Author: The Fairer Share Team - Page 7

Council tax works for millionaires and not for the millions

This article first appeared in the Metro on April 5th 2021, written by our founder, Andrew Dixon.

When voters go to the polls in the local elections next month, many will do so in the wake of their council tax bills rising up like never before.

Despite unemployment surging due to coronavirus, a majority of councils are preparing to bump bills up by an unprecedented 5%, inflicting maximum pain on millions of already hard-pressed households.

So why are our leading politicians not going into the local elections with a viable plan to turn the situation around?

As our primary residential property tax, council tax is clearly not fit for purpose. It is based on property valuations from 30 years ago, dating back to just before Nirvana released their breakthrough album Nevermind and Tim Berners-Lee released files describing his idea for the World Wide Web.

It is a terrible, regressive tax that hits renters saving up for a deposit just as hard as those who have made it onto the property ladder. Council tax also ensures that people who live in more modest houses and areas end up paying a higher tax rate than those living in wealthier areas and more valuable properties.

The Fairer Share campaign that I chair recently heard from a lady in Birmingham who works four cleaning jobs. She and her husband live in a three-bed semi-detached house. They pay £129 a month in council tax and struggle with the costs.

We have also heard from a retired Army officer in the north east. After his divorce, he couldn’t afford to move into a house so he lives in a private caravan site with minimal public services. He still pays £92 a month in council tax.

Another of our northern supporters currently pays £2,328 a year for a band D property, which is valued at around £180,000. Meanwhile, on Zoopla she can see a band H £9.8million six-bedroom detached house in London pays just £1,560 each year in council tax.

For any politician going into the local elections, there are surely votes to be won from backing reform of this ridiculously unfair tax. Yet too many politicians are sitting on the sidelines of the debate, hitting out at council tax rises without offering up a convincing alternative source of revenue for cash-strapped local authorities.

"Across England around 76% of households would benefit under a proportional property tax, with households paying £435 less property tax a year on average."

In much of the country, it is a different story. More than 115,000 people have signed the Fairer Share petition calling for council tax and stamp duty to be replaced with a simple proportional property tax set at a flat rate of 0.48% of a property’s value.

There are also growing signs of support in the House of Commons. A number of MPs from both parties are now backing the plan, with our research showing that the tax generated would maintain the amount that the Government can put towards our services – while simultaneously leading to lower bills for millions of people.

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.

While renters would pay nothing, some homeowners in London may see a small increase in their annual bills, reflecting the extreme rise in house prices over the past 30 years.

However, we know that it would be unfair to create ‘losers’ on day one of the policy being implemented. Instead, our campaign is proposing a cap on the increases in tax of £100 per month, not far off the price of a daily cup of coffee.

If our politicians are not brave enough to introduce a proportional property tax then the alternative is sticking with the current broken system.

Andrew Dixon

Chairman & Founder

Fairer Share

by The Fairer Share Team

The 10 Areas with the Highest Council Tax Burden

Proportional Property Tax saving: £800 | Households better off: 100%

Levelling Up Index: 10

To see the data for all English Parliamentary constituencies, click here for Council Tax Burden and here for the impact of our reforms.

by The Fairer Share Team

Letter to Fairer Share from Financial Secretary to HM Treasury, Rt Hon. Jesse Norman MP

In March we received the following letter from Jesse Norman MP who has the important role of Financial Secretary to the Treasury. The letter outlines the Government's view of our campaign. To see our response to the points raised in the letter, click here.

Dear Kevin,

Thank you for sending the briefing from Fairer Share in January on replacing Council Tax and Stamp Duty Land Tax (SDLT) with a Proportional Property Tax. As I said when we spoke, I thought it would be helpful to send you a written response to the proposal.

The data provided in the briefing by Fairer Share which you forwarded gives a very useful insight into the thinking behind the proposed new package, and any serious proposal that purports to reduce tax for the majority of people and improve economic efficiency while remaining equitable and revenue neutral overall is of obvious potential interest.

