Simon Fell (Barrow and Furness) (Con) I beg to move, That this
House has considered the matter of alternatives to Council Tax and
Stamp Duty. It is an honour to serve under your chairmanship, Mrs
Harris; we have spent a lot of time together today. I will address
the problems with our property taxes, discuss previously suggested
remedies and present a solution that cuts taxes for 77% of
households, generates a surplus and garners popular support. I do
not intend to...Request free trial
(Barrow and Furness) (Con)
I beg to move,
That this House has considered the matter of alternatives to
Council Tax and Stamp Duty.
It is an honour to serve under your chairmanship, Mrs Harris; we
have spent a lot of time together today. I will address the
problems with our property taxes, discuss previously suggested
remedies and present a solution that cuts taxes for 77% of
households, generates a surplus and garners popular support. I do
not intend to speak for long. A lot of colleagues are present,
and I want to hear their views, and hear from the Front
Benchers.
I realise that this area is fraught with danger. My first
political memory is of the poll tax riots. We all know the
consequences of trying to shake up the domestic rates system, but
our current property taxes unfairly favour the wealthy, burden
lower-value homes, discourage efficient housing use, under-tax
larger properties and penalise homebuyers and sellers. Those
issues affect us all, and all our constituencies. Property taxes
fund our important local services and infrastructure. They impact
owners and renters alike. When these taxes are ineffective,
society suffers. Council tax and stamp duty are the main
culprits.
Council tax was introduced three decades ago, in 1993, as a
replacement for the unpopular community charge—the poll tax—but
over time council tax has come to mirror many of the
characteristics of its disliked predecessor. Surveys reveal
public dissatisfaction with it. Only 29% of people consider
council tax calculations fair, and 33% support maintaining the
status quo. It places the greatest burden on the young, low
earners and residents in less prosperous regions, while greatly
benefiting wealthy homeowners and property investors. As property
prices have soared, average incomes have stagnated. Research by
the think-tank Onward shows that households spend between 0.8%
and 4.5% of their income on council tax, with the highest
payments in the north-east and south-west and the lowest in
London. That is not the mark of a fair tax.
It is unfair for two reasons. First, it relies on outdated
property valuations from almost 30 years ago, disregarding
substantial house price growth, especially at the top end of the
market. That means that those who benefited the most from house
price rises have also been the biggest beneficiaries of the
council tax system. Secondly, the band structure creates a
disproportionate burden, as all properties within a band pay
exactly the same amount. Consequently, lower-end properties in
each band bear a higher proportionate tax load than high-end
ones. Those flaws sever the link between council tax and property
values. For example, a person in a £100,000 property pays roughly
five times more tax relative to property value than someone in a
£1 million property. Here in Westminster, a £30 million mansion
pays £1,828 in council tax, while a family in a modest band D
home in my constituency of Barrow and Furness pays £2,068. How in
the world can that be fair?
Stamp duty, council tax’s accomplice, compounds the problem.
While stamp duty is progressive, with higher rates for larger
transactions, it still exacerbates the housing crisis by
hindering efficient property use. Taxing transactions discourages
homeowners from moving, whether it be an older couple downsizing
or a growing family upsizing. The economic impact extends to job
opportunities rejected due to moving costs. The Chancellor’s
stamp duty holiday gave the UK property market a much-needed
boost during the pandemic, but it also highlighted the merits of
abolishing it altogether. Stamp duty hampers housing stock
utilisation and residential mobility. Abolishing stamp duty on
owner-occupied properties would unleash transactions and
alleviate the housing crisis. Stamp duty should, however, remain
in place for second home and non-residential buyers. In
communities such as mine in Barrow and Furness and in Cumbria
more widely, with villages being hollowed out by owners of second
homes and holiday lets, that just makes sense.
Our country’s property taxes, unpopular and unfair, demand
reform. Proposed remedies so far have included new council tax
bands, local income tax, higher stamp duty thresholds and capital
gains tax on primary homes, but they are just band-aids.
Fundamental reform is required to address the inequity and
inefficiency of our property taxes.
(Cheadle) (Con)
I congratulate my hon. Friend on bringing forward this debate and
on the eloquence of his speech; this is an important subject.
Does he agree that one of the issues with council tax is that it
is very much subject to the vagaries and the whims of whichever
political party is in charge of the town hall? The Liberal
Democrats in Stockport said that they wanted to freeze council
tax, but when in power they put it up by 4.3%. That is an extra
burden on taxpayers, and they do not necessarily get any value
for that money.
My hon. Friend makes an excellent point; I am sure that her
electorate in Cheadle will have been listening hard. As I have
said, only 33% support keeping council tax as it is. I am sure
that that number is even lower in my constituency, where the
administration has put up council tax by 3.9%. They are very
unhappy with the current situation.
I and many of my colleagues support a move to a proportional
property tax system, which is a methodology put forward by Fairer
Share. It offers a concrete solution to replace the current
convoluted band system with a simple flat tax of 0.48% of
property value, and a 0.96% surcharge for second homes, empty
homes and non-residential properties.
The benefits of moving to such a system would be significant.
Some 18 million households would experience a tax reduction, with
an average annual tax saving of £556 per household. Council tax
payers outside central London would save £6.5 billion annually,
providing a substantial boost to local communities and economies.
