Andrew Griffith MP

Economic Secretary to the Treasury HM Treasury

The Correspondence & Enquiry unit 1 Horse Guards Road

London SW1A 2HQ


26 May 2023 

Alternatives to Council Tax and Stamp Duty

Thank you for attending the Westminster Hall debate on Wednesday 17th May. I appreciate your recognition of the cross-party support for reform and your acknowledgment of the unfairness inherent in our country’s property taxes.

I thought it prudent to write to you, post-debate, to address some of the concerns that you raised at the debate.

You expressed concerns about the impact on low and fixed incomes, particularly the “asset- rich, cash-poor”individuals. As mentioned in my introductory remarks, during the transition to Proportional Property Tax (PPT),any increase in local property tax would be capped at £100 per month (£3 per day) for primary residences. This transitional protection would cease upon sale, but buyerswould benefit from the removal of Stamp Duty.

Additionally, a deferral mechanism could be implemented for owners genuinely unable to pay, allowing them todefer tax payments with a modest interest charge. The deferred amount could be paid later or upon the sale of the home,avoiding debt-related issues associated with Council Tax collection.

It is important to note that this reform aims to address the inherent unfairness of Council Tax rather thanimposing wealth taxes. Council Tax, in essence, acts as a wealth tax for low and middle-income families. While it istheoretically based on a property’s value, the valuations are outdated, relying on property prices from 1991.

In my constituency of Barrow & Furness, the average household pays 0.80% of the property value in Council Taxannually, significantly impacting their disposable income. Such a tax rate would be deemed unpalatable in affluentareas like London. Therefore, we must question why it is accepted in constituencies like mine.

You rightly noted that a property tax on residential properties alone would not be comprehensive, but it is a positive step to tax immovable and easily valued assets, considering how simple it is to shift financial assets offshore.

Furthermore, local government finance has long been a subject of concern and debate. Local authorities face thechallenge of balancing their budgets while providing essential services to their communities. However, existingmechanisms like Council Tax has limitations that result in imbalances and unfairness. Fairer Share proposes asolution to these challenges through the implementation of Proportional Property Tax (PPT). This innovative approachaims to create a fairer and more progressive system of local government finance. The PPT addresses thelimitations of existing mechanisms by aligning tax payments more closely with property values and ensuring a more equitable distribution of resources.

Under the PPT, properties would be regularly revalued based on their current market value, reducing disparities andensuring that households with similar properties pay a fair share of taxes. Additionally, the PPT introduces aprogressive structure, meaning that individuals with higher-valued properties contribute more, while those withlower-valued properties pay less.

Crucially, Fairer Share’s PPT still upholds the principles of local referenda, allowing local residents to have a say inmajor financial decisions. The PPT would provide local communities with a fairer and more transparent tax system as the basis for their decision-making.

Implementing Fairer Share’s PPT would bring several benefits to local government finance. Firstly, it would create afairer and more progressive system, reducing inequalities in tax burdens across households and communities. Thisenhanced fairness would contribute to greater social cohesion and address the long-standing issue of disproportionate tax contributions.

Secondly, the PPT would provide local authorities with a more stable and predictable revenue stream. By basing taxes on property values, which tend to be more stable than other economic indicators, local authorities can better plan and allocate resources to meet the needs of their communities.

Lastly, the PPT promotes local autonomy and decision-making. By granting local authorities’ greater revenue-raising powers, they can become more self-reliant and responsive to local needs and preferences. The PPT enableslocal authorities to have the financial means to invest in infrastructure, public services, and other initiatives thatdirectly benefit their communities.

I understand your concerns regarding the challenges of valuation. Fairer Share approached the International Property Tax Institute (IPTI) for advice on implementing Proportional Property Tax (PPT) inthe UK. IPTI, drawing on its expertise in property tax systems worldwide, provided guidance on various valuationissues related to the potential implementation of PPT.

It is worth noting that several countries already have property tax systems similar to the proposed PPT, which haveproven successful. Countries like the Netherlands, British Columbia (Canada), and New York City (USA) employ property tax systems closely resembling PPT, utilizing local property taxes based on annual revalued capitalvalues. Some parts of Australia also employ local property tax systems with similar characteristics. Other jurisdictionslike Ontario (Canada) and New Zealand use capital values but revalue them every 3 to 4 years.

Many countries worldwide conduct regular revaluations of capital values for their property tax systems.

Notably, these jurisdictions value all property types (residential and non-residential) on the same basis. They havefound that valuing residential properties with a high degree of accuracy is relatively straightforward, utilizingcomputer-assisted mass appraisal (CAMA) techniques incorporating automated valuation model (AVM)technology.

Ireland’s unique approach to valuing residential properties for local property tax purposes is included in the study.Although based on individual capital values like PPT, Ireland’s system employs self-assessment for valuations. Arevaluation is planned for later in 2021. Another similarity between the Irish system and the UK is the distinctionbetween residential and non- residential properties, involving separate processes, procedures, and valuation methods.The current UK valuation agencies do not possess the necessary technology for PPT. However, their previousexperiences with mass appraisal systems could be beneficial.

In conclusion, IPTI provided comprehensive advice on implementing Proportional Property Tax (PPT) in the UK, addressing valuation methodologies, data requirements, costs, challenges, and international examples. The report highlights the potential benefits of PPT and offers insights based on the experiences of other jurisdictions.

Thank you once again for your input, and I hope that the information provided addresses your concerns.

I look forward to hearing from you.

Yours sincerely

Simon Fell

Member of Parliament for Barrow & Furness


Watch the debate below: –