Reforming Council Tax will help to deliver the aspirations of 'Planning for the Future'
Earlier this month, the Government published a radical and exciting new white paper, Planning for the Future, setting out major reforms for the planning system with the ambition of increasing and revitalising the UK’s housing stock.
Primarily, the reforms aims are to increase the speed and volume of housing developments, to reduce the cost of housing (particularly for prospective younger buyers), and to ensure genuine community involvement in local developments and practices.
As with our Fairer Share campaign, the white paper appears to take a certain amount of inspiration from the late philosopher Roger Scruton, who held firm in his belief that:
“People do not only want beauty in their surroundings. They are repelled by ugliness, which is a social cost that everyone is forced to bear. Such buildings destroy the sense of place and undermine the spirit of community.” as noted in the Living with Beauty: report of the Building Better, Building Beautiful Commission, of which Scruton was co-chairman.
The white paper’s welcome adoption of locally-developed design codes would undoubtedly move the UK’s planning legislation further inline with what Scruton envisaged for the majority of his career. As always, it is the detail of these design codes, paired with the level of commitment to community involvement that will determine the extent by which Scruton’s vision is realised. But there is a clear aspiration from the Government to incentivise developers to improve the quality of homes they build.
In addition to the issue of building aesthetically pleasing and appropriate homes, the white paper rightly frames the discussion with the consistent theme of building more homes to meet the UK’s housing needs — with consent from the local community becoming a crucial part of the planning process. It is here where Council Tax reform can play its own role alongside planning reform in achieving the Government’s vision.
Historically—as noted throughout the paper—one of the major barriers around planning has been NIMBYism. Under the current system, there is a financial incentive for local residents to object to developments — fewer homes mean greater demand and higher prices for their properties. The losers are the government and local authorities, who are forced into making costly interventions to the market, and prospective buyers trying to get a foot on the property ladder. A proportional property tax combined with the Government’s planning reforms can be used realign the incentives and costs of planning objections more fairly.
For example, if government linked the budget for a local area to a local homes target, residents would clearly see the link between supporting development and spreading the tax burden between more property owners. Conversely local residents may choose to limit supply, increase prices and (as tax is proportional to price) pay more in property tax which the Government would then spend on increasing effective housing supply elsewhere through more homes or reducing travel times to existing areas with underused supply. This realignment can only exist with a tax linked to property wealth.
Furthermore, the variability of Council Tax across the country alters the potential incentives for developers. For example, in Westminster the likely buyers and tenants for new housing developments would be relatively unaffected by the local Council Tax rate. Not only is Council Tax lower than other parts of the country but household incomes are higher in Westminster, meaning households finances would be less impacted by any increase to the tax rate. However, if you take Hartlepool as an example, where the average household income is significantly lower, the high relative cost of £2,090 a year in Council Tax for a Band D property worth under £200,000, could dissuade prospective buyers and tenants from moving to the town, therefore disincentivizing the building of new developments there.
The removal of Stamp Duty would also assist in advancing the objectives of these planning reforms. Removing the tax on property transactions stimulates the housing market by increasing the incentive to move home, as has been seen with the recent increase in the Stamp Duty threshold to £500,000. The removal of Stamp Duty reduces the cost of relocating for those looking to pursue job opportunities elsewhere in the country. This will improve both labour mobility and workplace productivity. A greater incentive to move would result in the more efficient use of the UK's housing stock, which in turn would lead to an increase in the number of new residential developments and the volume of homes in the UK.
Council Tax reform can act as a more than useful facilitator to create an environment that spawns the type of developments to which the government is clearly aspiring, namely: attractive homes that stand the test of time, are desired by the communities they inhabit, and are fit for purpose in the 21st Century.
Find out more about Fairer Share’s proposal by visiting our campaign page.
Andrew Dixon | An interview with the founder of Fairer Share
Andrew Dixon is founder of ARC InterCapital, founding trustee of The Woodhaven Trust, and an Enterprise Fellow at The Prince’s Trust.
In 2020, Andrew launched Fairer Share to reform England’s poorly designed, out of date, and unfair property tax system.
In this interview he talks about his motivations for setting up the campaign, its proposals, and how to get involved.
How do you think the world has changed over the last few years?
AD: The big story of the last few years has been growing levels of social discontent. Many people feel they have been left behind by economic growth, are struggling to keep up with the higher costs of living, and are frustrated with politics.
One of the main reasons for this discontent is rising levels of inequality. In the UK, the top 10% of households have 45% of the country’s wealth while the bottom 50% own just 8%.
Add to this regional and intergenerational inequality:
- The UK has greater levels of regional inequality than 28 other developed countries, including the US, France, and Germany, according to a recent academic study.
- 60% of families headed by people born in the early-1950s were home owners by the age of 33 compared to just 40% of those born in the early-1980s, according to the Resolution Foundation.