Over 750,000 house buyers each year would be exempt from paying
stamp duty and navigating exemption paperwork, simplifying and
reducing the cost of house buying. Increased housing market
activity would contribute to a £3.27 billion boost in GDP per
year.
Some 1.4 million second homes, empty homes and undeveloped
properties would finally contribute their fair share of tax, with
the revenue used to lower bills for all taxpayers. That would
incentivise owners to rent, sell or develop those properties and
increase the housing supply. The calculation is that over the
span of five years, 600,000 homes would be released. That
includes 250,000 one and two-bedroom homes, which we know young
people desperately need right now. The reform would generate an
annual surplus of £5.4 billion through surcharges on second,
empty and foreign-owned homes. I am sure the Treasury can think
of inventive ways to spend that sort of money. Finally, shifting
the tax burden to owners, aligning with broad international
practice, would also ease administration for councils.
However, it is rare—perhaps impossible—to propose a wide-ranging
reform where there are not winners and losers. After all, we are
proposing to rebalance the property tax system based on
principles of fairness. However, there are several mitigations
that could be implemented to soften the blow of any change for
those who might have to pay more. First, during the transition to
a proportional property tax system, any rise in local property
tax could be capped at £100 a month for primary residences. That
transitional protection would cease upon sale, but buyers could
benefit from the removal of punitive stamp duty. Secondly, a
deferral mechanism could be put in place, allowing owners who are
genuinely unable to pay to defer their tax payments with a modest
interest charge. That deferred amount could be paid later on the
sale of their property or home, avoiding any debt-related issues
associated with council tax collection. Those measures aim to
alleviate the impact on individuals while ensuring a fair and
manageable transition to the new system.
Of course, there would also be impacts on local government
finance. For councils that would generate less revenue from a
proportional property tax compared with their current council
tax, the shortfall would need to be supplemented through central
Government grants or funds redistributed from councils generating
higher PPT revenue. The arrangement is not new, and it is a
long-standing feature of local government finance. It could be
seamlessly incorporated into the proportional property tax system
with the following principles.
First, the Government could fully recognise how the proportional
property tax affects the revenue-raising capacity of councils
when formulating the funding arrangements for local government.
Secondly, councils could be granted new powers to independently
generate additional revenue. Some councils may experience a
decrease in revenue-raising capacity, but there are opportunities
to introduce new revenue-raising powers, such as planning reforms
and charging more for increased house construction. Again, that
would be beneficial for counties such as Cumbria, Devon and
Cornwall that are facing the accommodation and short-term let
issues that I mentioned earlier.
Thirdly, while some councils might be sceptical about the
transition to proportional property taxes because it could result
in severe revenue-raising capacity issues, it is important to
note that it is the residents in such areas who will benefit most
from a decrease in property tax bills. Finally, the policy may
also create incentives for companies and individuals to relocate
to areas with lower proportional property tax rates, benefiting
those communities and eventually increasing the revenues for
local authorities. The measure rebalances the local economy and
helps level up left-behind areas in one fell swoop.
If taken up, the measures would address the impact on local
government finance by ensuring a balanced transition, exploring
new revenue sources and considering the overall benefits and
adjustments that can be made to accommodate different council
circumstances. The reform is crucial for my constituents in
Barrow and Furness. It will benefit 96% of the households there,
with an average annual saving of £600. It is no surprise that 58%
of voters in my constituency support the policy, with only 9%
opposing it, according to polling by J.L. Partners. Nationally,
voters overwhelmingly back the policy by a ratio of 3:1—in the
north it is 9:1. A majority of voters in every constituency
support the reform. I fundamentally believe that we should lead
with policy and not follow polls, but those are numbers that are
worth paying attention to.
Council tax and stamp duty are fundamentally flawed, and many of
us recognise that. Politicians from most of the parties
represented in this Chamber, along with think-tanks such as
Bright Blue, the Institute for Fiscal Studies and the Institute
for Public Policy Research, and campaign groups such as
PricedOut, Generation Rent and the Intergenerational Foundation,
have endorsed the transition to a proportional property tax.
Prominent economists from respected publications, including the
Financial Times, The Daily Telegraph, The Economist, and The
Guardian have also endorsed the reform.
The policy would significantly increase the disposable income of
individuals across the country, directly benefiting households
and improving the quality of life in local communities. It would
free up properties, encouraging efficient use, and, crucially, it
is based on the principle of fairness. It represents a genuine
and impactful stride towards levelling up and advancement for
all. I look forward to listening to what my hon. Friends and
colleagues have to say.
(in the Chair)
I remind Members that they should bob if they wish to speak. I
intend for the first Front Bencher speech to start at 5.08 pm, so
I would be grateful for brevity in speeches and
interventions.
4.43pm
(Newcastle-under-Lyme)
(Con)
It is an honour to serve under your chairmanship, Mrs Harris. I
congratulate my hon. Friend the Member for Barrow and Furness
() on securing this debate and
putting forward the case so adeptly in his opening remarks. I do
not intend to repeat them. I have spoken in favour of Fairer
Share’s proposals in the past, and I think there are more things
that we can do besides. I also note that the Housing, Communities
and Local Government Committee report from July 2021—I think my
hon. Friend the Member for Cheadle () was on the Committee at the
time—suggested that the Government look at this area.
