can you provide the evidence of these criticisms in Parliamentary debate? In fact, our reform has been championed by the Housing Select Committee, and was noted by a Minister in the House of Lords.
Across England around 76% of households would benefit under a proportional property tax, with households paying £435 less property tax a year on average.
There are 78 constituencies where over 99% of households would benefit from moving to a proportional property tax. Many of these are in the north of England and the midlands but there are also plenty of southern seats that would benefit from the change.
We are grateful for the endorsement for a proportional property tax by leading economists in the national media including Martin Wolf at The Financial Times and Russell Lynch at The Daily Telegraph.
In his op-ed piece in the Daily Telegraph, Aaron Bell, who took Newcastle-under-Lyme from Labour for the Tories at the 2019 election, said: ‘…abolishing Council Tax and Stamp Duty and replacing them with a fairer property tax is the right thing to do for millions of people up and down the country. It is also the right thing for the Conservative Party to do if we are serious about delivering to those who voted Tory for the first time in a generation.’
Sir Paul Beresford MP
Thank you for making me aware of the campaign; I hope this explains why such an idea is not one I feel able to support.
Fairer Share
That is a pity. Council tax is clearly broken. Everybody in government knows this. The Financial Times editorial board wrote ““Taxation of property is incoherent, notably in the UK: the regressive burden of council tax is proportionately much higher for owners of cheaper properties than more expensive ones. Moreover, valuations have not been updated for England since 1991. Reform is urgent: this should consist of a tax proportional to the property value, regularly updated valuations and the capitalisation of the tax for elderly residents, with the balance paid out of the estate.” As you know, Fairer Share has incorporated all three recommendations – proportionality, regular valuations and capitalisation.
As we have stated here, there is a “policy vacuum” at the heart of levelling up. If the Conservative Party is serious about levelling up, not just paying lip service to it, then PPT should be a no-brainer. Our proposal is ready to go, it is not radical and the cap on the increase of £1,200 per year limits any losses to a sensible and politically palatable amount. The benefits of PPT to most voters are undeniable and by rights it should be at the centre of levelling up agenda. If this is too heavy a lift then I fear this Government may have little to show to its “Blue Wall” by the time of the next election.
The ‘policy vacuum’ at the heart of Levelling Up
This article first appeared in Politics.co.uk on July 28th 2021, written by Fairer Share Founder, Andrew Dixon.
Two years after he first started talking about it, the prime minister’s levelling up agenda is still looking remarkably policy-light.
This week, MPs on the business, energy and industrial strategy committee said that levelling up risks becoming an “everything and nothing policy”. That verdict came after the lack of detail in the recent big speech on the flagship policy prompted Labour to charge Boris Johnson with serving “empty waffle”, while one Conservative MP admitted that levelling up is an ambiguous phrase that “means whatever anyone wants it to mean”.
What’s clear is that, two years after Johnson first started talking about it, there continues to be a policy vacuum at the heart of levelling up.
This might be understandable if there was a shortage of interventions that the prime minister could pick up and run with to achieve a fairer Britain. Yet no such shortage exists. Indeed, one policy that ticks all of the boxes is increasingly being talked about by MPs on both sides of the chamber.
This week, MPs on the housing, communities and local government committee (HCLG) backed an overhaul of council tax, which they rightly called out as “an increasingly regressive tax that penalises those in more deprived areas”. In the place of council tax, the select committee MPs are backing a fairer system that would deliver for voters in the so-called red wall and beyond. “The government should consider options for wider reform of council tax and business rates, including possibly replacing them with a proportional property tax,” their report states.
The MPs’ concern over council tax tallies with research showing that residents of constituencies in the north and Midlands clearly receive the worst deal under the current system. By backing a proportional property tax, the committee’s 11 MPs are voicing their support for a fairer system that should be central to any credible levelling up agenda.
Research shows that across England, around 76% of households would benefit under a proportional property tax set at a flat rate of 0.48% of a property’s value. Across all the 44 so-called ‘Red Wall’ seats in England which the Conservatives gained from Labour in 2019, 97% of households would be better off as a result of the policy, with an average saving of £660 per year.