As a country, we are bound together by ties of mutual responsibility, social trust and most importantly a sense of fairness. We feel passionately about our fellow citizens and their circumstances and want to live in a society where everyone has a fair shot at life. When we see something which is grossly unfair, it bothers us.
This sense of fairness is part of our national character. As a country, we have a proud history of pulling together to fight for each other’s rights and liberties – from the signing of the Magna Carta to the creation of the NHS. Our society was founded on principles that seek to uphold fairness and equal opportunities for all in education, work, health, justice, security and living standards.
How has growing inequality changed how people feel about the country?
AD: Despite our strong sense of fair play, people increasingly feel that the country is only working for the country’s most fortunate people and everyone else just has to get by on their own. 71% of the public say there is “one rule for some and a different rule for people like me.” According to one recent survey, 69% say “rich people get an unfair advantage.”.
How has growing inequality impacted our politics?
AD: People feel alienated from politics. This has fuelled the rise of anti-establishment parties on the left and right and, I believe, was one of the reasons behind the Brexit vote. Regardless of your view on Brexit, the Leave campaign was undoubtedly successful at tapping into people’s frustrations.
Has coronavirus affected this trend?
AD: It has made the situation worse. It has shined a light on the growing divides in society. On one hand, it has revealed the deep flaws in our broken adult care system on which many vulnerable and elderly people depend. Many of our care homes have suffered from decades of underinvestment, especially in less well-off parts of the country.
People with pre-existing health conditions, those in insecure and low-paid work, and ethnic minorities have been adversely affected by the pandemic. People in lower paid jobs are more likely to work in industries that expose them to the virus, such as retail and construction, and as contractors do not have many employment protections, they have continued working despite the obvious risks.
What do you think the future holds?
AD: If we don’t tackle the deep-seated problems endemic in our society, we will all lose out. Inequality will increase, the country will become more divided, and frustration will continue to rise. We will have a country that is fractured, with tensions rising between the UK’s regions and between the generations.
We need to make sure that society is working for everyone. We need to bridge these divides.
Do you think this had an impact on the 2019 General Election?
AD: Regardless of your opinion on the election result, the Conservative Party’s manifesto promise to ‘level up’ the country resonated with voters outside of the south east. Over the last few decades, London, in particular, has benefited from economic growth, while the rest of the country has stagnated. Suddenly, you had a political party that said they were going to tackle this problem. This won over huge numbers of voters in the north of England and led to the collapse of the Labour’s ‘Red Wall’ seats.
Is there an alternative?
AD: Yes, there is. The alternative is a country where we all pay our fair share; an equitable society in which those with the means to do so are proud to contribute to well-funded public services. Tax revenues play an important role in creating a fairer society that provides everyone with improved opportunities in life through quality healthcare, welfare and education systems.
A fairer system is one where sufficient tax revenue is raised to pay for our important public services, while ensuring that the burden is based on people’s ability to pay. While we may not like paying taxes, we accept them because of the safety net they provide as well as our desire to support others in the community.
We want to live in a country where we are not riven by divides but, instead, brought together by our shared commitment to each other.
Are property taxes part of the problem?
AD: Yes. Council Tax is emblematic of the inequality in our society. It allows people who can afford the most valuable homes to pay relatively little while placing an unreasonable burden on those with properties worth much less. Meanwhile, Stamp Duty is one of the key reasons as to why it is so expensive and difficult for young people to buy their first home or older couples to downsize.
Why is Council Tax unfair?
AD: Firstly, Council Tax is based on property valuations that are almost thirty years out of date, despite dramatic growth in house prices, particularly at the top of the market. This means that those who have benefited the most from house price growth over recent years are the biggest beneficiaries of the Council Tax system.
Secondly, due to the band structure – in which all properties in a specific band pay the same amount – homes at the bottom of each band pay proportionately more than those at the top of each band.
How is Council Tax contributing to growing regional inequality?
AD: Property prices have risen much faster in some parts of the country than others. The average property price in London has increased by nearly 640% since 1995 while it has increased by 298% in the North East.
A modest property in Middlesbrough worth £150,000 may pay a Council Tax bill of £1,702 while a £10 million home in Westminster will pay just £1,560. These flaws mean that Council Tax is only weakly linked to property values. In London, homeowners pay an average of just 0.28% of their property value in Council Tax, while in the North East that number is 0.77%, nearly three times the proportion.
How is Council Tax making economic inequality worse?
AD: Another problem is that Council Tax is levied on tenants rather than landlords. As tenants are more likely to be younger people in lower paying jobs without access to the resources to buy a home, we have a situation where those with much less are, again, paying more. This is not the norm. In most other countries, including the USA, Australia, the Republic of Ireland and the Netherlands, the property owner pays property taxes.
But if we want to tackle regional inequality, shouldn’t we start with infrastructure first?
AD: There have been many great schemes to boost regional economies, like the Northern Powerhouse, led by my former colleague Jim O’Neill and good friend Jürgen Maier. Their focus on business, infrastructure, and creating good-quality, well-paying jobs is critical, but there is an additional important element. As well as creating new jobs, we also need to make sure people’s cost of living is fair and proportionate, which is why it’s important to reform residential property taxes.