I welcome all the refugees from the Finance (No. 2) Bill
Committee who are in the Chamber. It is a pleasure to support the
Government on that, but what we are trying to do today is steer
them towards ways in which they can improve our tax system in the
future. I am sure the Minister will be taking notes.
I pay tribute to Fairer Share, Andrew Dixon and the people behind
that campaign, for the work they have done devising the policy
and producing the straight-forward numbers at the top of it, as
well as for thinking incredibly hard about its implementation
challenges. They have addressed the issue of valuation, which my
hon. Friend the Member for Barrow and Furness referred to, and
thought about how to phase it in, how to manage the revenue flows
and how to manage the impact on councils. That work has been done
in advance of the Treasury considering the policy. I am sure that
the Treasury would look favourably at the various reports
commissioned by Fairer Share, as ways in which the policy could
not only be brought in but implemented in a practical way.
I will quote a few figures that reference my constituency of
Newcastle-under-Lyme. Under the proposals, the average household
in Newcastle-under-Lyme would gain about £600 per year, and 97%
of my constituents would be better off under this regime. We know
that council tax hits constituencies such as mine and those of
many hon. Members here today harder, partly because it relies on
that 1991 valuation. There has been a disproportionate property
boom. Prices have risen everywhere, but disproportionately in the
south of the country. Therefore, people in constituencies such as
mine and that of my hon. Friend the Member for Barrow and Furness
are paying a far greater proportion of their property’s value in
their annual council tax.
I do not want to go through all the details, because I am mindful
of your strictures on brevity, Mrs Harris, but I think that
moving the burden of council tax to the owner of the property
rather than renters is a sensible step, not only to take a little
bit off the renters’ plate, but to make life easier for councils’
collection departments, because the house is sold far less
frequently than the lease changes. It is a difficult job for
council collection units to keep up with those changes and ensure
that people do not fall behind with their council tax when they
move into a property. We all have constituents who have fallen
behind with their council tax, and it can be very difficult for
them to recover.
This policy would complement the Government’s levelling-up
agenda. Newcastle-under-Lyme has been very fortunate, receiving
more than £35 million through the towns fund and the future high
streets fund to level up. I always say that levelling up is not
just about nice new buildings and transport links; it is also
about jobs and skills. We have to get the tax part right for
levelling up, too. A policy like this would mean levelling up
across the country for anyone in those poorer,
lower-middle-income households. It would mean a £556 annual tax
cut for 19 million people in those households. It would mean the
Treasury’s approach dovetailing with that of the Department for
Levelling Up, Housing and Communities, in terms of the direct
support given to communities such as mine. This would give direct
support to families living in those communities, and families
living in lower-priced houses throughout the country. It would be
genuinely levelling up across the country.
Finally, I will say a quick word on stamp duty, which my hon.
Friend the Member for Barrow and Furness did not cover quite so
much in his speech. We hear a lot about the housing crisis and
the need to build more houses to address that. In my view,
downsizing is key to solving our housing crisis in this country.
Obviously, people live in houses, but, in a real sense, people
live in bedrooms, because someone needs a bedroom to sleep in. We
have an appalling allocation of bedrooms in this country.
Understandably, many people, including retired couples, still
live in the house where they brought up their children. That
might be a four-bedroom house in they are using only one bedroom.
There are so many unoccupied bedrooms in the private sector.
This reform to stamp duty would address the impediment of stamp
duty itself being a reason that people do not want to move
home—it is expensive to move, even if downsizing, particularly in
the south-east. The reform would also provide a strong incentive
for people to downsize to a lower-value home. For all those
reasons, I hope that the Treasury is listening to my hon.
Friend’s proposals. I am fully in support of the motion.
Several hon. Members rose—
(in the Chair)
Unfortunately, I will have to impose a three-minute limit. The
next speaker is .
4.48pm
(Westmorland and Lonsdale) (LD)
It is a pleasure to serve under your guidance this afternoon, Mrs
Harris. I offer massive thanks to my neighbour and friend, the
hon. Member for Barrow and Furness (), for bringing this important
issue to the House. It is important for all parties, as they put
their manifestos together for the next election, to think about
this matter very seriously. I pay tribute to Andrew Dixon and his
team.
The proposal for a proportional property tax is worthy of serious
consideration. Council tax—basically a back-of-a-fag packet
alternative to the poll tax dreamed up quickly in the early
1990s—is a bad attempt at a wealth tax, which fails miserably. It
is regressive: someone can live in a £20 million mansion in
Westminster and pay less in council tax than someone living in a
social rented home in Kendal, Windermere, Grasmere, Appleby or
Kirkby Stephen. The most a very wealthy person could pay in
council tax is three times more than the least wealthy person
pays.
A solution is needed, and a proportional property tax potentially
provides it. It would help us to move away from a council tax
that pushes people into poverty, makes them pay bills they cannot
afford, adds to the cost of living crisis in my communities and
others and distorts a housing market that is already not normal,
exacerbating the problem. In an area like my constituency, where
there are 6,000 people on the council house waiting list and a
minimum of 7,000 second homes, we can see that problem. I am
proud that Westmorland and Furness Council took up the
Government’s new permission to double council tax on second
homes, but that is still a minor blip for somebody who can afford
a £750,000 extra home in the Lake district.
