Sir Keir Starmer has announced his resignation as prime minister and is widely expected to be succeeded by Andy Burnham. And with new leadership comes new government policies.
The former mayor of Greater Manchester – now back in Parliament – has been vocal in the past on changing the dial on tax.
He previously told Andrew Marr on LBC that “we overtax people’s work and we under-tax wealth,” raising the idea of a “land value tax”.
It’s just one of many comments Burnham has made on property taxes in the past.
So how could this thinking play out once Burnham has the keys to No 10? The i Paper takes a look.
How would a land value tax work?
Burnham has been pushing the idea of a land value tax for several years. While running for Labour leader in 2010, he penned an article arguing for “radical reform of the tax system” and calling for an annual tax on the market rental value of land.
He also argued at the time that the levy would allow for the abolition of stamp duty – a tax paid when you buy a home. This is because the one-off charge would be replaced by ongoing payments.
Exactly how a land value would be calculated and what proportion of the value would be paid in tax annually is up for debate and Burnham has not yet been clear on which details he would implement.
Burnham has also called for reform of council tax, calling the current system “highly regressive” and its 1991-based valuations “not justifiable”.
Are there alternatives?
One campaign which has developed a full policy on how a new property tax could work is Fairer Share. It proposes a “proportional property tax” – similar but not exactly the same as a land value tax – which has been supported by multiple Labour MPs.
The tax would replace both council tax and stamp duty. Instead, homeowners would pay a 0.48 per cent levy on the value of their property. If you rent out the property you’d be charged a double rate of 0.96 per cent.
Below, we look at how much you would pay under a proportional property tax.
Fairer Share says 77 per cent of households would pay less than they do under council tax, with an average saving of £556.
Any annual tax increase under the system is capped at £1,200 a year, until the home is next sold.
It has the backing of some Labour MPs. Jonathan Hinder, MP for Pendle and Clitheroe, said: “A proportional property tax would reaffirm to ordinary people that Labour’s on their side, putting pounds in their pockets without costing government a penny.
“Stamp duty and council tax are unpopular and broken, and there’s a credible alternative ready to go. A PPT could redistribute to lower-income and ordinary families within Labour’s fiscal rules. It’s an idea whose time has come.”
Lewis Shaw, a mortgage broker, said it could help free up the housing market, as the one-off costs of stamp duty sometimes prevent people from buying homes and moving.
“Young families are crammed into places that are too small because upsizing carries the same penalty. The result is a country where the housing we have is allocated about as badly as it could be,” he added.
“Replace stamp duty and council tax with either a land value tax or a proportional property tax, set at a revenue-neutral rate so the Treasury collects the same overall revenue. You tax the asset, not the transaction.”
Though most households would pay less under the system, property holders in London and the South East would be hit hardest. According to Rightmove, the average house price in London is £671,618, whereas across the UK, it is around £275,000.
Would Burnham cut income taxes as a trade-off?
Burnham has said the UK overtaxes work, and undertaxes wealth, but the Fairer Share proposal is designed to offset stamp duty and council tax, so it won’t necessarily raise additional revenue.
Without doing so, it is unlikely Andy Burnham would be able to cut income taxes.
Even a 1p per pound cut to the basic rate of income tax would cost £7bn, which would need to be covered by additional taxes or spending cuts if Labour were to meet its fiscal rules, which govern its budget making.
Julian Jessop, an independent economist, warned that even with the implementation of these new taxes, income tax reductions were unlikely.
He explained: “There is no room for tax cuts. Two certainties are more spending on infratstructure and more spending on defence.”
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