Government's cowardice over council tax has left it in a mess

When council tax bands have little to do with today's value, how can it replace a mansion tax?

Simon Jenkins writes in today's Guardian that it's strange that Vince Cable carries on talking about a mansion tax when we already have one, called the mansion tax:

England's property-based council tax stops at the present H-band. This means that the same tax is paid on all houses valued at more than £320,000 at 1991 prices (roughly £950,000 today). In parts of London, this means half the houses pay the same. Nick Clegg is right to protest that "it cannot be right that an oligarch in a £4 million palace in central London pays the same council tax as someone in a four-bedroom family home". It is ludicrous.

So what is the problem? The answer is no politician dares change it. All are cowards. They bid the rest of us to show spine, come to the mark, tighten our belts and take cuts without complaint. Yet faced with an equitable fiscal reform that could net billions in revenue, they cringe and whimper and protest it is all too hard. Like tackling drug illegality or the criminal justice system, politicians who think that something is politically toxic end up making it so.

Jenkins suggests that if the Liberal Democrats weren't cowards, they would introduce new tax bands, above band H, and charge increasing levels of council tax on them, "perhaps triggered at half-million pound steps".

But the real way we can tell that governments – not just the Lib Dems – are cowards is that, even aside from using council tax to introduce a mansion tax by proxy, they haven't even done the most basic housekeeping.

As Jenkins suggests, council tax bands are levied on the value of houses in 1991. If a rising tide floats all boats, then that's not too problematic – the most expensive houses in 1991 would still be in band H now, and the right people would be taxed the most. But it doesn't float all boats. Some houses have risen in value faster than the average, while some have risen in value less fast.

Despite this, there has never been a reassessment of council tax bands, and so many people are paying tax based on assets they do not actually have. Introducing higher tax bands without reassessing the existing houses would merely compound that error.

Doing so has nothing to do with raising revenue, and everything to do with basic fairness. If governments can't even bring themselves to do that, don't expect them to go much further with actually using council tax for good.

Houses for sale. But what's the council tax on them? Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The tale of Battersea power station shows how affordable housing is lost

Initially, the developers promised 636 affordable homes. Now, they have reduced the number to 386. 

It’s the most predictable trick in the big book of property development. A developer signs an agreement with a local council promising to provide a barely acceptable level of barely affordable housing, then slashes these commitments at the first, second and third signs of trouble. It’s happened all over the country, from Hastings to Cumbria. But it happens most often in London, and most recently of all at Battersea power station, the Thames landmark and long-time London ruin which I wrote about in my 2016 book, Up In Smoke: The Failed Dreams of Battersea Power Station. For decades, the power station was one of London’s most popular buildings but now it represents some of the most depressing aspects of the capital’s attempts at regeneration. Almost in shame, the building itself has started to disappear from view behind a curtain of ugly gold-and-glass apartments aimed squarely at the international rich. The Battersea power station development is costing around £9bn. There will be around 4,200 flats, an office for Apple and a new Tube station. But only 386 of the new flats will be considered affordable

What makes the Battersea power station development worse is the developer’s argument for why there are so few affordable homes, which runs something like this. The bottom is falling out of the luxury homes market because too many are being built, which means developers can no longer afford to build the sort of homes that people actually want. It’s yet another sign of the failure of the housing market to provide what is most needed. But it also highlights the delusion of politicians who still seem to believe that property developers are going to provide the answers to one of the most pressing problems in politics.

A Malaysian consortium acquired the power station in 2012 and initially promised to build 517 affordable units, which then rose to 636. This was pretty meagre, but with four developers having already failed to develop the site, it was enough to satisfy Wandsworth council. By the time I wrote Up In Smoke, this had been reduced back to 565 units – around 15 per cent of the total number of new flats. Now the developers want to build only 386 affordable homes – around 9 per cent of the final residential offering, which includes expensive flats bought by the likes of Sting and Bear Grylls. 

The developers say this is because of escalating costs and the technical challenges of restoring the power station – but it’s also the case that the entire Nine Elms area between Battersea and Vauxhall is experiencing a glut of similar property, which is driving down prices. They want to focus instead on paying for the new Northern Line extension that joins the power station to Kennington. The slashing of affordable housing can be done without need for a new planning application or public consultation by using a “deed of variation”. It also means Mayor Sadiq Khan can’t do much more than write to Wandsworth urging the council to reject the new scheme. There’s little chance of that. Conservative Wandsworth has been committed to a developer-led solution to the power station for three decades and in that time has perfected the art of rolling over, despite several excruciating, and occasionally hilarious, disappointments.

The Battersea power station situation also highlights the sophistry developers will use to excuse any decision. When I interviewed Rob Tincknell, the developer’s chief executive, in 2014, he boasted it was the developer’s commitment to paying for the Northern Line extension (NLE) that was allowing the already limited amount of affordable housing to be built in the first place. Without the NLE, he insisted, they would never be able to build this number of affordable units. “The important point to note is that the NLE project allows the development density in the district of Nine Elms to nearly double,” he said. “Therefore, without the NLE the density at Battersea would be about half and even if there was a higher level of affordable, say 30 per cent, it would be a percentage of a lower figure and therefore the city wouldn’t get any more affordable than they do now.”

Now the argument is reversed. Because the developer has to pay for the transport infrastructure, they can’t afford to build as much affordable housing. Smart hey?

It’s not entirely hopeless. Wandsworth may yet reject the plan, while the developers say they hope to restore the missing 250 units at the end of the build.

But I wouldn’t hold your breath.

This is a version of a blog post which originally appeared here.

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