This new tax would allow us to use sliding scales and surcharges
to ensure that people pay a fair amount for the property that
they have. A wealth tax would take account of their ability to
pay and would therefore allow a massive majority of my
constituents, and everybody else’s, to pay a more reasonable
amount. In my community, the average house price is about 12
times the average income, so the average person is completely
snookered when it comes to getting into the market. This new tax
would allow us to do something about the distortion that council
tax brings about by encouraging people to live in homes for which
they do not pay a fair value, while a massive majority pay far
too much. I agree that encouraging downsizing is a really
important way of at least alleviating the housing crisis, but
because the proportional property tax would be payable on
undeveloped land with planning permission, it would bring into
use predominantly brownfield sites so that we could actually get
homes built.
We want to tilt the scales against second homes and towards first
homes in communities like mine. If levelling up is to mean
anything, we surely want to shift towards a system that
disincentivises multiple home ownership and property investment,
and incentivises people to have homes as homes.
4.51pm
(Hartlepool) (Con)
It is a pleasure to serve under your chairmanship, Mrs Harris. I
thank my hon. Friend the Member for Barrow and Furness () for securing this important
debate. Hartlepool has one of the highest
council-tax-to-property-value ratios in the country. I pay three
times more in council tax for my home in Hartlepool than for my
rented London work flat, despite that flat being worth many times
more than the Hartlepool home. That high cost is simply unfair on
my constituents, and there is an urgent need for reform.
Reform based on a proportional property tax such as the one
proposed by the Fairer Share campaign would save my constituents
£950 on average. The question must be asked, though, why council
tax is so high in Hartlepool and so comparatively low in
Westminster. It is fair to concede that we have a larger number
of band A properties in Hartlepool and more deprivation, so
arguably bringing prosperity to the town will help to ease the
council tax burden. Sadly, we also have many children in care,
and Hartlepool Borough Council spends many thousands of pounds
per week per child in care. That accounts for a large proportion
of our council tax. I have also been told that the council spent
over one third of a million pounds in one year with just one taxi
company running children around.
The Conservative-independent coalition has been in power for only
the past two years, and a ship as cumbersome as Hartlepool
Borough Council takes more time than that to turn around.
However, the local Labour party’s recent success in the local
elections was based largely, I suspect, on its manifesto pledge
to freeze council tax this coming year. I support council tax in
Hartlepool being frozen, just as it was by the newly elected
Conservative-led coalition in 2021—interestingly, that was not
supported by the Labour group at the time, but now it has decided
that it should be frozen. If the Labour group thinks it can
freeze it, I think the Conservative-led coalition can do better.
I will work with the new Conservative leader, examine
Hartlepool’s accounts, sharpen our pencils and find a way to cut
it. This is not an empty, unicorn promise to put on a local
election leaflet; the local election is done. It is something
that I believe should be done for the good of the people of
Hartlepool.
(Glenrothes) (SNP)
The hon. Lady clearly blames the previous Labour administration
in Hartlepool for the high council tax rates there. Why does she
think that in Westminster the council tax on a typical band D
property is over 50% higher than in Fife?
I am not here to comment on comparisons between Westminster and
Fife, but clearly huge amounts of money have been squandered in
Hartlepool without any care. It has been the usual Labour
spending of other people’s money—very sadly, as that money
belongs to the hard-working families I represent. However,
cutting council tax in Hartlepool is something for the short
term. Looking further forward, we must find a fairer way for
communities like mine. Councils must not be allowed to see this
as carte blanche to go on careless spending sprees.
Councils run by Conservatives, with better fiscal responsibility,
invest their money wisely. They do not fritter it away on vanity
projects. They keep a rein on their public spending. They also
invest in order to have other income streams than just asking for
more handouts from their council tax payers and the Government.
We have seen that in Hartlepool in the two short years of the
Conservative-led coalition, which has worked with me to secure
investment in the town and provide more jobs, for example at the
Northern Studios and the production village led by the
internationally acclaimed Northern School of Art. A proportional
property tax would enable us to continue to deliver good services
and to invest in prosperity-generating projects, while lowering
the financial burden on the local community.
4.55pm
(City of Durham) (Lab)
I thank the hon. Member for Barrow and Furness () for securing this important
debate. It is good to see cross-party consensus; I hope the
Minister will note that it is not a party political issue. I also
pay tribute to my hon. Friend the Member for Easington () for his work in
highlighting the problems with council tax.
We all know that council tax is flawed. Our constituents know it,
we know it and the Government know it, too. The reality of
council tax is that it is making councils overly reliant on
locally raised revenue streams in order to offset Whitehall cuts.
What makes the situation even worse is just how regressive
council tax is. It baffled me when I was a local councillor, as
it still does, that council tax is based on property valuations
made in 1991, over 30 years ago. It was supposed to be revised
periodically, but that has never happened in England. Housing
inflation since 1991 has made those valuations nonsensical.
Crucially, it means that the richest households, who live in the
most expensive houses, are not paying their fair share.
Billionaires in London will pay the same tax as someone occupying
a modest property. Council tax has become like the “community
charge”—the poll tax—that it was supposed to replace.