How else is Council Tax impacting people’s lives?
AD: Council Tax is also trapping many people in cycles of debt. Council Tax arrears account for 60% of cases sent to bailiffs by local authorities and, in 2017-18, more than 300 people were sentenced to prison for not paying Council Tax.
Council Tax is also riddled with well-intentioned but self-defeating exemptions for second homes and single occupants, which encourages under-occupation and exacerbates the housing shortage. Councils, for example, are able to give second homes a Council Tax discount of up to 50% on their bill and yet recent Government statistics show that over 216,000 homes have been empty for over six months. Additionally, undeveloped plots of land with planning permissions pay no Council Tax, which encourages land banking where developers simply wait for the value of their plot to increase prior to development.
If your analysis is right, why was Council Tax so badly designed in the first place?
AD: Not enough thought was put into the system when it was first introduced in 1993. It was a rushed replacement for the even less popular Poll Tax and the long-term consequences were not properly considered. Since then, new well-intentioned exemptions and dispensations have been added but these have made the system even more complicated and distortionary. The system is so poorly designed, unpopular, out of date and unfair that if it did not exist already, nobody would suggest its creation.
What are the problems with Stamp Duty?
AD: Stamp Duty is a better designed tax than Council Tax in the sense it is progressive, linked to property values and is more generous to young people thanks to its first-time buyer discount. However, by taxing property transactions, Stamp Duty discourages homeowners from moving that would lead to a more effective use of housing. This has wider economic consequences when it leads to people turning down job opportunities outside of their local area due to the cost of moving home. This contributes to regional unemployment and local skill shortages.
And Stamp Duty makes buying a home prohibitively expensive for many potential homeowners, especially younger people who have already had to raise money to put down a deposit on their mortgage. Many young people have no option but to keep on renting.
Stamp Duty also prevents older couples from downsizing, something many couples want to do now their children have left home. Faced with the prospect of having to pay Stamp Duty on their next, albeit, smaller home, they end up staying put. The result is that many people are now living in homes that are too large for them. Meanwhile the housing crisis deepens.
Do you think people realise how unfair our property taxes are?
AD: No. It is a well-kept secret, and this is one of the other reasons why very little has changed over the last 30 years.
How could we design a fairer system?
AD: We need root-and-branch reform of our property tax system. These reforms should be grounded in clear and straightforward principles of fairness that everyone will accept and understand, and not knee-jerk reactions or vested interests.
What would those principles be?
AD: In our view, a fair system is one where:
- Property taxes are based on actual property values;
- They are re-distributive, like Income Tax, with wealthier parts of the country paying more;
- They are based on a household’s ability to pay;
- The system is simple, easy to understand and easy to administer;
- It should encourage the most efficient use of our limited land.
What reforms are you recommending?
AD: These core principles led to the key elements of Fairer Share:
- We replace Council Tax and Stamp Duty with a single Proportional Property Tax, charged at a fixed percentage of the property’s value;
- The new tax is payable by property owners and not tenants;
- The tax can be deferred if the homeowner genuinely cannot afford to pay;
- We scrap the ineffective and unfair reliefs and exemptions, such as those on single occupants and undeveloped plots of land;
- A surcharge would be applied to second homes, empty properties, and those bought by foreign buyers.
Fairer Share’s reforms focus on England in the first instance as Council Tax is already devolved in Wales, Scotland and Northern Ireland.
How would you bring property taxes up to date?
AD: It is essential for properties to be revalued as soon as possible with updated and annual revaluations to stop the situation where large increases in property prices are not factored into the taxes that households pay. While valuing properties every year may sound challenging, new technology now makes this very feasible.
What would the new flat rate for the Proportional Property Tax be?
AD: After looking at the data, we have set the rate at 0.48%, with a higher rate of 0.96% for second, empty and non-resident owned homes. Factoring in administrative savings and the abolition of distortionary exemptions, the new Proportional Property Tax would be revenue-neutral.
If the new tax will be payable by property owners, won’t the costs simply be passed down to renters in any case?
AD: Landlords may pass some or all of the Council Tax down to renters, but given 75% of properties will pay less tax, the new effective tax rate is likely to be much less than renters are already paying. The abolition of Stamp Duty will also make it easier for renters to get on the housing ladder should they so wish.
I also expect that there will be an increase in the supply of rental housing, reducing average rents; this is because second homes, unused properties and undeveloped land will be brought into the tax system, which will incentivise more efficient use of the current housing stock.
Why is the time right for this reform?
AD: The Conservatives won the last election on a wave of support from outside of London on a commitment to ‘level up’ the country. The party will need to deliver on those promises and a first step would be reform the country’s regressive Council Tax and punitive Stamp Duty.
What would be the benefits of the reform?
