Andrew Dixon is the founder of Fairer Share.
Despite Council Tax being highly unpopular, successive governments have put reform in the ‘too difficult to touch’ box. There has been some tinkering: talk of adding new bands to reflect the significant increase in house prices since the current Council Tax system was introduced in 1991, and recently announced rebates to households in bands A to D.
Both highlighted the crucial link between the cost-of-living crisis and the regressive nature of Council Tax. However, the Government is still uninterested in meaningful reform to our outdated and unfair way of taxing peoples’ homes.
With inflation predicted to reach 8 per cent this year and with energy, fuel and food bills on the rise, now is the time for politicians to tackle Council Tax. Doing so would help reduce costs for the vast majority of households across the country. It could also provide major electoral benefits to whichever of the major parties is willing to grasp it.
Extensive polling by JL Partners indicates that voters throughout the UK believe that it is time to replace Council Tax and Stamp Duty with a simpler and fairer Proportional Property Tax, based on current property values rather than values from over 30 years ago. The findings show that, were the Conservatives to back the proposal, they could gain as many as 60 seats and retain the majority of ‘Red Wall’ seats they won in 2019. On the other hand, were Labour to back the policy, it could help the party gain as many as 52 seats including 43 in the ‘Red Wall’, as well as winning back essential seats in Scotland.
The policy has more supporters than opponents in every single parliamentary constituency. Support for the policy is highest among people living in lower value homes in the North and the Midlands as they would benefit the most from significantly lower bills. Across England, households would pay an average £556 less property tax a year, with this annual saving rising to £750 in Blackpool South and as much as £950 in Hartlepool.
The tipping point at which someone is likely to oppose the policy is when they live in a home worth £500,000 or more – in other words, well above the UK average of £260,000. Importantly, the minority who oppose a proportional property tax also say it would not be an issue that would make them vote for an alternative party. So, given the clear electoral benefits, why aren’t our political parties fighting each other to back the policy?
When asked about a Proportional Property Tax, the Government responds by saying the tax would mean “soaring bills for many hard-working families and pensioners who have saved and improved their homes”. This shows a complete lack of understanding of the policy, which has significant safeguards in place to protect those who live in valuable homes but have limited income – the so-called “asset rich, cash poor”.
For those who wish to stay in their high value homes, losses would be capped so that, at the point of transition, no-one would pay more than £1,200 more a year than they currently do. For anyone unable to pay this, there would also be the ability to defer payment until the property was sold.
Although the Government has missed the point about the Proportional Property Tax, the Labour leadership has also displayed a deafening silence on this issue. This reflects that the Opposition has a large number of seats in and around London, where house prices have sky-rocketed in recent years. But the latest polling makes it clear that Labour’s concerns about how these voters would respond to a proportional property tax are misguided.
Meanwhile, a surcharge for foreign-owned, empty, and second homes would ensure that international buyers in London pay amounts in property taxes closer to what they might expect in New York or Paris. This would limit the scope for property being used to facilitate economic crime and act as a much-needed control on skyrocketing house prices. The surcharge generates £4.5 billion in tax revenue, which can be used to lower local tax bills for households up and down the country.
Importantly, the policy would generate a surplus of £5.6 billion for the Treasury. Such proceeds could be used to help fund adult social care or limit the recently announced increase in National Insurance. Doing so would be an eye-catching manifesto pledge.
What other tax reform helps to ease the cost-of-living crisis for hard-working families, boosts the public finances to the tune of £5.6 billion, and wins seats at the next election? The Proportional Property Tax would tick all three boxes. If a different yet beneficial reform exists, neither party has yet shared it with the electorate. This reform could be a game changer for the Prime Minister. As the cost of living rises and Sue Gray looms, it is one he should reach for immediately.