However, the proposal would involve a radical overhaul in existing tax arrangements, and inevitably this would bring disadvantages as well as advantages. Despite its limitations, the current system has evolved over time. It is familiar, well-understood and factored into people’s planning. Thus, as well as expected costs and benefits, any radical change would almost certainly involve unintended consequences, some negative and potentially serious.

All these things are matters of potential concern. For the sake of clarity, I set out some more specific thoughts on these issues below.

First of all, the briefing acknowledges that removing Council Tax and SDLT and replacing them with a proportional property tax will raise annual taxes for many households. Even with the proposed cap, it is important to note that this would risk being perceived publicly similarly to a ‘mansion tax’, a significant and unanticipated increase in bills for families and pensioners who have saved and improved their homes.

On the policy design itself, Council Tax is designed, as you will be aware, to help pay for the cost of local services. These services are used by everyone, including those that rent a property, and the fairness of relieving renters from this tax should be considered. There is also an obvious concern that relieving every household that rents its home from paying this tax, and placing the liability on the property owner, would simply lead to landlords increasing rent to compensate for the tax rise. Reliefs and exemptions already exist for those who are struggling to pay a Council Tax bill.

Turning to the proposal to replace SDLT, SDLT has been designed as a proportionate tax, which is paid by people who can afford to purchase a property. Those who can afford to

purchase higher value properties pay more, and purchases of additional properties incur higher rates, as will purchases by non-UK residents from 1 April 2021. Furthermore, the Government has relieved first-time buyers who purchase a property of £500,000 or less from paying SDLT on the first £300,000 of the property’s value.

In 2019-20, residential SDLT raised £8.4bn, which is rather more than the £4.2bn suggested in the briefing. Despite the significant revenue raised, 34% of transactions did not involve payment of any SDLT at all because they fell under the starting threshold or a first-time buyer. Any government would need to consider very carefully the impact of replacing such a secure tax.

Finally, in relation to the delivery of a Proportional Property Tax and the necessity for frequent revaluations of properties, I understand your concern about the current system of basing bills on 1991 values. By way of context, it is worth pointing out that a full revaluation of every property in the UK would be expensive to undertake, and many final values reached would be controversial. It would involve a huge upheaval, and would also risks accusations of being unfair or inconsistent as a result of in-year or regional disparities in the property market.

For these reasons, the Government has no plans to introduce a Proportional Property Tax. But despite these concerns, I and my colleagues in the Treasury remain interested in the work of the PPT campaign, and I am very grateful to Fairer Share and to you for sharing this proposal. As you know, the Government keeps all aspects of the tax system under review, and we warmly welcome serious and constructive contributions from outside organisations and campaigning groups.

As ever,

RT HON JESSE NORMAN MP

by The Fairer Share Team

Campaigners from across the political divide unite to call for overhaul of residential property taxes

Below is an open letter to the Chancellor of the Exchequer published on 14th March 2021, featuring in The Observer.

Dear Chancellor,

We are writing to ask you to consider announcing a root and branch review into the way residential property is taxed in the UK.

As the Government begins to plot its way out of the coronavirus pandemic, which has accentuated the inequalities in our society, fairness should be at the heart of the Government’s policy agenda. This must mean looking at the options for reforming our residential property taxes so that they are based on today’s property values and homeowners’ ability to pay, while encouraging efficient use of our housing stock and generating incentives for local communities to accommodate development.

Any such review should begin by focusing on Council Tax, which is poorly designed, out of date, and unpopular. This tax is based, in England and Scotland, on property valuations that are now almost 30 years old and therefore bear no resemblance to the realities of current house prices.

It would appear that Council Tax is a material wealth tax for those in modest houses but is a modest service charge for those in wealthier areas. This places the heaviest burden on the young, low-earners, and those living in less prosperous parts of the country, who typically reside in modest properties.

We have known for many years that Council Tax is not fit for purpose but the situation is now critical. Council Tax is increasingly putting lower-income families into debt and Covid-19 has only exacerbated the situation, with an extra £700 million added in outstanding Council Tax debt from over 800,000 UK households between March and September alone.