The select committee report frames proportional property tax as a long-term option but there is no reason why the policy could not be introduced in the near future. A simple proportional property tax as designed by the Fairer Share campaign would be revenue-neutral, maintaining the amount that the government can put towards our services, while simultaneously leading to lower bills for millions of people. There would also be significant safeguards in place to help the so-called ‘asset rich, cash poor’, such as the option to defer payments at notional interest rates until point of sale.
While opponents of a proportional property tax point to practical issues, such as annual valuations, work done by the International Property Tax Institute shows that there is no technical problem with revaluation. At present, hundreds of jurisdictions use some sort of automated valuation model to aid their property tax systems.
As he searches for policies to anchor the levelling up agenda, the prime minister does not need to look far to see why proportional property tax would do the job better than most. This week’s HCLG committee report comes after the liberal Conservative Bright Blue group also recently backed an annual proportional property tax on the current value of houses. Conservative MP Kevin Holinrake said: “Introducing a proportional tax on property in the UK would be an excellent way for our party to demonstrate our commitment to levelling up and to do something meaningful for the many new constituencies we have won across the country”.
If levelling up is not an everything and nothing policy and is really a serious policy programme, the prime minister could prove it tomorrow by putting proportional property tax at the heart of the agenda. In doing so he would be implementing a policy that would not cost the Exchequer and has been shown to deliver real-world levelling up benefits to households across the country. As Johnson himself might say, he would be advancing a plan that is “oven-ready”.
Andrew Dixon, Chairman & Founder, Fairer Share
Parliamentary Committee recommends Fairer Share to the Government
Great news! This week, the House of Commons Committee for Housing, Communities and Local Government published a list of recommendations to the UK Government calling for Council Tax reform and specifically for the Government to look at replacing Council Tax with our Proportional Property Tax.
The committee, made up of both Conservative and Labour MPs, said Council Tax was becoming increasingly regressive to the detriment of deprived areas. They said that reform was "long overdue".
Committee chair Clive Betts said:
“Council budgets have been stretched for several years and the social care funding crisis is at the heart of financial pressures for many councils.
“Covid-19 has also hit councils hard and, while the government responded to the pandemic with substantial financial support, they now need to come forward with a long-term sustainable way of funding councils and the services they provide.”
Andrew Dixon, Founder of Fairer Share responded to the news, saying:
"It’s great to see our campaign getting into the heart of Westminster. We will keep up the pressure to make sure that the Government ends our terrible property taxes and creates a fairer system for everyone."
The Committee includes MPs from across England:
Clive Betts MP (Sheffield South East)
Bob Blackman MP (Harrow East)
Ian Byrne MP (Liverpool, West Derby)
Brendan Clarke-Smith MP (Bassetlaw)
Florence Eshalomi MP (Vauxhall)
Ben Everitt MP (Milton Keynes North)
Rachel Hopkins MP (Luton South)
Ian Levy MP (Blyth Valley)
Andrew Lewer MP (Northampton South)
Mary Robinson MP (Cheadle)
Mohammad Yasin MP (Bedford)
Helping the red wall doesn’t mean harming the south
This article first appeared in The Times on June 28th 2021, written by the Conservative MP for Carlisle, John Stevenson.
The Chesham & Amersham by-election result has prompted understandable concern in some quarters of the Conservative party. But while the result was a disappointment, I would caution colleagues against leaping to the wrong conclusion. Namely the idea that a focus on red wall seats has to come at the expense of those in the south.
The real story is that if the government wants to deliver on our manifesto pledge of levelling up the country, then something has to be done about property taxes. Our system is broken. Council tax hurts the poorest in society all across the country. Simultaneously stamp duty puts a brake on economic growth by
hindering transactions in the housing market, leading to an inefficient housing stock.
There is no doubt that constituents like mine in Carlisle would benefit from a fairer system. In fact, near enough 100 per cent of my constituents would benefit to the tune of £700 if the government was to scrap council tax and stamp duty and bring in a simple proportional property tax, as proposed by the Fairer Share campaign.