I appreciate that the Minister could not announce a policy change
here in Westminster Hall today even if he wanted to, but can he
give us a sense of what is happening in the Department on this
issue? Last November, at a sitting of the Levelling Up, Housing
and Communities Committee, the Secretary of State said that the
Department was looking into local government finance. Where has
that process got to? When are we likely to hear again from the
Secretary of State? Will we see a Green Paper? More broadly, can
the Minister share his thoughts on re-evaluating property prices?
As I said, the current valuations are over 30 years old. I would
appreciate an answer from him on those points.
The cost of living crisis is affecting all our constituents. It
is leaving people with extremely difficult choices to make. In
many cases, their choice is between heating or eating. These are
the families who desperately need our vital public services.
Replacing council tax with something progressive, as well as
adequate funding from Whitehall, would ease the burden on those
families and strengthen our public services locally. We need to
do this as a matter of urgency.
Several hon. Members rose—
(in the Chair)
Order. Unfortunately, we are now down to two minutes for each
speaker.
4.57pm
(Darlington) (Con)
Thank you, Mrs Harris, for calling me to speak. It is a pleasure
to serve under your chairmanship. I congratulate my hon. Friend
the Member for Barrow and Furness () on securing this debate.
The council tax system is fundamentally flawed. As we have heard
from the hon. Member for City of Durham (), the property values are
from 1991 and are in many cases entirely hypothetical, leading to
individuals paying a higher share of their property value and an
ever-increasing share of their income.
Analysis by Fairer Share computes that almost 99% of the 50,000
homes in Darlington could benefit from a reduction of
approximately £750 a year in their local council tax. That is a
significant saving for every home in my constituency. We cannot
ignore the potential savings for that community.
I draw the House’s attention to my entry in the Register of
Members’ Financial Interests, and I declare an interest: I was a
high street solicitor prior to being elected to this place. I saw
on a daily basis the adverse effects on the housing market of
stamp duty, which is putting a barrier in the way of home
ownership and home moves, causing a bunching of pricing where tax
levels change and, basically, using the legal profession as an
unpaid tax collector.
A reform to local council revenue and housing market taxes is
overdue. Some 30 years since its introduction, we must consider
alternatives to council tax. There is the potential to make the
system significantly fairer for some of our poorest communities
across the country, and we should not dismiss the idea of a
proportional property tax too quickly. I look forward to the
Minister’s considered responses and thoughts on the matter.
5.00pm
(Leeds East) (Lab)
I congratulate the hon. Member for Barrow and Furness () on securing this important
debate on alternatives to council tax and stamp duty.
The Government need to look at more progressive alternatives to
council tax, which is very regressive, as has been said. I draw
hon. Members’ attention to the work of the Fairness Foundation.
Its important research on this very issue, which is out later
this week, makes the point that low-income households spent two
to four times more on council tax, as a percentage of their
income, than richer households. The research also makes it clear
that people want the Government to do more to tax the richest in
society. Council tax is deeply regressive, so the Government must
lay out alternatives. Some 68% of people think that the
Government should be doing more to tax high net worth
individuals—those with £10 million or more—and 79% of people
worry that the wealthy do not contribute their fair share. It
will be no surprise to hon. Members that I encourage the
Government and the Minister to consider real wealth taxes on the
very richest.
I also draw hon. Members’ attention to a campaign that is being
run by the community union ACORN, which argues that when the
Levelling-up and Regeneration Bill becomes law, councils should
implement a 100% council tax premium on second homes and empty
homes to help to fund important expenditure on council housing. I
have lent my support to the campaign, and I will support that
proposal if and when the Bill becomes law. We have heard about
the issue of second homes and holiday homes, which could be
looked at. I encourage the Minister to look at the Fairness
Foundation’s research when it comes out later this week; it is
about what can be done to move to a more progressive taxation
system in which the super-wealthy pay their fair share.
(in the Chair)
I call .
(Cheadle) (Con)
Thank you for calling me, Mrs Harris, but I was intending only to
intervene in the debate, so I will leave the time for the other
speakers.
(in the Chair)
Thank you very much. I call .
5.02pm
(West Dorset) (Con)
Thank you so much for calling me to speak in this very important
debate, Mrs Harris. I pay tribute my excellent colleague, my hon.
Friend the Member for Barrow and Furness (), for bringing this debate to
Westminster Hall.
West Dorset has one of the highest council tax rates in the
country. Council tax for the average band D property is in the
region of £2,300 per year, which is absolutely outrageous. There
are many different components to that: council tax is one, but
the revenue support grant—I have lobbied long and hard for its
review—also needs to be considered. It is fundamentally wrong
that London boroughs, which are often Labour-led, have revenue
support grants of £24 million-plus, yet in Dorset we have a
revenue support grant of virtually zero.
We do not have to go very far to understand why council tax is
higher in rural Britain than in urban Britain. We should pay
tribute to the Fairer Share campaign. Its work is excellent; I
wholly support it and shall continue to do so. West Dorset, for
example, has one of the highest average ages: a third of my
population is over 65. That has an associated social care
requirement, which is funded through council tax. The burden on
local people is therefore much higher than it may be in other
areas, such as the London Borough of Wandsworth. That London
borough has one of the lowest average ages in the country, yet it
receives tens of millions of pounds in revenue support grant.
That is wrong, and it needs proper review.
