Council Tax and Stamp Duty Alternatives Debate
Full Debate: Read Full DebateTim Farron
Main Page: Tim Farron (Liberal Democrat - Westmorland and Lonsdale)Department Debates - View all Tim Farron's debates with the HM Treasury
(1 year, 3 months ago)
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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 (Simon Fell), 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.
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 (Richard Burgon) 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 (Jill Mortimer) 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 (Chris Loder) 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.