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Introducing a proportional property tax would level the playing field for homeowners in deprived areas

Introducing a proportional property tax would level the playing field for homeowners in deprived areas
4 min read

Boris Johnson's social care plan is like a "classic Covent Garden pickpocketing operation", Keir Starmer said last week to much applause from Labour MPs at PMQs and some arresting headlines afterwards.

The image of Johnson and Rishi Sunak as street pickpockets worked well, as it did when Rachel Reeves deployed it in her well-received Budget response last month. It also forms a line of logic that leads Labour into some interesting new territory on how we tax homes fairly.

“It is not just broken promises; it is also about fairness,” said the Labour leader about the revised social care cost cap, which no longer includes council contributions towards total fees. “Under the Prime Minister’s plans, a person with assets worth about £100,000, most of it tied up in their home, would have to pay £80,000. They would lose almost everything.”

Labour is yet to detail our own social care plan, but the direction of travel is clear. Evidently, the leader rejects the concept of all homeowners paying the same towards social care regardless of the value of their property. Those living in areas in the North of England where house prices have hovered around the £100,000 mark for some years should not get the same treatment as millionaires living in London and the South East where prices have sky-rocketed, he suggests.

The position makes sense, coming in the wake of Labour analysis released at the weekend, showing how poorer Northern homeowners will end up losing a larger proportion of their wealth than better-off people under the changes. Homeowners in the North East will be particularly badly affected, with average prices under £186,000 in nearly 90 per cent of constituencies, while those in London and the South East will be less adversely impacted.

In the so-called red wall, 97 per cent of households would be better off as a result of a proportional property tax

But if Labour is to level the playing field then why stop at social care? The current council tax system also does exactly what he is railing against by forcing homeowners in modest homes in the North and the Midlands to pay out much more than their southern counterparts as a share of their home’s value every year.

In London and the South East, there are eight constituencies in which the average household pays no more than 0.20 per cent of their home’s value. But in many constituencies in the North and the Midlands, households must pay out a considerably higher share of their home’s value - going up to a whopping 1.41 per cent in my own constituency of Easington in East Durham. As a result, we currently have the absurd situation in which residents in my constituency face a council tax burden 14 times higher than that faced by residents of Kensington – and 24 times higher than people living in Westminster.

If we are to attack the government’s social care cap for hitting those with fewest assets the hardest, Labour should criticise the current council tax regime on the same grounds. Going further, we should be supporting plans to fix the problem without spending more money – by simply abolishing council tax and stamp duty and bringing in a fairer system of proportional property tax.  

Under the model proposed by the Fairer Share campaign, property owners would pay 0.48 per cent of their property value each year and this tax would bring in exactly the same amount of revenue as stamp duty and council tax. Around 76 per cent of households across England would gain under the new system, seeing a reduction in the amount of tax they pay on their primary residence.

In the so-called red wall, 97 per cent of households would be better off as a result of the policy with an average saving of £660 per year. We need new ideas to rebuild Britain and Labour backing such a radical and progressive policy would help us beat the Tories at the next election.

Judging by his comments this week, Starmer already supports the principle behind a proportional property tax. The logical next step for him is to get behind a policy that is increasingly and unsurprisingly gaining support from the public as well as from MPs on all sides.

“He has picked the pockets of working people to protect the estates of the wealthiest" Labour’s leader told the Prime Minister at PMQs last week. I agree, and Labour should now apply the same principle and replace outdated council tax with a new, progressive and fairer proportional property tax.

 

Grahame Morris is Labour MP for Easington 

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