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,