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