But seats like mine are only part of the picture. The reality of proportional property tax would be lower bills for 76 per cent of households across England,
with beneficiaries in the north and south.
Take North West Cambridgeshire where 91 per cent of households would benefit from a proportional property tax, or Bedford, the commuter town, where 89 per cent would benefit, or the cathedral city Salisbury, where 83 per cent of households would benefit. Even the inner London borough of Barking would see nearly two thirds of its residents directly benefiting from the change.
It is of course true that some wealthy parts of the south of England would see their bills rise under proportional property tax. But many southerners would see
lower bills and those who will have to pay more are predominantly the richest homeowners in the most affluent and valuable areas of the country.
Furthermore, a cap on any increase at the point of implementation of £100 per month and the option to defer payments at notional interest rates until point of sale surely insulates these homeowners from any material concerns and means that everyone who wants to will be able to remain in their present home.
What’s clear is that the current system is not working. For example, my residents who can only afford houses in the lowest band pay 1.3 per cent of their property value in council tax per year. At the same time, the wealthiest band property owners in Brighton pay just 0.1 per cent of their property value per year. This is patently unfair.
A proportional property tax would address this inbuilt unfairness without hiking up bills across the south of England. At the same time, the removal of
stamp duty and the introduction of a proportional property tax would correct broken incentives in the market — encouraging transactions and helping people to move into homes that are most suitable for their needs.
Stamp duty is a poorly-designed tax because it hinders people moving. At the top of the market in particular it is prohibitively expensive, often a cash
payment of 5 per cent to 10 per cent of the value of the property is required.
These payments stop families moving up the market as they need space for their children and disincentivises others from downsizing when their own children
move out to homes of their own or the rental market.
Across the country fewer barriers to downsizing could lead to hundreds of thousands of additional homes being freed up, helping to mitigate some of the
housing supply shortage particularly where there is greater demand, in London and the South East. And it would help young people get on to the housing ladder where it is too expensive for all but a few.
Ultimately, levelling up for one part of the country does not need to come at the expense of another and a proportional property tax would not just be of
enormous benefit to my constituents. It would also mean the end of stamp duty for everyone and lower bills for households across England, from Carlisle to
Cambridgeshire.
John Stevenson is the Member of Parliament for Carlisle.
Andrew Dixon | Council Tax Farce is Making a Mockery of Levelling Up Agenda
Boris Johnson likes to insist that his commitment to levelling up is “absolutely rock solid throughout this country”.
Yet in many parts of the country, including throughout much of Yorkshire, our property taxes tell an entirely different story – council taxes that are both rising up and levelling down.
Batley and Spen, where Labour and the Conservatives will go head-to-head in a by-election battle on July 1, is one constituency that clearly gets a rotten deal under the current system.
That’s because council tax works for the millionaires rather than the millions. It ensures that people who live in modest houses are paying a higher tax rate than those living in the wealthiest areas.
It is also hitting renters saving up for a deposit just as hard as those who have already made it onto the property ladder.
The unfairness of the current system is underlined by the fact that residents of Westminster presently pay out just 0.06 per cent of their home’s value in council tax every year.
Yet across Yorkshire and Humber this “council tax burden” leaps up to 0.76 per cent. In Batley and Spen it climbs further to 0.87 per cent.
That means we currently have the absurd situation in which residents of Batley and Spen face a council tax burden 15 times higher than people living in Westminster.
The vast majority of residents in Batley and Spen and nearby would be far better served if the Government was to scrap council tax and stamp duty and bring in a simple proportional property tax, as proposed by the Fairer Share campaign.
Set at a flat rate of 0.48 per cent of a property’s value, this tax would bring in exactly the same amount of revenue as stamp duty and council tax and would mean lower bills for 19 million households across England.
There would also be safeguards in place to ensure that only those who can afford to pay more do so.
Under proportional property tax, any increase in property tax is capped at £1,200 and those who cannot afford to pay the tax have the option to defer payments and pay a modest interest rate.
Across the UK, more than 120,000 households have signed the Fairer Share petition calling for a proportional property tax.