I hope that the Minister hears my message loud and clear. We all
expect a full review of council tax and the different levers that
contribute to it, as many of us have argued long and hard in
debates on local government finance motions.
5.04pm
(Keighley) (Con)
It is a pleasure to serve under your chairmanship, Mrs Harris. I
thank my hon. Friend the Member for Barrow and Furness () for securing this important
debate. Like other hon. Members, I feel that council tax needs to
be reformed, but I want to limit my contribution to the nuanced
empty homes premium that exists in the current council tax
structure, which is unfairly disadvantaging many of my
constituents in Keighley and Ilkley and many people across the
country.
Since 2013, local authorities in England have had discretionary
powers to charge additional council tax on properties that are
unfurnished for two years or more, with more tax being charged
the longer the property is unfurnished. In my constituency,
Bradford council charges 200% after two years, which rises to
300% after 10 years. The policy might have been introduced for
all the right reasons at the time: discouraging individuals from
banking multiple properties, and encouraging empty homes to be
brought back into the fold. However, that tax hike has had
unintended consequences.
As the housing market is being squeezed and young families
struggle to get on the housing ladder, that additional tax on
home buyers—particularly on young families who might want to buy
an empty property, renovate it and do it up, but are unable to do
so in the two years of free time that they have before the 200%
kicks in—makes it unachievable. When many are struggling to get
builders and contractors in, and might find difficulties because
the home is not in the condition they thought it would be in and
they have to make it adequate and fit to live in, the 200%
increase through the empty homes premium is having a negative
impact on the many householders who want to do up their
properties.
There is also an impact when individuals want to sell a property
but cannot sell it within the period of time that the home is
vacant. The Treasury has indicated that that is something that it
is likely to review; the levelling-up White Paper is also looking
at reviewing it. My plea to the Minister is that he look at the
negative consequences of the empty homes premium when carrying
out a further report.
5.06pm
(Aberdeen North) (SNP)
Thank you for your diligence in chairing the meeting this
afternoon, Mrs Harris. It has been a busy debate, so it has not
been the easiest job.
I congratulate the hon. Member for Barrow and Furness () on securing this debate. It is
important that we discuss and think about the future of tax
policy. Too often, there are only seven of us in the Chamber when
tax policy is being discussed, so it is nice to see such a full
room talking and thinking about the future of tax.
The situation in Scotland is similar but different: we have
council tax and we have stamp duty, but it is now called the land
and buildings transaction tax and is structured slightly
differently. We introduced the LBTT in 2015, and it has been in
place since then. The charge we pay in Scotland is more
proportionate to the property price than stamp duty is in
England, and we have a slightly different system that means that
40% of people who buy houses—it is separate from the additional
dwelling supplement—do not pay any LBTT. Also, if a property is
under £175,000—the majority of first-time buyers buy at that
level—the LBTT is not payable at all.
(North Shropshire) (LD)
On the point about stamp duty and similar taxes, does the hon.
Lady agree that there is an opportunity to graduate those taxes
to reflect the energy performance of a building so that we might
encourage people to retrofit buildings and use the tax regime in
a way that would meet some of our carbon targets?
I had not considered that before. It is very novel, and a good
idea that should definitely be considered.
We are looking at council tax reform in Scotland. We agree that
the system is not currently as fair as it could be. The Scottish
Greens, along with the SNP and the Convention of Scottish Local
Authorities, are planning short-term reforms and looking at how
to approach long-term reforms to council tax. We also have a more
proportionate system in Scotland for council tax. The hon. Member
for Westmorland and Lonsdale () talked about the amount that the highest payers pay,
compared with the lowest payers. It is different in Scotland,
where it is higher for those at the top.
Council tax is significantly less in Scotland, as my hon. Friend
the Member for Glenrothes () mentioned. Our properties are
£600 less for a band E property on average across Scotland
compared with England. The Scottish Government have committed to
abolishing council tax for anyone under the age of 22. That flies
in the face of what the UK Government are doing, which involves
paying young people less, giving them less in benefits and,
basically, disadvantaging them at every opportunity.
We also have a situation whereby people who were looked-after
children on their 16th birthday will be eligible for a council
tax reduction to zero until their 26th birthday. We have put that
in place because we recognise the hardship that young care
leavers feel in many areas of life, so things are slightly
different in Scotland. We still do not have as fair a system as
we would like, and we are still looking to reform it, but we are
committed to making those changes.
5.10pm
(Ealing North) (Lab/Co-op)
It is a pleasure to speak in the debate with you as Chair, Mrs
Harris. I thank the hon. Member for Barrow and Furness () for securing it, and I
particularly thank my hon. Friends the Members for Leeds East
() and for City of Durham
() for their
contributions.
I am sure we will shortly hear from the Minister about whether
the Government have any plans to introduce a new system of
property taxation. However, if they were to agree to develop and
implement a new system, it would clearly take some time. They
could already be helping working families by freezing council tax
this year, which could be funded by strengthening the windfall
tax on oil and gas producers. As the Minister will know, I and my
colleagues have been deeply concerned about the increase in
council tax that the Government have forced on local authorities
and households this year. That tax rise has taken the bill for a
typical band D property above £2,000 for the first time. It comes
in the middle of a cost of living crisis and from a Government
who have been responsible for 24 tax rises and for making the tax
burden the highest in 70 years. At the same time, they have
refused time and again to close gaps in the windfall tax on oil
and gas producers’ unexpected and excessive profits. We have long
said that it cannot be right for the Government to leave money on
the table like that while pushing up taxes yet again for working
people across the country.