A review of property taxes should also consider whether there is a place for Stamp Duty in a modern system of property taxation. By taxing property transactions, Stamp Duty discourages homeowners from moving and blocks up the property market, hindering older people from downsizing and limiting young families’ ability to move up the property ladder. This has wider dynamic economic implications as we have seen from the Stamp Duty holiday.

Households are already paying comparable property taxes relative to other developed nations – the problem is that the wrong households are paying the wrong taxes at the wrong times. The current unfairness exists within individual constituencies, between regions, and between the generations.

We urge you to use the so-called “Tax Day” on 23 March, when the Treasury will publish a range of consultations and calls for evidence into tax policy, to begin this review process. We are ready and willing to support the Government with its efforts to introduce a fairer and more efficient system of property taxation that is fit for the modern age. We recommend the Government examines this issue through the lens of fairness, economic activity, social mobility, housing stock efficiency, the Government’s levelling up agenda and the impact of the pandemic on household and local government finances.

We look forward to your response and to the upcoming consultation announcements.

Kind regards,

Alicia Kennedy, Director, Generation Rent

Andrew Dixon, Chairman, Fairer Share

Anya Martin, Director, Priced Out

Ben Rich, CEO, Radix

Carys Roberts, Executive Director, IPPR

Charlotte Alldritt, Director, Centre for Progressive Policy

Dr Gavin Kerr, author of “The Property-Owning Democracy: Freedom & Capitalism in the 21st Century”

Dr Justin Thacker, Director, Church Action for Tax Justice

James Kirkup, Director, Social Markets Foundation

John Muellbauer, Institute for New Economic Thinking, Oxford Martin School

John Myers, Founder, London YIMBY

Liz Emerson, Co-founder, Intergenerational Foundation

Neal Lawson, Director, Compass

Polly Mackenzie, Chief Executive, Demos

Professor Philip Booth, Director of the Vinson Centre for the Public Understanding of Economics and Entrepreneurship, University of Buckingham

Robert Colvile, Director, Centre for Policy Studies

Robert Palmer, Executive Director, Tax Justice UK

Robin McAlpine, Director, Common Weal

Ryan Shorthouse, Chief Executive, Bright Blue

Sam Dumitriu, Research Director, The Entrepreneurs Network

Torrin Wilkins, Director, Centre Think Tank

by The Fairer Share Team

Our Response to MP Neil O’Brien’s Review of PPT

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 this review of our policy undertaken by Neil O’Brien, the MP for Harborough, Oadby and Wigston.

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 Mr O’Brien’s concerns in detail. We have responded in a Q&A format below:

Neil O’Brien MP

I read the proposal with interest and it raises important points about fairness in our tax system. However, as I understand it, evidence about how the proportional property tax would work in England shows that a lot of places that are low-income areas but also experiencing rising house prices would be hit very hard, even places with high levels of deprivation and low household incomes. If house prices were to rise in an area, low-income households would quickly see their bills rise at staggering rates well above increases to their income.

Fairer Share

Should a similar argument also apply to Council Tax?

Not only is Council Tax out of date, it also taxes tenants – those who don’t even own the property – rather than owners, hitting the asset-poor and income-poor. Given rising levels of Council Tax debt, it clearly does not take into account ‘the ability to pay’, a problem worsened by recent Council Tax increases that have exceeded current levels of inflation.

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 more 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.

Indeed, this would go a long way to alleviating the challenges faced by the rural poor. One of the issues for the rural poor is poor cash flow, the ability to roll over a tax burden into a highly-priced asset would improve their liquidity and reduce their Council Tax burden.

And to be clear, 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.

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.

Within Mr O’Brien’s constituency of Harborough, for example, someone living in a modest band A property pays 0.90%, whereas someone in a higher band H property pays just 0.22% 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 in the first place. We have been inundated with stories from supporters who are struggling to find the money to pay their Council Tax bills.

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%.

Mr O’Brien is 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.

Neil O’Brien MP

Another issue to consider is that excessive council tax increases are kept in check by referendum principles, which could not be done under the proposed property tax system. If house prices begin to rise in an area, low-income households would quickly see their tax bills rise at staggering rates well above increases to their income.

