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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As a Conservative MP, I want Parliament to get a proper debate on Brexit

The government should consider a Green Paper before Article 50. 

I am very pleased that the government has listened to the weight of opinion across the House of Commons – and the country – by agreeing to put its plan for Brexit before Parliament and the country for scrutiny before Article 50 is triggered. Such responsiveness will stand the government in good stead. A confrontation with Parliament, especially given the paeans to parliamentary sovereignty we heard from Leave campaigners during the referendum, would have done neither the Brexit process nor British democracy any good.

I support the government’s amendment to Labour’s motion, which commits the House to respecting the will of the British people expressed in the referendum campaign. I accept that result, and now I and other Conservatives who campaigned to Remain are focused on getting the best deal for Britain; a deal which respects the result of the referendum, while keeping Britain close to Europe and within the single market.

The government needs to bring a substantive plan before Parliament, which allows for a proper public and parliamentary debate. For this to happen, the plan provided must be detailed enough for MPs to have a view on its contents, and it must arrive in the House far enough in advance of Article 50 for us to have a proper debate. As five pro-European groups said yesterday, a Green Paper two months before Article 50 is invoked would be a sensible way of doing it. Or, in the words of David Davis just a few days before he was appointed to the Cabinet, a “pre-negotiation white paper” could be used to similar effect.

Clearly there are divisions, both between parties and between Leavers and Remainers, on what the Brexit deal should look like. But I, like other members of the Open Britain campaign and other pro-European Conservatives, have a number of priorities which I believe the government must prioritise in its negotiations.

On the economy, it is vital that the government strives to keep our country fully participating in the single market. Millions of jobs depend on the unfettered trade, free of both tariff and non-tariff barriers, we enjoy with the world’s biggest market. This is absolutely compatible with the result, as senior Leave campaigners such as Daniel Hannan assured voters before the referendum that Brexit would not threaten Britain’s place in the single market. The government must also undertake serious analysis on the consequences of leaving the customs union, and the worrying possibility that the UK could fall out of our participation in the EU’s Free Trade Agreements (FTAs) with non-EU countries like South Korea.

If agreeing a new trading relationship with Europe in just two years appears unachievable, the government must look closely into the possibility of agreeing a transitional arrangement first. Michel Barnier, the European Commission’s chief negotiator, has said this would be possible and the Prime Minister was positive about this idea at the recent CBI Conference. A suitable transitional arrangement would prevent the biggest threat to British business – that of a "cliff edge" that would slap costly tariffs and customs checks on British exports the day after we leave.

Our future close relationship with the EU of course goes beyond economics. We need unprecedentedly close co-operation between the UK and the EU on security and intelligence sharing; openness to talented people from Europe and the world; and continued cooperation on issues like the environment. This must all go hand-in-hand with delivering reforms to immigration that will make the system fairer, many of which can be seen in European countries as diverse as the Netherlands and Switzerland.

This is what I and others will be arguing for in the House of Commons, from now until the day Britain leaves the European Union. A Brexit deal that delivers the result of the referendum while keeping our country prosperous, secure, open and tolerant. I congratulate the government on their decision to involve the House in their plan for Brexit - and look forward to seeing the details. 

Neil Carmichael is the Conservative MP for Stroud and supporter of the Open Britain campaign.