The debate is focused on stamp duty as well as council tax. The
last time the Government made significant changes to stamp duty
was in autumn last year. The main change was to increase the nil
rate threshold for stamp duty payments on residential properties,
effectively by removing the lowest band. The changes were
introduced by the previous Chancellor, the right hon. Member for
Spelthorne (), under the brief
premiership of the right hon. Member for South West Norfolk
(). They were continued by
the current Chancellor and Prime Minister—albeit on a
time-limited basis—at a cost to the public finances of £1.7
billion a year. We opposed those plans and made it clear at the
time that it would not have been right or responsible to support
them. Given that our economy was reeling from the long-term
damage the Government had done, with current and future
homebuyers facing a Tory mortgage penalty, this was not the time
to spend £1.7 billion a year on that tax cut. Despite that, the
Government pushed ahead. So when it comes to stamp duty, it is
clear that they do not have a record of spending public money
wisely.
I am interested in what the hon. Member just said. Would a Labour
Government put the stamp duty limit back to where it was—a tax
penalty for millions of Britons?
As I said, we opposed the stamp duty cut because it is not a way
to spend public money wisely. We are clear that a Labour
Government would spend public money wisely, making sure that we
eased the burden on working people, who are suffering the highest
tax burden in 70 years. I will be interested to see whether the
Minister attempts to defend the mini-Budget stamp duty changes.
Will he also defend the Government’s council tax rise and their
failure to strengthen the windfall tax?
I will conclude, because I am conscious of the time. The
Opposition believe that our country needs a tax system that is
fairer, not one in which an ever greater burden falls on working
people, and that is what we will continue to fight for.
5.13pm
The Economic Secretary to the Treasury ()
It is a pleasure to see you in the Chair, Mrs Harris, and to
serve under you today. Let me join others in congratulating my
hon. Friend the Member for Barrow and Furness () on securing this well-attended
debate. I note the largely cross-party nature of the
contributions—with the exception of the speech by the hon. Member
for Ealing North ()—and I will try to reflect
that in my tone. We welcome this opportunity to discuss the
important issue of property taxation, including the current
status of council tax and stamp duty. I have heard the concerns
that have been articulately put on behalf of Members’
constituents in many different parts of the country, and those
concerns have been thoughtful and constructive.
For many people, council tax is the most fundamental tax: we pay
it every month, it is highly visible, it has an impact on all
sorts of important decisions and, when we pay it, we know what
services we are getting for it. It has the strength unique in the
taxation system of being local and personal. That is not to say
that it is perfect, and we have heard today about some of the
difficulties manifested in some communities.
Importantly, council tax is set, collected and retained by
democratically elected local authorities, and I ask colleagues to
think about that as we think about potential reforms. It ensures
that households contribute to the cost of local services, whether
that is fire and rescue, refuse collection, transport, libraries
or—this is a particular passion for my constituents in Arundel
and South Downs—dealing with potholes.
Council tax is a well-understood tax and has a high rate of
collection and a stable base. It does not, for example, go up and
down with property prices, as some potential alternatives might.
Therefore, it gives local authorities a strong degree of
certainty in their financial planning. On aggregate, it raises
about £36 billion for local councils in England. That is about
57%—very importantly, the majority—of their core spending power.
Council tax is the largest single source of revenue for local
authorities. To ensure fairness, it is mitigated—we heard a
little about this—through a range of reliefs, such as support for
those on low incomes, a reduction for those with a disability and
an exemption for students.
Stamp duty is an efficient tax to administer and collect. It
raises a really substantial sum—£14 billion that the Government
use to pay for essential services, such as the NHS, schools and
police.
So these are not easy issues. For all of us thinking about the
best way forward and about how to chart a course for reform, this
issue does pose questions that are worth thinking about.
Notwithstanding the advocacy of the proposal from many hon. and
right hon. Members in the debate, neither the Opposition
Front-Bench spokesman, the hon. Member for Ealing North, nor the
distinguished hon. Member for Westmorland and Lonsdale () actually went to the point of committing to make this
change, so I would contend that there is a little more work to
do.
Will the Minister give way?
Although the hon. Member does not represent England, perhaps he
would like to make that commitment.
At least we agree that we are no longer a United Kingdom—I am
pleased to agree with the Minister on that.
Given the increasing complexity and scale of services that local
government in Scotland and England has to provide, does the
Minister see any benefit in giving councils the power to raise
taxes based on something other than simply property values? Is it
time to broaden the base so that they can raise their own incomes
tax, VAT, sales tax or tourist taxes—or are the Government
obsessed with the idea that their core tax will always be based
on imaginary property values?
In the interests of trying to reflect the views of hon. Members,
I will not be distracted by that interesting idea. Again, the
proposal that has been put forward does acknowledge the
opportunity for local authorities to diversify their sources of
revenue. One of the issues that, as a democrat, I find most
problematic with this proposal is the impact it would have on
local authorities. Their ability to raise revenue for themselves
would be taken away, which would be one of the single biggest—and
adverse, in my view—issues for local government. The system is
often accused of being overly centralised, but this proposal
would absolutely remove any ambiguity whatever, and that is
something that the advocates of this proposal may want to think
about.