Fairer Share

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.

Neil O’Brien MP

Even if the new proportional tax was to be paid by property owners rather than tenants, it is highly likely that this would simply be passed on back to tenants in rent increases, as property owners still need to make mortgage payments.

Fairer Share

Yes, property owners are very likely to pass some or all of the tax down to the tenant through higher rent.

Keep in mind 75% of properties will see a reduction in Council Tax. Therefore, it is likely that the landlord will pay less property tax than the tenant is currently paying in Council Tax. As a result, the tenant will receive a net gain as future rent (incorporating the proportional property tax) will still be less than the current rent plus Council Tax.

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.

Neil O’Brien MP

On second homes and vacant homes, 95 per cent of second homes are already charged full council tax and vacant homes can be charged double the council tax rate if these are empty for two or more years. Council tax is a valuable source of revenue for local councils and it is important that they have the discretion to raise or lower council tax rates based on the needs in their local area.

Fairer Share

Yes, it is for this reason we have a surcharge rate of 0.96% for second and vacant homes, and for foreign buyers.

Under a proportional property tax – as historically has happened within local government finance – some councils will receive additional funding from other parts of the local government finance system. The size of this additional funding would be based upon an assessment of the difference between a council’s resources (its tax base) and spending needs. As the Institute for Fiscal Studies note, if local tax bases change in size when reforming local taxation and resource equalisation is still a desirable aim of policy then it would require funding levels to adjust, “…increasing them for those [local authorities] whose tax base falls, and reducing them for those whose tax base rises.”

While the exact approach to this adjustment would depend on the context of local government finance at the time, an underlying principle would be to take account of the relative size of a council’s proportional property tax base, and not the revenue that a council intends to generate from that tax base. What this should mean in practice is that two local authorities with similar tax bases and a similar assessment of relative need would receive broadly similar baseline funding levels, irrespective of their local proportional property tax rates.

In conclusion, 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.

In his recent op-ed piece in the Daily Telegraph, Mr O’Brien’s colleague, 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.’

We are indeed grateful to Mr O’Brien for taking the time to analyse our Proportional Property Tax recommendations. As we can see from our Constituency Data, under a proportional property tax, 88% of all the households in Mr O’Brien’s constituency would benefit from an average annual saving of £400. Furthermore, 95% of households living in bands A-D would be better off.

We encourage Mr O’Brien to take another look at our proposals and we welcome further input.

by The Fairer Share Team

Moving to a Proportional Property Tax: Implications for Local Government Finance

Addressing the impacts on council revenues, resources and residents

Summary

The Fairer Share campaign proposes replacing the regressive Council Tax and unpopular Stamp Duty with the Proportional Property Tax (PPT).

Many of our supporters have asked us the following important questions on local government finances:

How would PPT revenue be managed between local and central government?
What impact does the PPT have on council finances?
What impact does PPT have on council residents?

Each of these topics are discussed in turn, below:

Managing PPT revenue between local and central government

Currently, Council Tax revenue goes to councils. Stamp Duty revenue goes to central government.

The move to PPT would create a new source of revenue.

There are three arguments in favour of councils receiving a direct share of the PPT revenue raised in their area. It would mean that:

voters could hold local councillors to account for local tax and spend decisions;
councils do not give-up revenue-raising power to national politicians; and,
councils have incentives to pursue local growth so as to increase local tax revenues.

Significantly, with revenue based upon annually updated house prices, councils would retain a share of the uplift in house prices that their policies create.

The key argument in favour of central government receiving a direct share of PPT revenue from every council area is that it would offset the Exchequer’s loss of Stamp Duty receipts. This centrally- collected revenue could potentially be redistributed to local areas that have higher local spending needs and / or greater need for local economic investment.

These arguments can all be recognised within the design of PPT, along the following lines:

PPT revenues split into a council allocation and a central government allocation. A council and central government would each “own” a share of the PPT rate. The council allocation would ideally be large enough to encourage councils to pursue local growth initiatives.
Councils given power to flex the rate of PPT that gives them their PPT allocation. Councillors could make decisions to increase or decrease the rate on their PPT allocation, much like councillors can make decisions to vary Council Tax now.