In constituencies near Batley and Spen, MPs have also made it clear that they believe in a fairer system of property tax, with the policy cutting across party lines.
One key supporter of proportional property tax is Kevin Hollinrake, the Conservative Party MP for Thirsk and Malton who set up the Property Research Group of MPs to fight for reform of outdated property taxes.
Earlier this year Boris Johnson was asked about the policy at Prime Minister’s Questions when it was noted that a proportional property tax “would create a transparent property taxation system, generate revenues that local government needs and ease the tax burden on hard-pressed families across the country”.
As Batley and Spen gears up for the by-election, both the Labour and Tory leaderships should take note.
If the Conservative Government is really committed to making the country fairer then support for a proportional property tax should be a no-brainer, showing voters that there is more to levelling up than mere rhetoric.
And if the Labour Party is serious about reconnecting with lost voters on July 1, how better to prove the point than getting behind a policy that would mean big savings every year for the households throughout the constituency?
With council taxes skyrocketing, what Batley and Spen does not need is an MP who toes the party line if it fails to deliver for local people.
Unfortunately, our current property tax system does exactly that and we urgently need to open the door to a fairer alternative.
Bringing in a proportional property tax would result in lower bills for 76 per cent of households across England.
In Batley and Spen it would mean lower bills for 99 per cent of households, with average savings of £650. That’s something that voters could see as a rock solid commitment to levelling up.
Andrew Dixon is the founder of Fairer Share
What Impact Does Council Tax Have On Child Poverty?
Thanks to a number of timely public interventions, most notably from Marcus Rashford, child poverty has been in the public spotlight in recent months. But how might Council Tax impact child poverty in a given area?
To provide a perspective on this, we researched the 10 constituencies with the highest increases in child poverty between 2015 and 2020. We show the Child Poverty Rate, the average Council Tax bill and the average household saving if we moved to a fairer system – the Proportional Property Tax
These are the 10 Constituencies with the highest five-year increases in child poverty:
1) Middlesbrough
MP: Andy McDonald (Lab)
Child Poverty Rate: 45.6%
Average Council Tax: £1,300
Tax Saving with Fairer Share: £850 (100% of households better off)
2) Birmingham Yardley
MP: Jess Phillips MP (Lab)
Child Poverty Rate: 46.1%
Average Council Tax: £1,100
Tax Saving with Fairer Share: £450 (95% of households better off)
3) Newcastle upon Tyne Central
MP: Chi Onwurah MP (Lab)
Child Poverty Rate: 45.4%
Average Council Tax: £1,150
Tax Saving with Fairer Share: £750 (99% of households better off)
4) Sedgefield
MP: Paul Howell MP (Con)
Child Poverty Rate: 35.9%
Average Council Tax: £1,400
Tax Saving with Fairer Share: £850 (100% of households better off)
5) Jarrow
MP: Kate Osborne MP (Lab)
Child Poverty Rate: 35.7%
Average Council Tax: £1,250
Tax Saving with Fairer Share: £750 (99% of households better off)
6) Gateshead
MP: Ian Mearns MP (Lab)
Child Poverty Rate: 38.2%
Average Council Tax: £1,300
Tax Saving with Fairer Share: £850 (100% of households better off)
7) Newcastle upon Tyne North
MP: Catherine McKinnell MP (Lab)
Child Poverty Rate: 32.6%
Average Council Tax: £1,300
Tax Saving with Fairer Share: £650 (98% of households better off)
8) Newcastle upon Tyne East
MP: Nicholas Brown MP (Lab)
Child Poverty Rate: 38.1%
Average Council Tax: £1,200
Tax Saving with Fairer Share: £700 (99% of households better off)
9) Birmingham Ladywood
MP: Shabana Mahmood MP (Lab)
Child Poverty Rate: 54.5%
Average Council Tax: £1,150
Tax Saving with Fairer Share: £600 (98% of households better off)
10) Bradford West
MP: Naz Shah MP (Lab)
Child Poverty Rate: 47.3%
Average Council Tax: £1,150
Tax Saving with Fairer Share: £600 (98% of households better off)
To see the data for all English Parliamentary constituencies, click here for Council Tax Burden and here for the impact of our reforms.