AD: 18 million households would pay less, with 75% of households better off, and it would level the playing field between London and the rest of the country. The average household in the North East would enjoy £615 tax savings each year and an average household in the North West would save £510 each year. A total of £6.5 billion would be saved by households outside of London giving a huge boost to regional communities.
And why hasn’t our property tax system been reformed already?
AD: On one hand, politicians are still chastened by the memory of the negative reaction to the bungled and unpopular Poll Tax. On the other, Council Tax and Stamp Duty are so unpopular that politicians are anxious about even raising the topic. Just 29% of the public believe that Council Tax is calculated fairly and only 26% believe that their own bill is set at the correct level.
Also, as soon as you start talking about reforming property taxes, ideas are incorrectly labelled as a ‘Mansion Tax’ or a ‘Garden Tax’. Given that many powerful individuals benefit from the current system, it is not surprising, but it is still frustrating.
Why would anyone object to a fairer property tax?
AD: People with the good fortune of owning more expensive homes, or even multiple properties, will pay more. While they may initially object to the new system, I believe they will be supportive of a fairer system when they recognise the adverse impact the current system is having on other people’s lives. We all want to live in a fair society.
How can the new system be fair if it means London paying for more of the country’s public services than other regions?
AD: Everyone benefits from a fairer, redistributive system. More prosperous areas of the country should support less prosperous areas. Just think of coronavirus. We need well-funded health services and adult social care up and down the country for society as a whole to benefit.
Why should second home owners pay a higher rate?
AD: Second homes remove properties from the market that could have been used by local families, meaning the government needs to invest in new roads, schools and supply new housing elsewhere. The higher rates ensure these owners pay a fair share for the increased costs.
Why should foreign home buyers pay a higher rate?
AD: Foreign owners are much less likely to pay Income Tax, National Insurance, Capital Gains Tax and Inheritance Tax, despite being able to access the same services as everyone else. The proposal ensures that foreign owners pay their fair share of these services.
Won’t people be able to find a loophole to avoid the tax, like buying it through an offshore company?
AD: No. One of the reasons proportional property taxes have been called ‘the perfect tax’ is because they cannot be avoided. Unlike other assets, like investments paintings and income, property cannot be hidden nor moved overseas.
What will happen to pensioners who live in expensive homes with little or no income?
AD: A key component of our scheme is that the tax is only payable if households can afford the tax. Households will have the option to defer payment until a later date such as when they sell the property. A modest interest will be charged to those who wish to take up this option.
Is this a Mansion Tax or Garden Tax?
AD: No. Unlike a ‘Mansion Tax’ this new system charges everyone at the same rate, and unlike a ‘Garden Tax’, it is based on the value of a property and not the size of the plot.
When did you first start thinking about property taxes?
AD: Our property tax system has always seemed peculiar to me. It is bizarre that more expensive properties can end up paying relatively less tax than more modest homes. In 2017, I came across Dr Gavin Kerr’s excellent article, ‘Predistribution’, property-owning democracy and land value taxation. This led me to the 19thCentury American political economist Henry George. Inspired by George, in 2018, I commissioned a team to draw up the Commercial Landowner Levy – a land value tax to reform business rates and support the struggling high street.
Who has shaped your own thinking on property taxes?
AD: There are many economists and politicians who have pointed out the problems with our property tax system in the past and proposed alternatives, including Henry George, Lloyd George, Milton Friedman, and even Winston Churchill. But one particularly influential publication was The Mirrlees Review, which was edited by Nobel Prize-winning economist Sir James Mirrlees. I liked its recommendation to abolish Council Tax and Stamp Duty and replace it with something like the Proportional Property Tax.
Why does this campaign need to be led by me and you rather than politicians?
AD: We have been plagued by an unfair and irrational property tax system for decades now. Time and again it has been ignored by the governments of the day, and it is challenging for politicians to solve this problem on their own. We need to show policymakers the strength of feeling around the country on this issue.
How do you intend to build on the momentum of the campaign?
AD: This is a grassroots campaign, and there needs to be a groundswell of support to show there is real appetite for change. But we also need to build a broad coalition of supporters. We need the support of charitable foundations, think tanks, local councils, celebrities, media, local community groups, business leaders and forward-thinking politicians.
How can people get involved?
AD: We need to build momentum. Our biggest challenge right now is that not enough people know just how unfair our current system is, so the best way to get involved is to sign our petition and start sharing the campaign.
How can I share the campaign?
AD: Please post our campaign video on social media, send our ‘Savings Calculator’ to friends and family, email your MPs and local councillors, and write to your local newspaper.
It’s time to show our politicians change is needed.
https://player.vimeo.com/video/410546330
What do you do outside of Fairer Share?
AD: I spend most of my time investing in early stage businesses. Since 2000, I have invested in more than 40 British businesses through my company ARC InterCapital, and my portfolio now employs more than 1,500 people across the country.
