MPs demand property tax reform to tackle inequity and inefficiency

Simon Fell (Con), led the debate and described the present system of property taxation as “unfairly favour(ing) the wealthy”, burdening lower value homes.

He highlighted the importance of property tax receipts towards funding local services and infrastructure, but said both council tax and SDLT were ineffective. He argued that attempts to improve their fairness (including new council tax bands and higher SDLT rates) were “just band-aid” and argued that the government needed to fundamentally reform these in order to address their inequity and inefficiency.

Mary Robinson (Con) suggested that concerns about council tax rates may lie with the political party who runs the council. She provided the example of the Liberal Democrats in Stockport increasing council tax by 4.3 per cent despite a promise to freeze it before they came to power.

Fell, agreed but said that he and many of his colleagues support a “move to a proportional property tax system”, advocated for by the campaign group Fairer Share. Their proposals would replace the current “convoluted”  system with a flat tax equivalent to 0.48 percent of a property’s value, and a 0.96 per cent surcharge for second homes, empty homes and non-residential properties. Fell said the system would result in households paying less tax, and lead to  more than 750,000 house buyers being exempt from paying SDLT, increased housing market activity.

Aaron Bell (Con), who was also in favour of Fairer Share’s proposals, said moving the burden of council tax to the landlord rather than renters would be a sensible step, and would complement the government’s levelling up agenda.

Tim Farron (Lib Dem) described council tax as “a bad attempt at a wealth tax, which fails miserably”. He suggested that a proportional property tax could be a solution, as it would ensure households pay a fair amount for the house they have.

Jill Mortimer (Con), said her Hartlepool constituency had one of the highest council-tax-to-property-value ratios in the country, and claimed that the proposed property tax would save her constituents an average of £950.

Mary Kelly Foy (Lab), described council tax as “flawed” and said it made local authorities overly reliant on locally raised revenue streams. She expressed her concern that council tax is still based on property valuations made in 1991. Kelly asked the minister to provide some information about how  this could be addressed. Peter Gibson (Con), also called on the government to introduce alternatives to council tax, saying “a reform to local council revenue and housing market taxes is overdue”.

Richard Burgon (Lab) asked the government to look for more progressive alternatives to council tax, and suggested MPs to consider a campaign that run by the union ACORN, which argues for a 100 per cent council tax premium on second homes and empty homes.

Chris Loder (Con), praised the Fairer Share campaign group for their excellent work, and hoped that the minister would consider a full review of council tax and different levers that contribute to it.

Kirsty Blackman (SNP), mentioned that situation in Scotland is similar but different. She said that the devolved equivalent of SDLT, Land and Buildings Transaction Tax,  ensures that the charge is more proportionate to the property price than in England, with no tax due on properties worth less than £175,000. She also told MPs that the Scotland Government is currently looking at council tax reform.

Shadow Financial Secretary, James Murray, called on the government should freeze council tax this year, funded through a windfall tax on oil and gas producers. He added that his Party is opposed to the government’s SDLT policies and expressed concern at the length of time it would take to implement a new system of property taxation.  

The Economic Secretary to the Treasury, Andrew Griffith , welcomed the opportunity to discuss property taxation. He noted that council tax provides a strong degree of certainty to local authorities in their financial planning as it is not linked to fluctuating property prices, and that it provides councils with  their largest source of revenue. Griffith added that SDLT raises around £14 billion to support investment in public services.

Peter Grant (SNP) intervened to ask if the government could see benefits of giving councils the power to raise taxes based on property values or if the “government is obsessed with the idea that their core tax will always be based on imaginary property values”.

Griffith acknowledged that the proposals being considered offered an opportunity for councils to diversify their sources of revenue, it would limit “their ability to raise revenue for themselves”.

Helen Morgan, the Liberal Democrat’s Spokesperson for Levelling up, Housing and Communities, argued that a simple step to addressing some of the inequality in the current system could be to reassess valuations and introduce higher bands of council tax.

The Economic Secretary highlighted that higher bands have been introduced over time, although it has been a while since their revaluation.

Tim Farron, considered the Fairer Share approach ‘cross-party’ and urged the minister to look again at council tax to see if there are ways that he could make it fairer.

“While we will think about the proposals, we must think about democracy and about the potentially disempowering impact on local government”, Griffith argued.

You can read the full debate here.