Responding to Daily Telegraph Readers’ Comments on the Proportional Property Tax
Bright Blue, a leading right-leaning think tank, has published a well-received report recommending that a new annual proportional property tax (APPT) should be introduced. Like Fairer Share’s reforms, the tax would raise the same amount for the Government as current property taxes, but more closely reflect the value of homes than the existing system that includes council tax valuations dating back to 1991.
The Daily Telegraph reviewed the reforms, highlighted the fairness of the proposals and encouraged their readers to comment.
Readers were asked: “Do you think stamp duty and council tax should be replaced? If so, what would you suggest as an alternative?”
Below are the reader’s comments and our response to their suggestions:
@Neil Thomson:
"Although reviews of stamp duty and council tax are long overdue, I don't think a property levy that hits the south of England disproportionately is fair or reasonable.
"The tax subsidy from London and the South East is too high already and is cross-subsidising the other three home nations and the north of England levelling up agenda already.
"The tax take on the south of England has increased disproportionately on income. To compound that with property taxes is punitive and represents a further disincentive to living and working in London, when the capital city has been hit very hard by the pandemic. Ministers need to think again."
Fairer Share
Fairer Share’s proposal takes these concerns seriously, balancing the advantages and disadvantages very carefully. The removal of Stamp Duty would support those in the South East, limiting the impact of reforming Council Tax on the South East and London. We also cap any increase to £1,200 additional payments per year - just £100 per month for those in the most expensive households.
It is also important to think about the broader issues facing the housing market. The current system is highly inefficient and stamp duty disincentivises downsizing. Freeing up properties through the removal of Stamp Duty would be a huge boon to the younger generations in the South East and London looking to get onto the market for the first time and for young families looking to move into homes of an appropriate size.
@TJ James:
"I have paid stamp duty on my property, which was significant. Why should double taxation be considered fair?
"We need more housing, not more tax pushing up the cost of housing. These people are living in a think tank bubble, not the real world."
Fairer Share
The biggest concern financially is those who cannot afford their homes at all because of the regressive nature of council tax, whether in the South East or in Rother Valley. This is precisely not the concern that the think tank bubble is usually considered to over-correct for.
At the point of transition from Council Tax to PPT, no household will see an increase of more than £1,200 per year. When there is a change of ownership the cap will fall away and the property will move to the 0.48% rate, but such buyers will have benefited from the removal of Stamp Duty. There would be no double taxation.
Overall Fairer Share is tax revenue neutral – this is not a tax increase overall. We are replacing the regressive Council Tax and the punitive Stamp Duty with a simple flat tax rate of 0.48% for all households (subject to the £1,200 cap). This means a fair and proportionate tax increase only for those who can afford it, while those who cannot will see a tax cut.
@Martin Thomson:
"The biggest problems with any tax based on property value that I can see are firstly maintaining a realistic valuation, and secondly that no government would then have any incentive to prevent house price inflation – in fact quite the reverse."
Fairer Share
House pricing is not centrally determined otherwise Governments may have had more success in reaching their targets of housing affordability. PPT would see tax rises in line with the value of the property. This increased tax should provide a “brake” function on any house price increases as demand for houses will be affected by the annual payments. For those who choose to afford high PPT payments because they live in mansions or multi-million pound homes, they will at least commensurately contribute to their local authority’s budgets.
Our tax also aims to help the supply problem with house price inflation. By taxing at the point of planning permission being granted, we aim to see a greater degree of development, which should contribute to house cost reductions or at least the flattening of any house price increases.
@Andrew Ryan:
"A tax raid on southern property wealth sounds like a fair idea to me, considering the current system is 'regressive' and 'distortive'. We either believe in a proportional tax system where the wealthy pay more, or we don't."
Fairer Share
We agree that the system needs addressing, although a proportional tax system would not be a raid on property wealth in the South East any more than Council Tax is currently a raid on property wealth in the North East. Council Tax is unnecessarily regressive and needs addressing. We need a fairer system whereby those with the broadest shoulders carry more of the burden.
