According to the i Paper Burnham is considering whether to implement one of two taxes:
“Two models are competing for support: a proportional property tax, which would replace both council tax and stamp duty with a flat 0.48 per cent annual charge on a home’s current value; or a land value tax – an annual charge based on the value of the land a property sits on, rather than the building.”
No10 has said: “Suggestions that scrapping council tax or stamp duty is under active consideration by this Prime Minister are not true.” Then this morning Burnham said: “Rachel Reeves was right to start to reform council tax to create some fairness there in relation to people in homes that are of much greater value, who haven’t seen their council tax go up over the years because of the failure to revalue the banding.” He also supported a land tax at the beginning of his Makerfield campaign – not long ago…
Guido dissects both massively damaging proposals below:
Proportional Property Tax:
- Run by leftist “Fairer Share” campaign, which boasts that this is a £5.6 billion tax rise.
- Asset-rich cash poor individuals like pensioners will be forced to sell or accumulate annual debt with interest every month.
- Penalises any improvements to residential property, which increase the tax bill.
- Would cause a huge rise in rents as tax liability sits only with owners, not tenants.
- Landlords would sell up instead of renting. Savills said: “For some landlords, it will add to the weight of the question ‘should I be in the sector?’ In turn that would add to the under-supply in the private rental market.”
- Constant valuations would be technically difficult: campaigners say government should use Zoopla-style guesses. That will not cut the mustard…
- London will be forced to pay an additional £7.5 billion bill, producing further disincentives for people to buy and work in the capital, especially foreigners, who would have to pay a 0.96% annual charge.
- Recent buyers get hit twice – anyone who paid stamp duty in the last few years now faces the annual charge as well.
- A permanently higher annual charge in London and the South East will be discounted into price, imposing a huge one-off capital loss on owners.
- Protecting low-income households in high-value homes will require highly complex discretionary relief schemes.
Land Value Tax:
- Abrupt one-off capital loss on existing owners. Homeowners, pension funds, commercial landlords, small businesses, farmers, developers, and lenders lose massive value straight away.
- Lloyd George introduced land taxes as Chancellor in 1910 and repealed them as Prime Minister in 1922. They cost four times as much to collect as they raised. The government posted 10.5 million valuation forms, with a fine equivalent to £7,500 in today’s money for failing to return one. Housebuilding fell from 100,000 in 1909 to 61,000 in 1912. The Liberals never led a party again…
- Denmark’s grundskyld land tax raises 1.74% of tax revenues and was cut back in 2024 after preliminary 2022 assessments produced land values that in some cases exceeded the total property value.
- New Zealand scrapped its land tax in 1990 when it was raising 0.4% and was seen as unfair and discriminatory. Australian state land taxes raise 2.4% and apply to under 20% of properties. Taiwan is suffering from an affordability crisis with a 0.2% rate…
- Pittsburgh ran split-rate taxation from 1913 to 2001 and repealed it after a reassessment crisis. Altoona became the only US city fully reliant on land value taxation by 2011 and abandoned it in 2017 for want of any demonstrable economic benefit…
- Separating land value from building value is far harder than advocates admit. Almost all British transactions are for combined land-and-building assets – there is no observable market price for the bare land for most properties.
- Good luck valuing properties: Flats and leasehold, mixed-use buildings, land with uncertain planning prospects, brownfield and contaminated sites, farms and estates, transport and utility land, public sector and charitable land, and high-density urban sites where the land value is essentially a function of planning permission. The base depends on the broken planning system…
- Farming, nurseries, ports, logistics, utilities, renewable energy sites, low-margin manufacturing, caravan parks and community facilities will be hit hardest.
- Household wealth and the banking system are tied to property values – Falling land values alter loan-to-value ratios and disrupt commercial property markets. The Lloyd George tax showed this: devalued land meant less collateral, fewer loans and fewer homes built.
- It probably raises very little. Once pensioners, low-income owners, charities, public land, social housing, small businesses and infrastructure are protected, the base shrinks to the point of pointlessness. This is what normally happens…
Both taxes would be disasters. Has anyone thought of lowering tax instead of adding new ones?