I also support The Woodhaven Trust, a charitable foundation that I founded in 2008, championing prison reform, supporting ex-offenders establish businesses after leaving prison, and helping them find other routes into employment. I am also an Enterprise Fellow at The Prince’s Trust and an Adviser to The Entrepreneurs Network.
Before founding ARC InterCapital, I started my career in banking. I was a Vice-President at Goldman Sachs in Sydney, and before that I worked at Société Générale in Tokyo.
Biography of Andrew Dixon
Andrew Dixon is an angel investor, founder of ARC InterCapital and founding trustee of The Woodhaven Trust.
Starting his career in finance at Société Générale and Goldman Sachs, Andrew has spent over two decades investing in small and medium-sized businesses. Through ARC InterCapital, he has invested £20 million in over 40 British companies and his current portfolio employs more than 1,500 people.
Meaningful investments have included Infinitesima, the Abingdon-based high-tech firm that developed the Rapid Probe Microscope for the semiconductor industry; call answering service Cymphony and LIVE IT, the global online ticketing platform for live events. He was the first seed investor in Gamesys, which went on to become one of the most successful businesses in the online gaming space
In 2008, he founded The Woodhaven Trust to support initiatives that provide offenders and ex-offenders with pathways into employment and self-employment. The Trust also supports causes that champion progressive tax reform and teach leadership skills to young people.
Inspired by San Quentin prison’s Last Mile project, in 2016, Andrew co-founded social enterprise Code4000, which teaches coding skills in prisons to increase offenders’ prospects of meaningful employment upon release. And in 2013, he co-founded Prosper 4 Group, which runs the UK’s only national jobs board for ex-offenders.
An Enterprise Fellow at The Prince’s Trust, he lives with his wife and two daughters in Surrey, and enjoys cricket, golf and the occasional glass of wine.
How Council Tax is driving British debt
Council Tax debt in the UK has reached unparalleled levels in the five months following the outbreak of Covid-19. Debt relief charities Citizens Advice, StepChange and the Money Advice Trust have estimated that the number of households that have entered into Council Tax arrears since March is between 800,000 and 1.3 million.
While it might be easy to write this off as another ill-fated consequence of the Covid-19 pandemic, on closer inspection Council Tax has been an ever-increasing driver UK household debt for a number of years. Between 2012-2018, the yearly total of Council Tax debt grew by 37% to £944 million. This brought the total household Council Tax debt in 2018 to a staggering £3 billion. Since 2008, the number of callers to the National Debt Helpline who were in Council Tax arrears grew from 15% to 30%, while callers reporting credit card debts fell from 67% to 35% over the same period. As has been found in many areas of our lives, the effects of the Covid-19 pandemic has merely exacerbated an already dire situation.
We believe that reform is needed and it is needed now. With bailiffs allowed to resume work from the 23rd August, it is crucial that Council Tax reform is high on the Government’s agenda this Autumn. 305 people received prison sentences and 6,278 suspended sentences for their failure to pay Council Tax between 2012-2018. With the scale of those recently falling into debt, charities fear that these figures will dramatically increase in the coming year as households struggle to manage falling household incomes, reduced local authority support, and ever-increasing Council Tax bills.
Whilst reforms aimed solely at reducing the incidence of Council Tax debt would be more than welcome, we must go further. Fairer Share’s proposal, The Proportional Property Tax (PPT), reduces property tax bills for 75% of households (18 million), reducing the financial strain on millions across the country. Additionally, PPT includes a deferral mechanism, allowing outstanding bills to be paid when the household can afford it or at the sale of the property. PPT would also be paid exclusively by the property owner, meaning 8.7 million renters would be removed from the system, both easing their financial burden and greatly simplifying the collection process. A single flat rate charged nationwide on the value of property would also add far greater simplicity to a highly complicated and confusing banding process, with rates varying vastly across local authorities.
Council Tax is now one of the most significant drivers of British household debt. Reforming property taxes to establish a fairer system that doesn’t punish people for their changeable financial situation, should be a priority for the Government as it seeks to ‘Level Up’ the country.
Dr. Gavin Kerr - Review of Fairer Share, The Proportional Property Tax.
The Proportional Property Tax (PPT) is the most important reform of the tax system to be proposed for decades. In my view its most significant virtue is the impact it will have in reducing divisions and inequalities between the regions of England, and generating development and jobs in northern and western regions. According to the Institute for Public Policy Research, the UK is more regionally divided than any other comparable advanced economy, with huge differences in productivity, income, unemployment, and health. England has some of the poorest regions in the whole of Europe, while London and the South East are among the richest.
England's broken property tax system is part of the reason for this unacceptable situation. By taxing property in proportion to its value, the PPT will result in a tax cut for millions of households outside London, while demanding fairer contributions from the bankers, large landowners, and foreign investors in London and the South East who benefit most from rocketing land values in these areas. In this way, the PPT will help create a level playing field between the regions, 'levelling-up' the country and allowing the 'Northern Powerhouse' to grow and develop into a reality, rather than remaining just a political slogan.