@Alice Taylor:
"I paid property tax that was based on the value of the house when I Iived in Texas. It's a much fairer system. The outdated band system here in the UK doesn't take into account the changes in values as neighbourhoods degrade and when they regenerate. It certainly doesn't take into account the condition of the house or outside factors, like neighbours or views, that affect value.
"The present system is very regressive and a poor person living in a terrace house that is a slum pays the same as the wealthy next-door neighbour who has the highest standard interior."
Fairer Share
Well said. Many other countries have superior property taxes.
@Andrew Richards:
"If the annual tax is to be based on property values, then it’s a double whammy for anyone improving their home, and already paying VAT for improvements for the privilege.
"Property values are also market driven, so we are now in a boom period with values increasing by over 10 per cent, along with the new tax no doubt.
"Anyone expecting the new tax to reduce when property values fall is deluded.
"Many older people will live in expensive homes that they have saved for and paid for throughout their lives. Equally, their incomes will be typically far less in retirement."
Fairer Share
Andrew’s comments are a nod to Land Value Tax which we certainly believe has its merits and has many supporters both in the economic and academic communities. However, it would be punitive in London and the South East. PPT balances both the economic benefits of LVT with a politically palatable solution that all parties can get behind.
With a rate of 0.48%, the tax equates to less than 1/200th of the increased value. Would a proportional property tax truly be a disincentive to increase the value of one’s property? Such a payment would be much less than the 20% VAT rate charged on materials, so it could be argued that a proportional property tax at 0.48% per year is no more of a disincentive to improve one’s home than VAT, which is charged at 20% and is paid upfront.
For owners of high value homes the increase in tax would be capped, so that at the point of transition, no household would see a rise of more than £100 per month (£3.29 per day). We would provide these households with the option to roll over the tax payment, at a modest interest rate, until point of sale or change of ownership.
However, any debts built up as a result of deferring a payment would be considerably lower than wealth gained from rising house prices. Assuming 4.8% annual house price inflation, housing assets would increase at 10 times the speed of any tax liability. House prices would have to increase at less than 0.48% per year for the tax debt to exceed the value of the housing asset.
Just to be clear, and this is a very important point, absolutely no one will be forced out of their homes. If they live in a modest home, they will see a reduction in their tax bill. If they live in a larger property, they can either choose to pay the additional charge, which even for the largest and most valuable homes would be capped at a £1,200 increase per year or they can choose to defer payment until they sell the property.
@TJ James:
"To change the current rules would be suicide for the Tories. All those with accrued property value bought on the basis of the current rules would feel hard done by. For instance, I've paid huge stamp duty when buying my house, why should I pay more tax having already settled the stamp duty?"
Fairer Share
Under the current system, someone who is planning to buy a £1 million home will have to pay £43,750 in tax before they have even collected the keys. Paying 4.8% over 10 years with Fairer Share is better than paying 4.4% up front. And, of course, the house buyer would be paying Council Tax as well over the 10 years – this could equate to a further 3%, and probably more.
Fairer Share’s policy is revenue neutral.
The political benefits are also clear. Freeing up homes across the country through a more efficient tax system will lead to greater numbers of younger homeowners, a leading indicator of Tory support. Furthermore, with both parties competing over voters in the North and Midlands, either could offer a lower tax bill for millions of their target voters.
@Ian Gladstone:
"Many folks have to live in a particular area by nature of their employment. Why should folks who live in a modest house in a good area pay more tax than someone in a large property in not such a good area?
"Many people are struggling to pay their mortgage in a good area close to work. Let's not hit them even harder with some poorly crafted tax grab."
Fairer Share
Fairer Share’s policy is revenue neutral and please see comments above.
@Nigel Phillips:
"Council tax is a poor system, but replacing it with a tax raid on southern property wealth would create massive increases for those in lower priced housing.
"The country has to repay its debts, I agree, but launching into a totally new scheme is madness. More thought is required, with a dash of common sense added."
Fairer Share
Fairer Share’s policy is revenue neutral and please see comments above.
@Viv Oliver:
"The cost of living, particularly home ownership, in the South East already stretches normal hardworking people to the limit. We don’t need additional taxes based on already overpriced housing, and higher costs of living."
