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.