The PPT will benefit the country in a number of other ways, perhaps most importantly by helping to solve the housing crisis, which is currently causing insecurity and misery for thousands of people across the country (including London and the South East). Levels of homelessness are rising, rents are sky high, and at the same time the number of people who own their own home is declining. By taxing empty properties and undeveloped vacant plots that have been granted planning permission, with an increased rate for second homes and (often empty) non-domiciled properties owned by wealthy foreign owners, the PPT will provide incentives for owners to rent or sell their properties and develop their building plots, putting more homes on the market.
As well as helping to solve the housing shortage and create a level playing field between the regions, the PPT will also be much easier and cheaper to collect than the Council Tax, making it an efficient as well as a fair tax.
Anyone who wants a fairer and more prosperous society in which everyone can earn a decent living and find a stable home for their family, should enthusiastically support this campaign.
By Dr. Gavin Kerr, Independent Researcher in political economy, author of The Property-Owning Democracy: Freedom and Capitalism in the Twenty-First Century.
How Stamp Duty and Council Tax reform can provide windfall for North
This article is by Fairer Share founder, Andrew Dixon, and was first published in the Yorkshire Post on 10/07/2020. The original article can be read here.
THE Chancellor’s solution to provide a temporary ‘stamp duty holiday’ on the first £500,000 of all properties sold until March of next year is a welcome one and may help to stimulate the housing market.
Will this policy have the desired effect? Potentially. However, many households will choose to stay put because they have lost their jobs, or are rightly concerned about the outlook for the economy or the industry in which they work. The stamp duty cut may bring forward purchases but it might not stimulate a flurry of activity.
This begs the question – why is it not permanent? As the Institute of Economic Affairs explained: “Making it permanent would get the property market moving and encourage those who want to downsize as well as those looking for family houses, freeing up homes for first-time buyers.”
It is important to note that the cut in stamp duty majoritively benefits existing home owners as the saving is likely to be capitalised into house prices.
We should also remember that it is renters who have been at the sharp end of the effects of Covid-19 – this policy does very little to help the many renters who are struggling to get by.
The biggest savings will be received by those who own the more valuable properties, and given regional disparities in house prices, much of the benefit will accrue to those in London and the South East.
If the Government is serious about levelling up the country, then they need to build this short-term fix into a long-term solution.
To compound matters, modest properties and areas of the country with less property wealth are already being hit with higher council tax bills as a percentage of their property value.
This unfairness has been exacerbated by a lack of property revaluations since 1991. The effective tax rate on residential property is just 0.2 per cent in London, compared to 0.63 per cent in Yorkshire and the Humber.
Indeed, our country’s two primary property taxes, council tax and stamp duty, have evolved into taxes that are neither reasonable nor right.
Meanwhile, across the country, we are seeing rising levels of inequality – both regional and intergenerational. These divides have been exacerbated by the financial crisis of 2008 and there are further challenges ahead as the Chancellor addresses the costs and the implications of the current Covid-19 pandemic.
The International Monetary Fund (IMF) highlights that economies with more equal distributions of income and wealth tend to have stronger and more stable paths of economic growth than those with greater inequality. A fairer economy will lead to a stronger economy for our country.
The philosopher Sir Roger Scruton noted: “A conscious effort to direct resources northwards, and to provide for the people of the northern cities the education and career opportunities that currently exist to the south of them, would begin to heal one of the most painful divisions in our country.”
For the Government to truly “level up” the country, as they promised during the 2019 General Election, the Autumn Budget must include the fundamental reform of property taxes, to put money into people’s pockets, stimulating the housing market and the wider economy.
Fairer Share, a campaign I helped to found, proposes to scrap both council tax and stamp duty, replacing them with the ‘proportional property tax’ – a simple flat rate of 0.48 per cent on the value of property.
Central redistribution from London and the South East would maintain local council budgets, sustaining tax revenues while reducing property tax bills for 75 per cent of households across the regions.
If Fairer Share were to be adopted, Yorkshire and the Humber would receive an average saving per household of £615 per year, bringing an overall annual tax saving of £971m to the region. This would represent a huge boost to countless communities and their local economies.
Renters have thus far been ignored as part of the Chancellor’s generosity. I believe the tax should be collected not from tenants, but directly from owners who are in a better position to pay.
If this were the case 8.7 million households would be removed from property tax altogether. This would be in line with international practice and would save local councils £400m in administrative costs. These savings could then be applied to more productive use – funding vital local services whose budgets have been stretched as a consequence of the current crisis.
On balance, the Chancellor’s stamp duty holiday is welcome. But we need to go much further if we are to rebalance the economy. It’s time we ensure that changes to how we tax property benefit those in key regions like Yorkshire, and those who rent as well as own property.
Andrew Dixon is the founder of Fairer Share – a new campaign to replace council tax and stamp duty with a fairer system.