Stability in PPT revenues would be desirable at both a local and national level. Should there be times when revenues from PPT drop significantly, the Government could step in with grants to fill the gap.

The impact on council finances

Upon introduction PPT would raise the same amount of revenue as Council Tax does now.

But because PPT is linked to local property prices, the amount of PPT revenue raised in some council areas would be significantly different – much larger or much smaller – from the revenue they currently raise from Council Tax. This is because Council Tax is based on valuations from 1991 and does not adequately reflect the substantial change in regional house price growth or generational imbalance that house price growth has created.

For those councils that would raise less from PPT than they currently do from Council Tax, the difference would have to be made up with central government grants or from funds redistributed from councils that raise relatively large amounts of PPT revenue (or both).

This type of arrangement is not new. It has been a feature of local government finance in England for decades. It could be incorporated seamlessly into PPT with the following principles:

Government should fully recognise how council revenue raising capacity is changed by PPT in its arrangements for funding local government. In other words, the ways in which the Government decides how to direct funding across all of local government should consider the individual capacity of councils to fund themselves.
Councils could be given new powers to generate more revenue independently. Given that some revenue raising capacity could be lost by councils, there are opportunities for new revenue raising powers to be introduced. One example, would be to give councils the power to implement a levy on overnight tourist stays. Another example would be to reform planning permission to allow councils to build more houses.

It would be understandable if some councils were sceptical about transitioning to PPT if they have less capacity to raise revenue. But it is important to note that those council areas that see the biggest reduction in revenue raising capacity are also the areas where the greatest proportion of residents will see a reduction in their property tax bills or experience no change in their tax liability as a result of PPT. The policy would also introduce incentives for companies and individuals to relocate to areas with lower PPT, which in turn would benefit the community. In time this would lead to higher PPT revenues for the community.

The impact on council residents

Unlike Council Tax, the obligation to pay PPT would be on the property owner, not the property tenant.

Overall, there would be far more winners than there are losers from PPT - 76% of England’s households will see a reduction in their property tax bills.

But due consideration needs to be given to those residents that may not benefit from PPT.

Some homeowners – predominately in London and the South East – would pay more in PPT than they currently do in Council Tax. This increase is ameliorated by the abolition of Stamp Duty Land Tax which is particularly punitive in this region due to the higher property prices.

Other residents who may not benefit are those currently receiving some form of assistance – by being exempt or paying a reduced rate – in paying Council Tax. How these residents are affected by PPT will depend upon how much help they have been receiving, and if they are homeowners or renters.

Fairer Share proposes a revenue neutral system retaining the same total quantum of funding provided by the current Council Tax Support scheme. In many areas the savings under PPT compared to Council Tax would be equal to (or larger) than the value of benefits received through the Council Tax Support scheme.

Mitigating action could be taken to support residents who pay more under PPT.

Fairer Share has already outlined some plans:

At the point of transition to PPT, any increase in local property tax would be capped at £100 a month for primary residences. The transitional protection would disappear at point of sale but such buyers would have benefited from the removal of the punitive Stamp Duty.
For those unable to meet the £100 a month increase under transitional protection, or in the longer-term, the full costs of PPT, there is a deferral mechanism until point of sale.

These mitigating actions are purely financial, but there are other options to consider, including:

Giving councils the power to design their own systems for supporting low-income residents through PPT, i.e., not having centrally designed restrictions.
Central government could offer councils financial resource for those negatively affected by PPT by increasing funding for Discretionary Housing Payments.
The Government could offer generous PPT discounts for socially rented homes that meet the highest level of energy efficiency, moving from a system of grants and loans to one of market incentives.

Conclusion

The design of PPT can support council independence through a split of revenue allocations between councils and central government. It can fit into the current system of local government finance so that the revenue-raising resources and spending needs of councils are recognised. It can protect those who are asset rich / cash poor and / or are currently exempt from Council Tax or are eligible for a discounted rate.