Fairer Share
Fairer Share’s policy is revenue neutral and please see comments above.
@Alan Crawford:
"The big problem is that the many people who bought recently, who upscaled to minimise the number of moves and therefore minimise stamp duty over a lifetime, are effectively taxed twice.
"Designing this fairly is much harder than people think. At a minimum you'll need a carefully designed taper based on a multitude of factors. It’s not impossible, but it will require some serious economic analysis."
Fairer Share
For owners of high value homes the increase in tax would be capped, so that at the point of transition, no household would see a rise of more than £100 per month (£3.29 per day).
@Steven Goodban:
"The current system has no doubt lost its way. With owners of very expensive properties in London paying far less than many in modestly valued properties in much poorer regions. This is not a property value tax in any shape or form.
"I quite like the idea of a property value tax along the lines suggested. Many European countries have had this in place for decades now and it seems a much fairer system."
Fairer Share
We agree Steven.
@David Potter:
"A 25 per cent reduction in council tax is, to my mind, a step in the right direction but does not go far enough.
"A property tax based on the value of the house is a retrograde step as far as I am concerned. Unless an adjustment is made for single occupancy then I am sorry but that is plain wrong. Why should a single person pay the same tax as his neighbouring house where two people are wage earners? I do not benefit from twice the services so why should I subsidise more wealthier households?
"Likewise, why would I invest in, for example, a conservatory if that means that the value of the property increases and, therefore, my tax year after year, just because of the improvement?
"If a radical tax shakeup is required why not have a local income tax which would, at least, protect those homeowners on below average incomes? Those homeowners receiving a state pension would pay little whilst those on several times the average wage would pay more."
Fairer Share
Of course, no system of property taxation will make everyone happy. But a scenario in which a small number of homeowners have enjoyed a large increase in property value and a much smaller rise in their tax bill is surely preferable to the current system under which many hard-working tenants face 5% annual increases in Council Tax whilst not benefitting from a commensurate increase in property value.
The purpose of taxation is to fund the services from which all of society benefits, whether that’s education, policing or adult care. These are core services that local government delivers and over 50% of local government funding comes from existing taxes on domestic property. Our proposal ensures that we all contribute the same fair share of our property wealth, unlike the current broken system which asks the poorest to pay proportionally more for the services we all depend upon. Whether or not you as an individual use these services should not affect how they are funded. For example, those who choose private healthcare or education cannot opt out of funding the NHS or schools.
Some have suggested a local income tax but a hard day’s work is already adequately taxed and does not address the intergenerational issues. As we know, those with greater assets find a way to reduce their income tax obligations.
Households are already paying sufficient property taxes – the problem is that the wrong households are paying the wrong taxes at the wrong times. The current inequity exists within individual constituencies, between regions, and between the generations.
There is a growing political consensus that both Council Tax and Stamp Duty need to be reformed. As we begin to look beyond Covid-19 and deal with the inequalities that the pandemic has accentuated, we should seize the opportunity to scrap both of these taxes and bring in a fair and workable system of property taxation.
Panel Discussion | Town Halls: How do we pay for them and what needs to change?
Our founder, Andrew Dixon, joined The TaxPayers' Alliance during their most recent panel discussion: Town Halls: How do we pay for them and what needs to change?
https://youtu.be/LWVr0kkpGF4
The Panel
Andrew Dixon | Our founder and the founding trustee of the Woodhaven Trust, Andrew has spent over two decades investing in small and medium businesses and is an Enterprise Fellow at the Prince’s Trust.
James Frayne | James is a Director at Public First - a public policy research agency specialising in economic and social research and opinion research. They have carried out polling on Council Tax in the past and James has written on the issue for ConHome.
Harry Phibbs | From 2006 - 2018, Harry was a Conservative Councillor for Hammersmith and Fulham. He is now a political journalist who contributes for the Evening Standard, The Guardian, and Conservative Home.
Harry Fone | Harry is the Grassroots Campaign Manager for The Taxpayers' Alliance and will chair the discussion.