National campaign launched to reduce Doncaster Council Tax bills by an average of £377 each year
This article originally appeared in the Doncaster Echo on 03/07/2020. The article can be read here.
Fairer Share has launched a new campaign to reform Council Tax, saving 98%+ of households in Doncaster on their current tax bills. The plan, named The Proportional Property Tax, proposes a flat rate of 0.48% on the value of property, providing significant financial benefits for the 75% (18 million) of households in England that will save. In Doncaster, the average household would save £377 each year if the plan was introduced by the government.
Fairer Share launched the campaign to address the increasingly unfair characteristics of Council Tax and the impact it has had across the UK. Research found that many expensive properties in London and the South East were paying less in Council Tax than smaller properties in other parts of England.
In addition to replacing Council Tax, the plan calls for the abolition of Stamp Duty and the controversial “Bedroom Tax”. Exemptions for foreign owners and those with second homes will also be removed. Under the plan, The Proportional Property Tax is revenue neutral and would be collected by central government and redistributed to local councils accordingly, meaning local budgets would remain unchanged.
In the three weeks since the campaign launched, over 15,000 people have signed the petition calling for The Proportional Property Tax. Fairer Share is now looking to gain the support of parliamentarians to increase momentum behind this much-needed reform, including Don Valley MP Nick Fletcher.
“As we have seen from the impact of Covid-19, it is clear that the deck is stacked in favour of the rich”, said Fairer Share founder, Andrew Dixon. “In many cases, the wealthiest are paying a lower effective rate of Council Tax than those who are merely well off, not to mention those who are financially struggling. Outdated property valuations combined with local authorities setting the rate of tax has led to an incredibly regressive system that charges a family in Doncaster more than a multi-millionaire in Westminster.”
Research by the Money Advice Trust shows that Council Tax arrears account for 60% of cases sent to bailiffs by local authorities, while recent research from Citizens Advice suggests 1.3 million households are currently in Council Tax arrears. Fairer Share’s plan includes a deferral mechanism that allows those who can’t pay to wait until a change in their financial situation, or the sale of their house.
For more information, please visit fairershare.org.uk/proportional-property-tax/
A Letter From Our Founder
Hello,
Thank you for visiting Fairer Share.
A sense of fair play is an important part of our national identity. We can reflect on this with great pride. We are bound together by ties of mutual responsibility, social trust and most importantly a sense of fairness.
Fairness has long underpinned trust in our society. From the signing of the Magna Carta and the creation of the NHS, to defining the rules of many of the world’s major sports, British society is founded on principles that seek to uphold fairness and equal opportunities for all in education, work, health, justice, security and living standards.
This sense of fairness should not be confused with equality nor sainthood. It is about being reasonable and doing the right thing.
However, the well-respected IPPR points out that this sense of fairness is interpreted too narrowly – as in the fair application of rules. Yes, this is important when playing football matches or board games. We believe that this sense of fairness should be expanded to include a sense of economic justice – “the fairness with which the economy generates prosperity and distributes its rewards”.
Our country’s two primary property taxes, Council Tax and Stamp Duty, have evolved into something neither reasonable nor right. The deck is stacked in favour of the rich. In many cases today, the wealthiest are paying a lower effective rate of Council Tax than those who are merely well off, not to mention those who are struggling. Such outcomes go against our sense of fairness.
Meanwhile, across the country we are seeing rising levels of inequality – both regional and intergenerational. These divides have been exacerbated by the financial crisis of 2008 and there are further challenges ahead as we come to address the costs and the implications of the current Covid-19 pandemic.
The EU Referendum exposed these vast divides, particularly within England. The philosopher Sir Roger Scruton noted, “A conscious effort to direct resources northwards, and to provide for the people of the northern cities the education and career opportunities that currently exist to the south of them, would begin to heal one of the most painful divisions in our country”.
The IMF highlights that economies with more equal distributions of income and wealth tend to have stronger and more stable paths of economic growth than those with greater inequality. A fairer economy will lead to a stronger economy for our great country.
In the run up to the 2019 General Election, the Conservative Party embraced this way of thinking and promised to “level up” the country. They won a clear mandate to do just that. Let’s help them deliver on their promise by presenting them with our vision for a fairer property tax.
We are fortunate to live in a liberal democracy, but that freedom comes with responsibility. Let’s use this responsibility. Let’s demand a fairer share for all.
I encourage you to watch our explanatory video, sign the petition and share this vision with your friends and family. Let’s do the right thing.
Thank you,
Andrew Dixon
Founder, Fairer Share Campaign
Our Thinking Behind the Fairer Share Campaign Video
In early 2020, and well before the world went into lockdown, the Fairer Share team decided we need a fun, punchy campaign video to kick start our journey to create change. We brainstormed some ideas, brushed off our cameras and spent a week travelling up and down the country to see if people knew how unfair Council Tax really is. Spoiler alert - they didn’t know how unfair Council Tax really is and they’re not happy...