This is all in addition to the other arguments in favour of PPT, such as working international precedents and a coherent approach to valuation.

by The Fairer Share Team

Budget 2021 | The Elephant in the Room

When Rishi Sunak was drawing up the Budget, he had a golden opportunity to begin a wholesale review of one of the biggest blocks in the way of the Government’s levelling up agenda. By pledging to look again at our outdated and unfair property taxes, the Chancellor could have sent a clear signal to millions of households that levelling up was going to work for them.

Instead, council tax was the elephant in the room when the Chancellor delivered the Budget. While he set out economic support packages for those worst-hit by Covid-19, there was no such respite for the millions of modest and low-income households facing crippling council tax bills.

Throughout today’s address to the Commons, Sunak stressed the theme of fairness. But the truth is that the Chancellor’s silence on council tax sits awkwardly with talk of fairness and levelling up. The current council tax system is based on property valuations from 30 years ago, dating back to just before Nirvana released their breakthrough album Nevermind and Tim Berners-Lee released files describing his idea for the World Wide Web.

Furthermore, recent research has showed that residents of constituencies in the north and midlands clearly get the worst deal with council tax. While the average household in England presently pays out 0.47% of their home’s value in council tax every year, residents of Easington and Hartlepool must pay out more than 1.3% on average every year. Across the ‘red wall’, households must pay out an average 0.84%.

Thankfully, while he may have kept quiet about council tax in the Budget, the Chancellor has not yet closed the door on a review of property taxes. After Sunak spoke a lot about fairness today, the Government could still show its commitment to fairness and levelling up in a way that matters by announcing a wholesale review of property taxes.

What takes the place of council tax would then be a matter of debate but support is growing for the campaign to replace both council tax and stamp duty with a simple proportional property tax set at a flat rate of 0.48% of a property’s value.

Work by Fairer Share has shown that this tax would be revenue neutral for the Treasury while leading to lower bills for millions of people. Across England, around 76% of households would benefit under the new system, with households paying £435 less property tax a year on average. 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.

To ensure there do not have to be any losers on day one, there would be a deferral mechanism until point of sale on a low interest rate, so that nobody has to pay out immediately if they cannot afford to. For those who wish to stay in their high value home and pay the new tax, losses would be capped so that, at the point of transition, no household sees an increase of more than £1,200 per year (£100 per month) on what they currently pay.

However it is replaced, the reality is that council tax is a bizarrely regressive tax which ensures that people who live in more modest houses and areas end up paying a higher tax rate than those living in wealthier areas and more valuable properties. On top of this, council tax also taxes tenants rather than owners and clearly does not take into account the ability to pay, leading to rising levels of council tax debt.

Having framed the Budget around fairness, the Chancellor should now show that he means action by looking again at our outdated and unjust system of property taxation. By signalling his desire to kill off council tax, Sunak would be sending the clearest possible signal that the levelling up agenda will definitely deliver for millions of households across the country.

Andrew Dixon

Fairer Share

by The Fairer Share Team

Our Letter to the Prime Minister

Andrew Dixon, our campaign's Founder and Chairman wrote to Prime Minister, Boris Johnson last week, warning that the 'levelling up' agenda would be under threat if we continue on with our broken and unfair system of property tax. You can read more about the letter here.

Dear Prime Minister,

I am writing to you in my capacity as Founder of Fairer Share, a grassroots initiative campaigning to abolish Council Tax and Stamp Duty, replacing both with the Proportional Property Tax.

As Prime Minister, you have rightly made ‘levelling up’ one of your Government’s key ambitions. This is a plan I wholeheartedly support, and it is why I am writing to you today.

Over the last 30 years, we have witnessed rising inequality levels – both on a regional and an intergenerational basis. Sadly, COVID-19 has hit the poorest the hardest, particularly those in low-income, insecure work, and it has compounded, deepened, and underlined those prevalent inequalities.

The agenda you have set to level up is essential as our economy recovers. I firmly believe that we cannot level up our country without scrapping and replacing both Council Tax and Stamp Duty – two taxes that continue to exacerbate rather than ease these inequalities.

