A council tax isn't a wealth tax

How should the government settle the inequalities in property wealth?

Very important, this one: the council tax isn't a wealth tax. That's a claim I've seen repeated around the place with relative frequency recently, most notably in Polly Toynbee's Guardian column today. She writes:

Wealth taxes only deliver 5.9% of revenues, mostly in council tax (which often falls on renters, not owners). Inheritance tax brings in just 0.5%, only paid by 3% of estates, halved since Labour unwisely doubled couples' exemption: it's the most avoided of all.

As she says, the incidence of council tax falls on the occupier, not the owner. If you have very little wealth but high income, you may rent a Band-H house and end up paying the same council tax as someone with very high wealth and very low income.

In practice, then, council tax is a tax on residency, not on property wealth and certainly not on wealth overall. (Legally, it's not quite that simple. A lease is still a form of ownership, so it's not quite the case that non-owners are taxed.)

It may be the case that, at the top end, that doesn't matter. If we were to introduce the "mansion tax" by adding a new band on top of council tax for properties over £2m, for instance, there would be few renters hit. But even then, there would still be some.

The distinction is important to make, because as the movement for a true mansion tax—or better still, a land value tax—grows, the opposition will try to claim that what we already have is good enough. It isn't.

The inequalities in property wealth are astronomical. A chart put together by researcher Andy Whightman makes that astoundingly clear. He writes:

This data was obtained from the Office of National Statistics by Faiza Shaheen of the New Economics Foundation and shows the average net property wealth for each 1% of the income distribution. The top 1% of the population has net property wealth of £15,040,000 whilst the bottom 33% has nothing. The top 1% own more net property wealth than the rest of the 99% combined.

But there's another way the government could take advantage of the discrepancies in property wealth to earn some income, settle the housing market and reduce inequality. Michael Darrington, former CEO of Greggs, writing in the Telegraph today, suggests a £100bn housebuilding programme funded by quantitative easing. But in focusing on the revenue source, he's missed the most impressive part of his plan, because he also suggests that:

While there are plenty of suitable sites for building already available, a programme on the scale I envisage would clearly require more.

One way to achieve this would be through the compulsory purchase of farmland at a sensible multiple of its agricultural value—say three or four times—which would give farmers a very good profit but not the lottery-winning values currently ascribed to development land.

But rather than the expensive and illiberal procedure of compulsory purchase, there's a more radical option available. As Darrington implies, land with planning permission is worth more than land without—a lot more. Frequently well over 20 times as much, in fact. And the institution with the power to convert land without planning permission into land with planning permission is the same one trying desperately to build houses.

In other words, an entire housebuilding program could probably be funded on the difference between the purchase price of agricultural land and the sale price of land with planning permission.

Councils could buy up agricultural land, award themselves planning permission, build houses, and sell some off while keeping the rest for social housing. In fact, such is demand for land with planning permission, they wouldn't even need to build them; they could just sell the land without houses, but insist that part of the sale price be that some houses built on the land be used for social housing.

In fact, councils wouldn't even need to buy the land. They could just grant planning permission with the same requirements on more land than they have been now. Because the real bottleneck is there, and not really with housebuilding at all.

Former council houses, refurbished and made energy-efficient. 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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Inside a shaken city: "I just want to be anywhere that’s not Manchester”

The morning after the bombing of the Manchester Arena has left the city's residents jumpy.

On Tuesday morning, the streets in Manchester city centre were eerily silent.

The commuter hub of Victoria Station - which backs onto the arena - was closed as police combed the area for clues, and despite Mayor Andy Burnham’s line of "business as usual", it looked like people were staying away.

Manchester Arena is the second largest indoor concert venue in Europe. With a capacity crowd of 18,000, on Monday night the venue was packed with young people from around the country - at least 22 of whom will never come home. At around 10.33pm, a suicide bomber detonated his device near the exit. Among the dead was an eight-year-old girl. Many more victims remain in hospital. 

Those Mancunians who were not alerted by the sirens woke to the news of their city's worst terrorist attack. Still, as the day went on, the city’s hubbub soon returned and, by lunchtime, there were shoppers and workers milling around Exchange Square and the town hall.

Tourists snapped images of the Albert Square building in the sunshine, and some even asked police for photographs like any other day.

But throughout the morning there were rumours and speculation about further incidents - the Arndale Centre was closed for a period after 11.40am while swathes of police descended, shutting off the main city centre thoroughfare of Market Street.

Corporation Street - closed off at Exchange Square - was at the centre of the city’s IRA blast. A postbox which survived the 1996 bombing stood in the foreground while officers stood guard, police tape fluttering around cordoned-off spaces.

It’s true that the streets of Manchester have known horror before, but not like this.

I spoke to students Beth and Melissa who were in the bustling centre when they saw people running from two different directions.

They vanished and ducked into River Island, when an alert came over the tannoy, and a staff member herded them through the back door onto the street.

“There were so many police stood outside the Arndale, it was so frightening,” Melissa told me.

“We thought it will be fine, it’ll be safe after last night. There were police everywhere walking in, and we felt like it would be fine.”

Beth said that they had planned a day of shopping, and weren’t put off by the attack.

“We heard about the arena this morning but we decided to come into the city, we were watching it all these morning, but you can’t let this stop you.”

They remembered the 1996 Arndale bombing, but added: “we were too young to really understand”.

And even now they’re older, they still did not really understand what had happened to the city.

“Theres nowhere to go, where’s safe? I just want to go home,” Melissa said. “I just want to be anywhere that’s not Manchester.”

Manchester has seen this sort of thing before - but so long ago that the stunned city dwellers are at a loss. In a city which feels under siege, no one is quite sure how anyone can keep us safe from an unknown threat

“We saw armed police on the streets - there were loads just then," Melissa said. "I trust them to keep us safe.”

But other observers were less comforted by the sign of firearms.

Ben, who I encountered standing outside an office block on Corporation Street watching the police, was not too forthcoming, except to say “They don’t know what they’re looking for, do they?” as I passed.

The spirit of the city is often invoked, and ahead of a vigil tonight in Albert Square, there will be solidarity and strength from the capital of the North.

But the community values which Mancunians hold dear are shaken to the core by what has happened here.

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