Will the Minister give way?
I will give way—sparingly.
I am grateful to the Minister for giving way. On the point about
stability, surely a simple step to address some of the inequality
in the current system would be to reassess the valuations and
introduce higher bands of council tax.
Higher bands have been introduced over time. It has been a long
time—just as a point of fact—since there has been a revaluation.
I note that both the Labour party and the Liberal Democrat party
served in Government for significant periods during that time, so
it is not just among Government Members that there is caution
about some of the unintended consequences of doing something that
affects so many people. The impact on those with low and fixed
incomes of moving any sort of basis of property tax should be
thought about carefully.
The hon. Member for Leeds East () was candid about his desire
to soak the rich with wealth taxes. What we are talking about
would effectively be an imperfect wealth tax, because it would be
a tax on that proportion of wealth that relates only to
residential property and it would not be comprehensive. For that
reason, there would be people who were asset-rich but cash-poor,
such as widows, who would have to think through the
consequences.
Moving towards a more periodic review of values poses the
question of how that revaluation would take place. Certainly,
some of us are shy of algorithms, but in all likelihood, unless
we were to recruit an army of estate agents-meet-inspectors, we
would be using some algorithmic method. In fairness, colleagues
on both sides have talked about the status quo, but there would
also potentially be unfairness in a mechanistic approach.
The Minister is being incredibly generous in giving way. In the
short time available to him, he is providing a thoughtful
critique of the proposal that has been put to him, and he is
entitled to do that. He correctly says that none of the parties
represented here is saying that this will definitely be in their
manifesto, although I think we should all consider it. However, I
would love him to consider the fact that the Fairer Share
approach is cross-party. The people who have been advocating for
the Government to think about this have made an extensive
critique of council tax and how unfair and outdated it is. On the
table is something that is potentially better. I would love the
Minister to look again at council tax to see whether there are
ways in which he could make it fairer.
I hear the hon. Gentleman, and I look forward to reading his
manifesto—whether it is for his party or for the coalition that
his party and the Labour party both seem very keen on.
As we think about proposals, we must think about democracy and
about the potentially disempowering impact on local government,
of which I suspect that most colleagues are strong advocates.
There is also the issue of accountability. My hon. Friend the
Member for Hartlepool () talked about the debate
going on in Hartlepool, and I suspect that it is one of the
livelier debates that local people are having. However, it would
not be able to take place if these things were simply set in
Whitehall and the money was distributed algorithmically.
My hon. Friend the Member for West Dorset () talked a little about the
compensating mechanisms of revenue support grant. The Government
are levelling up in many ways, but that is another way in which
we can seek a fairer outcome for our constituents.
Will the Minister consider reviewing that for the Dorset Council
area so we have fairness for our constituents?
I am quite sure that my hon. Friend, who is an effective champion
for his constituents, will continue to prosecute his case, but he
will understand if I do not give that commitment here and
now.
My hon. Friend the Member for Barrow and Furness and others
talked about second home ownership. We understand that, and I
have a proportion of second homes in my own constituency. As
colleagues know, proposals on the table in the Levelling-up and
Regeneration Bill would allow councils local and democratic
discretion to attract a council tax premium that goes some way to
address that issue. However, we should be cautious. Those homes
already bring a disproportionate amount of net benefit to local
councils, simply because they pay the full rate of council tax,
but do not consume at the same intensity. The ability to have
them pay double will increase that further.
Let us remember that this is not a simple issue. The
work-from-home, hybrid economy blurs the line. Hon.
Members—probably almost uniquely as a group—understand that
people may work in one place and live in another, so the line
between a first and a second home can be blurred. We should be
cautious about discriminating on tax grounds against the person
who chooses to work and rest in two different places, in two
small homes, rather than in a single home of equivalent value. I
offer that to hon. Members as a potential mitigant as we think
about this issue.
Today, we have heard some thoughtful proposals, and a number of
points have been made on both sides. In conclusion, these issues
are important, and there are real consequences not only for our
constituents, but for the housing market, in which, as one hon.
Member said, there is already substantial intervention. We need
to think through the unintended consequences at every point. Help
to downsize would be one potential benefit for us all.
The Government will continue to act where appropriate to do so. I
thank hon. Members for their thoughtful contributions. In
securing the debate, my hon. Friend the Member for Barrow and
Furness has allowed us to hear a variety of different
contributions from all parts of the House. The Government will
keep listening on this important topic.
5.25pm
I shall not sum up further than the Minister has so ably done
already, other than to thank you, Mrs Harris, for chairing and to
thank Members from both sides of the House for putting politics
to one side, embracing an idea and fighting for it. From Fife to
Dorset, and from Cumbria to Durham, I think we have put together
a rainbow coalition in support of reform. I am glad my hon.
Friend the Minister is listening to the calls for reform. We have
a piece of work to do to convince him about the democratic
deficit of the proposals, but I am convinced we can do it.
(in the Chair)
Before I put the question, I thank all Members for their
discipline and consideration this afternoon in making sure that
all who wanted to speak had an opportunity to do so.
Question put and agreed to.
Resolved,
That this House has considered the matter of alternatives to
Council Tax and Stamp Duty.
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