Today, I urge you to replace these regressive and destructive taxes as a central pillar of your levelling up plan.

Council Tax is an outdated and unfit system. It is based on property values made in 1991 and has led to low-income households paying a tax rate five to ten times higher than those fortunate enough to live in million-pound properties.

It is a regressive form of tax and disproportionately impacts struggling communities – the same communities your Government is aspiring to support. Evidence shows that the ‘red wall’ constituencies face “The Burden of Council Tax” that is nearly 80% higher than the national average.

The average household in England pays 0.47% of their home’s value per year, yet in many communities across the North and the Midlands, households pay a considerably higher rate, going up to 1.41%, with Easington in County Durham paying the highest rate. By comparison, the Cities of London and Westminster has an average rate of 0.06%. This system is fundamentally broken.

Meanwhile, Stamp Duty hinders aspiration and mobility, fuels intergenerational inequality and adversely impacts the broader economy. We need to find a solution to the well-intentioned Stamp Duty holiday.

Levelling up cannot be achieved solely through infrastructure spending pledges and Government cash. To help turn the tide, scrapping Council Tax and Stamp Duty would have a most significant impact on hard-working families and pensioners across the UK.

The simple Proportional Property Tax set at a flat rate of 0.48% of a property’s value would bring in the same amount of revenue as Stamp Duty and Council Tax combined. Our analysis shows that 19 million households in England would be better off, on average saving £435 each year. We also found that in the 44 ‘red wall’ constituencies that your Government won in the 2019 General Election, 97% of households would save £660 each year.

We all want to live in a fair society but it does not seem right that a household in Barnsley pays 1% of the property value in tax whereas a household in Battersea pays just 0.1%. Council Tax has become a troubling wealth tax for middle and low-income households, and is a modest service charge for the wealthy.

I urge you and the Chancellor to use tomorrow's budget to authorise a review of the country’s residential property taxes. I recommend the Government examine this issue through the lens of fairness, economic activity, social mobility, the Government’s levelling up agenda, and the impact of the pandemic on household and local Government finances.

There may never be a better time to reform this system – and I encourage you to be the Prime Minister to deliver this change and help us all to build back better.

Yours sincerely,

Andrew Dixon

Chairman

Fairer Share

by The Fairer Share Team

WATCH | Homeward Bound: Putting Our Taxes Back On Track (Subtitles)

As we emerge from the pandemic, we must seek to create a fairer society. Our current property taxes are unjust, outdated and deepen the existing inequalities in our society. In order to truly 'level up', we need to change track.

To find out how, watch our short film: Homeward Bound.

by The Fairer Share Team

A Review of Tory MPs’ Standard Response to Fairer Share

Many of our followers have received this standard response to our “Email your MP” campaign. This stock response from Conservative Party HQ makes some interesting arguments, focusing on the London Borough of Tower Hamlets as a case study. Fundamentally, we think they take a unique borough as an example and present a flawed case.

Several Conservative MPs support Fairer Share in spite of this stock response and they are making our case for reform both in private and in public. For example, John Stevenson (MP for Carlisle) wrote in Conservative Home and Aaron Bell (MP for Newcastle-under-Lyme) wrote in The Daily Telegraph making the political arguments for Fairer Share and The Proportional Property Tax.

The choice of Tower Hamlets:

Tower Hamlets is one of the most diverse boroughs in the country in terms of wealth disparities, with huge concentrations of wealth in the financial centres around Canary Wharf and Aldgate alongside localised areas of high deprivation in areas like Shadwell, Whitechapel and Mile End.
This means that there is a commensurately large disparity in the value of properties, resulting in both poorer renters and homeowners in fact benefiting from a move to PPT.
Our analysis shows that c. 50% of primary residents in Tower Hamlets, which will disproportionately be those poorest households, would benefit from a move to PPT. This includes all households living in properties up to £250,000.
It is predominantly in high wealth areas or those in large homes, that will see increases in their taxes.
For those living in more valuable properties we have capped any increase in tax at £100 per month. This is just a £3 per day increase. Additionally, the household would still have the option to defer payment should they wish.

