Many Labour MPs believe they have finally found their moment to scrap a system they call “a tax on deprivation” – and their hopes rest on Andy Burnham.
The Greater Manchester mayor, the frontrunner to replace Keir Starmer should he win next week’s Makerfield byelection, has argued that land is under-taxed, fuelling expectations that he could overhaul a council tax system that often leaves a modest terrace in the North of England paying more than a London mansion.
More than a dozen of those MPs, mostly from northern seats, wrote to Rachel Reeves last autumn urging her to scrap the tax altogether.
“It cannot be right,” says Chris Webb, the MP for Blackpool South and a signatory of the letter, that his constituents pay more “than the owner of a £10m mansion in Mayfair”.
The MPs want the current system, which is still based on 1991 home values, replaced with a new proportional property tax: a flat percentage of what a home is actually worth today.
Proponents say it would cut bills for an estimated three-quarters of households while raising them for the wealthiest, with some northern households gaining around £950 a year.
But reforming council tax is politically risky, and Burnham has not confirmed whether it would form part of his agenda were he to enter No 10.
Why the council tax system is controversial
Council tax was introduced in 1993, hurriedly, to replace the poll tax – the flat-rate “community charge” the unpopularity of which helped end Margaret Thatcher’s premiership.
Homes were sorted into bands, A to H, according to their value in 1991, and those valuations have never been updated. A property is still taxed on what it was worth before many of today’s owners were born.
Because house prices have risen far faster in London and the South East, modest northern homes now pay a larger share of their value than mansions in the capital.
Research by the campaign group Fairer Share found that nine of the ten constituencies with the highest council tax burden relative to property value are in the North, while all ten of the lowest are in central London.
Blackpool South MP Chris Webb campaigning before the election with thenshadow chancellor Rachel Reeves and shadow paymaster general Jonathan Ashworth (Photo by Christopher Furlong/Getty Images)The deeper problem, reform campaigners argue, is not that the North is overcharged but that the wealthiest areas are undercharged.
“Your average person paying this exorbitant council tax can’t join the dots,” said Jonathan Brash a Labour MP who led the letter to Reeves and chairs the All Party Parliamentary Group on tax reform. “What they see is bin collections going to twice weekly, charges for garden waste, potholes in the roads, litter in the streets.”
The effect, he argues, “breaks the bond of trust between the person paying the bill and the institution collecting the money”.
How Burnham changes things
The reason the issue is suddenly attracting more attention is Burnham. The Greater Manchester mayor, who could soon be Prime Minister, said: “I think land is under-taxed,” adding that he has “long been persuaded of the argument for a land value tax”.
But he has not called for a proportional property tax, the model that many backbenchers support. And Labour’s 2024 manifesto contains no pledge to reform council tax. A spokesperson for Burnham says he “did not propose any changes to the tax system” and supports that manifesto.
Still, the MPs hope his broad sympathy signals he would be open to going further as PM. Labour MP Jonathan Hinder put it more enthusiastically: “We’re obviously excited about the possibility of having a Prime Minister who’s on record as supporting it,” he said
For Burnham, or any future leader, the calculation may not only be about fairness. Many of the seats where the current system bites hardest are also the seats where Reform UK is advancing fastest – and cutting council tax has been central to Reform’s own local campaigns, although the party has struggled to deliver it, raising bills in councils it controls.
That makes it a live issue among exactly the voters Labour is losing.
But not everyone sees it as a political play. Hinder says: “We’re not doing it for a particular political battle, we’re doing it because it’s the right thing to do.”
What council tax reform could mean for your bill
Under the version championed by Fairer Share, council tax and stamp duty would be scrapped and replaced with a flat 0.48 per cent annual charge on a property’s value.
The group says the change would be revenue-neutral and leave around three-quarters of households better off. “It isn’t about more taxes,” a spokesperson for Fairer Share said. “It’s about fairer taxes.”
The campaign estimates that 77 per cent of households – around 18 million – would pay less, with an average saving of £556 a year, and a combined £6.5bn boost to communities outside London.
The biggest savings are concentrated in the worst-affected northern seats – Fairer Share’s modelling suggests households in places such as Hartlepool could save around £950.
The losers would be in London and the South East. IPPR analysis of the proposals found that homeowners in Westminster would pay around £2,600 more a year on average, and those in Kensington and Chelsea around £4,200 more.
But the MPs supporting the change are quite happy with that shift. Labour MP Luke Myer said he had been accused of being “obsessed with taxing the South”, but added: “I’m quite happy to have that label.”
Hinder is also blunt about the trade-off. “There’s no point sugar-coating it: people are going to pay more if they live in a much bigger house than people who live in a two-up two-down in Lancashire. We think that’s right.”
So why hasn’t it happened – and could it now?
Reforming council tax has been dodged for decades, MPs argue, with successive Prime Ministers fearful of following Margaret Thatcher’s fate.
There are also claims that Westminster-centrism has delayed the conversation. The people who would pay more, as Hinder puts it, are “disproportionately in London – where all the policymakers and the commentators and the journalists live”.
Bringing in a proportional property tax would also require a huge amount of work to revalue every home in England but, according to Aditi Sriram, an economist at the Institute for Public Policy Research (IPPR), which backs reform, that may not be an insurmountable obstacle. “We have the models we need to revalue. The biggest blocker by far is the politics,” she said.
Money is the other obstacle. Replacing council tax could be done at no net cost, but many supporters also want stamp duty – the tax homebuyers pay on a purchase – scrapped at the same time – and that could leave the Treasury an estimated £4bn to £5bn short in the first few years.
The first step has arguably been taken: the Government’s £2m mansion tax surcharge, announced at the last Budget, requires the very revaluations a wider reform would need.
For now, the Treasury is giving little away. Asked about reform, a spokesperson said only that Reeves would “strike the right balance” between funding public services and boosting growth.
Whether Labour seizes it may come down to nerve, Webb says. Change of this scale will require political courage. But the fact that reform is difficult is not an argument against it.”
Land value tax vs proportional property tax – what’s the difference?
Both would replace council tax with an annual charge based on what a property is worth now, rather than its 1991 band. The difference is what gets taxed.
A proportional property tax (PPT) is charged on the full value of a home – the land and the building on it. The best-known version, from the campaign group Fairer Share, proposes a flat 0.48 per cent annual rate, and would also scrap stamp duty. This is the model most of the campaigning MPs back, largely because it is simpler to value and already has cross-party support.
A land value tax (LVT) is charged only on the value of the land a property sits on, not the bricks and mortar. Economists like it because it does not penalise owners for improving their homes, and because the supply of land is fixed. But there are few international examples, and valuing land separately is harder. This is the model Burnham has spoken about.
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