An overlooked argument for property taxes

More sensible taxation of property could reduce the problem of unaffordable house prices.

The trouble with talk about taxes is it's all bluster. The Daily Mail talks with glee of Eric Pickles discontinuing a database that could have allowed the revaluation of council tax bands. Yet the article fails to mention some key points, not least those 3.7 million households worse off as a result of our failure to revalue council tax, or that hard-pressed homeowners in London effectively pay a much lower proportion of the value of their homes in tax.

There's something about the value we attach to our homes that seems to generate an especially strong emotional response when the words "tax"and "property" are used together. Which is odd, as council tax fell from 0.7 per cent of a property's value in 1993-94 to 0.5 per cent in 2006-07. And that brings me to my next point - fairness. Most of this difference in how much of a property's value was taxed will have been capitalised into higher house prices. This benefits existing owners at the expense of first-time buyers, bringing us to a situation where 80 per cent of first time buyers get assistance with deposits. We also have a government-backed mortgage indemnity scheme to allow people to buy property with a higher loan-to-value ratio, targeted at new-build homes which are generally more expensive to buy.

So, despite the noise everyone makes about housing affordability, especially in London, you'd be hard pressed to find much discussion about how more sensible taxation of property could help our problem with unaffordable house prices. Discussion tends to focus more on why unearned house price gains aren't homeowners "fault" - but there lies the main argument for taxing property (or for that matter, land). Anyone who bought their property in 1994 didn't earn that 250 per cent increase in the value of their home between 1994 and 2008.

A mansion tax would be aimed at £2m-plus properties. But without a revaluation and extra council tax bands between £320,001 and £2m, it wouldn't solve this fairness problem. It would just mean £2m-plus mansions get a bit cheaper for the rich to buy. At the moment those with a property at the lowest point of the top band (£320,001) are liable for twice the tax of a Band D property (£68,001) even though their property's value is actually 4.7 times more. Now, even allowing for subjective definitions of fairness, does that sound fair to you?

So how do you make the system fairer? Well, you could regularly revalue council tax so that it more accurately reflected property prices, moving to a tax based on a percentage of the property's value. Of course, whilst you would hope such a tax might avoid the hoarding of housing highlighted by The Intergenerational Foundation, it wouldn't have to force pensioners out of their homes. To deal with any hardship faced by the asset rich but income poor, taxes could be deferred until the property was sold, or we could have a rebate system as we do now for those who can't afford to pay their council tax bills.

A growing number of commentators including the Institute for Fiscal Studies and the Joseph Rowntree Foundation, suggest we need to reconsider property taxes. If we need to raise revenue to pay off the deficit and keep the economy growing, property taxes are well worth a look. And with a potential £10.6bn in missed revenue in 2009, which could have been ring-fenced to fund new homes, let's hope the plight of all those locked-out first-time buyers isn't ignored.

Kathleen Kelly is a Programme Manager for Place at the Joseph Rowntree Foundation

Kathleen Kelly is Programme Manager for Place at the Joseph Rowntree Foundation, the anti-poverty think tank.

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Has Arlene Foster saved power-sharing in Northern Ireland?

The DUP leader's decision to attend Martin McGuinness' funeral was much more than symbolic. But is Gerry Adams willing to make a deal?

After some prevarication, DUP leader Arlene Foster chose to attend the funeral of Martin McGuinness in Derry today. Her decision to do so cannot have been an easy one.

A substantial part of her loyalist base has noisily resisted attempts to memorialise the late deputy first minister as anything other than an inveterate killer. Foster herself notes in today’s Belfast Telegraph that the former IRA commander was responsible for the deaths of “many neighbours and friends”. And in 1979 – aged just eight – she bore witness to the bloody aftermath of an IRA attack in her own home: her father, a reservist police officer, was shot in the head by a gunman later eulogised by McGuinness.

Her attendance at today’s funeral is thus noteworthy and has been the subject of due praise. She was twice applauded by the congregation: as she took her seat, and after Bill Clinton singled her out in his eulogy. It is, however, much more than the symbolic gesture it might appear.

Last month’s election, which saw the DUP lose 10 seats and unionist parties lose their Stormont majority for the first time in nearly a century, proved Foster to be damaged goods. She was – and remains – tarnished by the RHI scandal but also by her crass behaviour towards the nationalist community, particularly on Irish language issues.

Her carelessly won reputation as a truculent bigot will therefore not be easily lost. Her departure remains a red line for Sinn Fein. But with just four days until the deadline for a new devolution settlement, Foster’s presence at McGuinness’ funeral is the clearest indication yet of the DUP’s carefully calculated strategy. It isn’t quite a resignation, but is nonetheless indicative of the new manner in which Foster has carried herself since her party’s chastening collapse.

She has demonstrated some contrition and offered tacit acknowledgement that her election shtick was misjudged and incendiary. Her statement on McGuinness’ death was delicately pitched and made only oblique reference to his IRA past. In the absence of a willingness to allow Foster to step down, the decision instead has been taken to detoxify her brand.

The conciliatory Foster the DUP will nominate for First Minister on Monday will as such at least appear to be apart from the dogwhistling Foster who fought the election – and her attendance today is the superlative indication of that careful transition. There has been talk that this increases the chance of a deal on a new executive. This is premature – not least because the onus is now almost entirely on Sinn Fein.

Theirs is just as much a mandate to reject Stormont as we know it as it is to return and right the DUP’s wrongs. Gerry Adams, the last member of the Armalite generation standing, has made this abundantly clear – and has hardened his line just as Foster has made sure to be seen magnanimously softening hers. He said last night that he would not tolerate any extension of power-sharing talks beyond Monday’s deadline, and called on Dublin to prevent the UK government from re-instating direct rule.

Though Adams also maintained a deal was still possible in the coming days, his statement augurs badly. As the former UUP leader Lord Empey told me on the day McGuinness died, the Sinn Fein president – the ideologue to McGuinness’ Stormont pragmatist – is now entirely without equal within his party. Though he has set the transition to a new generation of female leaders in train, he remains in total control.

The demand for Dublin’s involvement is also telling: as the leader of the third-biggest party in the Dail, his is an all-Ireland long game. Enda Kenny will soon depart, offering Fianna Fail – riding high in the polls – a useful pretext to renegotiate or scrap their confidence and supply arrangement with his minority government. Sinn Fein are on course to make gains, but implementing Brexit and austerity as partners in a Stormont executive would undermine their populist anti-austerity platform.

As such, Empey predicted McGuinness’ death would allow Adams to exert a disruptive influence on the talks to come. “I don’t think it’ll be positive because for all his faults, Martin was actually committed to making the institutions work,” he said. “I don’t think Gerry Adams is as committed – and it was obvious from the latter part of last year that Gerry was reinstating his significant influence in the party. For that reason I think it will make matters more difficult.  I hope I’m wrong, but that’s my sense.”

He is not alone. There was, earlier this week, growing confidence in Westminster that some fudge could be reached on the most contentious issues. It isn't impossible - but Adams’ renewed dominance and rejection of the extended timeframe such negotiations would undoubtedly require suggests a new executive is as unlikely a prospect as it has ever been. With Foster quietly reinventing herself, the DUP could be the big winners come the next election (which could come this year and reinstate a unionist majority) – and the resurgent republicans might well rue the day they squandered their big chance.

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.