The stock response makes the following arguments (and our responses in the bullets below):

1. House price rises in low-income areas create higher payments for those who can least afford it.

It is true that the average house price in Tower Hamlets has increased from £276,000 to £449,000 between January 2012 and March 2020. The average property owners at the upper-end of these increases, has gained £1,765 every month tax-free in property wealth over 8 years.
The option to defer payment allows homeowners to capture this property wealth until a point of sale, meaning that low-income homeowners in this situation would see a huge windfall, not be impoverished by this policy.

2. Residents in Tower Hamlets are more likely to be renters, and therefore unable to benefit from any increase in house value. Furthermore, tax increases on the property can be passed to the renter by the landlord. This means increased expenditure for the renter.

Our analysis shows that c. 50% of primary residents in Tower Hamlets, which will disproportionately be those poorest households, would benefit from a move to PPT. This includes all households living in properties up to £250,000 and includes both the owner and rental markets.
Renters will not be able to benefit from any increase in house prices. However, this is true now where renters pay council tax. The removal of stamp duty will help those renters get onto the housing market and into the virtuous cycle of wealth generation caused by property ownership.
Boroughs such as Tower Hamlets and other inner-city districts, such as Hackney, face the issues of a considerable amount of underused and vacant developments, and so would benefit from this encouragement to release much needed housing both in the rental market and for sale. A punitive rate on empty and second homes would encourage the release of these homes.

3. Local authorities can keep council tax lower than house price inflation in order to prevent drastically inflated council tax bills for local residents. This is reinforced by local democratic incentives.

To maintain the important democratic link between local expenditure and local taxation, the 0.48% rate would consist of two components. A fixed national rate would go to central government for redistribution and a floating local rate would go straight to the local authority, and could subsequently be moved up or down by that authority.
If a local authority, such as Tower Hamlets, is able to maintain its local services through other means of revenue, it would be able to provide a tax cut to its residents by lowering the floating rate.
In this way local authorities retain flexibility over taxation and voters can still judge them on value for money.
It is also worth noting that recent polling of Local Councillors shows that a fair national system which may come at the expense of some local autonomy is disproportionately favoured and 89% of councillors said that council tax is in need of some sort of reform.

4. 95% of second homes pay full council tax and empty homes can be charged at double the rate of council tax.

Boroughs such as Tower Hamlets and other inner-city districts, such as Hackney, face the issues of a considerable amount of underused and vacant developments, and so would benefit from this encouragement to release much needed housing.

It is well known that major housing developers in these areas market their luxury properties internationally, inflating the prices of luxury flats, while the flats themselves remain unoccupied or under-occupied.
Incentivising housing for primary residents is a notional goal of the Government, which has acknowledged the housing crisis. By placing higher rates on second and empty homes and automatically enforcing them, the Government will incentivise sales to UK primary residents and help alleviate the issue.

If you have received an email from your MP that uses the Tower Hamlet example, the points above can be used if you would like to respond. If you have any questions on the above, please email us at support@fairershare.org.uk

The Fairer Share Team

by The Fairer Share Team

The Fairer Share Team

1) Easington | Council Tax Burden = 1.41% of the average property value

2) Hartlepool | Council Tax Burden = 1.31%

3) Burnley | Council Tax Burden = 1.28%

4) Middlesbrough | Council Tax Burden = 1.27%

5) Liverpool Walton | Council Tax Burden = 1.23%

6) Preston | Council Tax Burden = 1.21%

7) Blackpool South | Council Tax Burden = 1.20%

8) Redcar | Council Tax Burden = 1.20%

10) Nottingham North | Council Tax Burden = 1.17%

Addressing the impacts on council revenues, resources and residents

Summary

Managing PPT revenue between local and central government

The impact on council finances

The impact on council residents

Conclusion

To find out how, watch our short film: Homeward Bound.

The choice of Tower Hamlets:

The stock response makes the following arguments (and our responses in the bullets below):

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