We are writing in advance of the Budget to ask you to consider announcing a root and branch review into the way residential property is taxed in the UK.
As the government begins to plot its way out of the coronavirus pandemic, which has accentuated the inequalities in our society, fairness should be at the heart of the government’s policy agenda. This has to mean looking at the options for reforming our residential property taxes so that they are based on today’s property values and homeowners’ ability to pay, while encouraging efficient use of our housing stock.
Any such review should begin by focusing on council tax which is poorly designed, out of date, and unpopular. This tax is based, in England and Scotland, on property valuations that are now almost 30 years old and therefore bear no resemblance to the realities of current pricing levels.
It would appear that council tax is a material wealth tax for those in modest houses, but is a service charge for those in wealthier areas. This places the heaviest burden on the young, low-earners, and those living in less prosperous parts of the country, who typically reside in modest properties.
We have known for many years that council tax is not fit for purpose but the situation is now critical. Council tax is increasingly putting lower-income families into debt and covid-19 has only exacerbated the situation, with an extra £700 million added in outstanding council tax debt from over 800,000 UK households since between March and September alone.
A review of property taxes should also consider whether there is a place for stamp duty in a modern system of property taxation. By taxing property transactions, stamp duty discourages homeowners from moving and blocks up the property market, hindering older people from downsizing and first-time buyers getting onto the market. This has wider dynamic economic implications as we have seen from the stamp duty holiday.
Households are already paying sufficient property taxes relative to other developed nations – the problem is that the wrong households are paying the wrong taxes at the wrong times. The current unfairness exists within individual constituencies, between constituencies, and between the generations.
We urge you to use the forthcoming Budget to begin this review process and we would be happy to support the government with its efforts to introduce a fairer and more efficient system of property taxation that is fit for the modern age.
We recommend the government to examine this issue through the lens of fairness, economic activity, social mobility, the government’s levelling up agenda and the impact of the pandemic on household and local government finances.
We look forward to your response and to the upcoming Budget.
Alicia Kennedy, Director, Generation Rent
Andrew Dixon, Chairman, Fairer Share
Anya Martin, Director, Priced Out
Ben Rich, CEO, Radix
Carys Roberts, Executive Director, IPPR
Catherine Alldritt, Director, Centre for Progressive Policy
Dr Gavin Kerr, author of “The Property-Owning Democracy: Freedom & Capitalism in the 21st Century”
James Kirkup, Director, Social Markets Foundation
John Muellbauer, Institute for New Economic Thinking, Oxford Martin School
John Myers, Founder, London YIMBY
Liz Emerson, Co-founder, Intergenerational Foundation
Neal Lawson, Director, Compass
Polly Mackenzie, Chief Executive, Demos
Professor Philip Booth, Director of the Vinson Centre for the Public Understanding of Economics and Entrepreneurship, University of Buckingham
Robert Colvile, Director, Centre for Policy Studies
Robert Palmer, Executive Director, Tax Justice UK
Robin McAlpine, Director, Common Weal
Ryan Shorthouse, Chief Executive, Bright Blue
Sam Dumitriu, Research Director, The Entrepreneurs Network
Torrin Wilkins, Director, Centre Think Tank