The Road Trip
The only ingredient that was missing, was a great host and presenter to give our video the punch it needed. We had a think, and decided to work with the wonderful Judie McCourt (who tends to grace our screens on behalf of the Postcode Lottery!) who is no stranger to the communities we were filming within. We had a sit down over a coffee, decided what we wanted to ask people together, and had a few practice runs. Admittedly, we did look rather silly wearing the inflatable crown and waving gigantic cards around in an independent coffee shop, but the practice paid off in the end!
So, with cameras packed, crew accounted for and Judie on driving duty - we undertook our journey to create the video - spending most of our time filming in Middlesbrough and Sheffield. Both towns are some of the most disproportionately affected from the current Council Tax system and believe it or not, a £150,000 property in Middlesbrough pays MORE Council Tax than an apartment in the City of London (with a private swimming pool) that costs £5,750,000. Sound unfair? That’s because it is.
The People
With all that said, we thought communities across the country deserved to know just how unfair the current state of affairs really is. We made it our mission to work with members of the public to highlight the stark inequality of Council Tax whilst letting them know that we’re embarking on a campaign to instigate real change that will make a real difference. Luckily, our interviewees were big fans of the campaign so we even gained a few supporters along the way (and we’d love for you to join us too).
What immediately became clear from our time chatting to members of the public is that the VAST majority of people we spoke to had no idea just how tough Council Tax is for households across the country. As the famous line goes in our video, “we’re gettin’ screwed!”. Council Tax in the north ends up costing hard working people far more than those within London, and that’s just not fair, is it? You wouldn’t charge more VAT for a Nissan than on a Ferrari, so why are mansions in London paying less council tax than family homes in other parts of the country?
Once we said our goodbyes and came home to edit the video, we found that our biggest challenge on this campaign was yet to come… We interviewed dozens of people, from all walks of life, and the common thread that tied them together was a frustration at just how unfair the system currently is. Speaking of unfairness, we then had the challenge to boil down dozens of equally powerful reactions into a 2 minute video, which ironically, didn’t seem very fair! We might have to steadily release snippets from our “extended cut” to give the people the stage they deserve, and to allow their voices to be heard!
We can only create change together
We didn’t pay anybody to take part in our video, nothing was scripted, and the reactions were 100% real. Our video, much like our entire campaign, is led by the people and is made special by the general public. We will make your voice heard, but we need you to help. We’re taking on an entire system here where the most well off will be forced to start paying their fairer share - and they won’t be happy with us one bit! Together, by signing a petition, speaking in the thousands, and by joining forces to demand change - we can really make a difference here.
Please, sign the petition here and help us ensure everybody pays a fairer share.
Thanks for looking through this article on www.fairershare.org.uk! Watch this space for more articles as the campaign goes on and sign up to our newsletter here.
Less Than 3 out of 10 People Believe Council Tax is Fair
In January this year, we wanted to have a better understanding of how Council Tax is perceived by the British public. To find out, we polled over 1,500 fine people up and down the country to see what they thought.
Given the lack of conversation around the issue within the national media, we expected a large percentage of respondents to have little or no knowledge of how Council Tax works. We had suspected that at least a small percentage would view their bills and the system to be unfair.
The findings were even more shocking than we had imagined. Less than three out of every ten Brits (29%) believe the Council Tax system is fair, whilst over half the public (52%) said they have no understanding of how the system works. This is particularly startling given that Council Tax is payable on almost all domestic properties, whether they are rented or owned.
Respondents might not know that Council Tax is calculated based on the value of property from thirty years ago, or that each local council sets their own tax rate. They might not know that, compared to how much their property is worth, London’s tax rate is under half that of the North East. Perhaps if we all had a better understanding of these features, an even higher percentage would deem the system to be unfair.
While many may not know how Council Tax works, they do know that their bills are rising. With Council Tax bills increasing by at least 4% in each of the last four years, over half of those surveyed (54%) believe their Council Tax bill to be too high. With inequality rising over the last decade and all of us really feeling the squeeze, a hefty Council Tax bill really sticks out as we manage our monthly finances.
For Fairer Share, this information is invaluable. These findings suggest there is a lack of information on how Council Tax is calculated, how much we pay relative to other parts of the country, and how this money is reinvested in our communities. We know we are paying too much, but we don’t know why or how to change it.
That is where we come in...
At Fairer Share, we want to balance the scales. We want to kickstart the conversation, explaining why those in the Midlands and the North are paying more than those in London, and galvanise support by showing that a fairer alternative is possible. We want to direct this support towards the decision makers who have the power to end this unfair and unjust Council Tax system.
If you would like to join our campaign, please sign our petition calling for the government to replace Council Tax and Stamp Duty with our alternative: The Proportional Property Tax. To find out more about the Proportional Property Tax, please read our policy outline here.
Thanks for looking through this article on www.fairershare.org.uk! Watch this space for more articles as the campaign goes on and sign up to our newsletter here.