Andy Burnham’s closest allies have warned that replacing council tax and stamp duty with a new land value tax (LVT) would take years to implement and could be “politically problematic”.
The new prime minister has advocated for a major shake up of property taxation where owners would be charged based on the value of the land they own, rather than the buildings sitting on it.
But David Blunkett, a Labour grandee and Burnham mentor, told The i Paper that while a new land tax is an “interesting idea”, it cannot happen “in the immediate future” and would “dislocate the system” by creating “winners and losers” across the housing market.
Steve Rotherham, the mayor the Liverpool City region and another of Burnham’s closest allies, also sounded a note of caution over plans to replace council tax and stamp duty with a proportional property tax, asking whether the reform could create “more losers than winners”.
Burnham ‘long persuaded of a land value tax’
During the Makerfield by-election campaign, Burnham said he had “long been persuaded of the argument for a land value tax”, adding that he is keen to reform “highly regressive” council tax.
As far back as the 2010 Labour leadership contest, he argued for a LVT that could replace stamp duty, which is charged on the buyers of houses, which he branded “a tax on the aspirations of young people” trying to put down roots.
Burnham has since broadened his position to include council tax, arguing that the current system is regressive because it still rests on 1991 valuations and that land itself remains fundamentally undertaxed.
Proponents of reform argue that because of the 1991 valuations people living in large properties in wealthy areas can pay less council tax than those living in smaller properties in poorer areas.
Stamp duty is a tax paid by people buying property or land and is generally applied to purchases over £125,000, although first-time buyers benefit from a higher £300,000 threshold.
Conservative leader Kemi Badenoch has pledged to abolish the levy, while the Institute for Fiscal Studies (IFS) think tank has described it as “one of the most economically damaging taxes”.
)Labour Peer Lord Blunkett acknowledges Andy Burnham’s praise during a speech after Burnham became Labour leader. (Photo by Nicola Tree/Getty Images)Council tax is an annual charge paid by households to help fund local services such as bin collection and libraries, but the IFS stated it is “highly regressive” and based on outdated property values.
A proportional property tax, as proposed by the Fairer Share campaign, would replace the current council tax and stamp duty with an annual charge based on property values at market rates.
‘It cannot happen in the immediate future’ – Blunkett
Supporters of a LVT – which taxes the value of land rather than the property built on it – argue it would encourage landowners to use sites productively and reward development, which would boost growth.
But in an interview with The i Paper, Lord Blunkett warned that land taxes could be “politically problematic” and would “take years to implement” because they would “dislocate the system because of the winners and losers”.
He said it must be pitched as one of Burnham’s “10-year projects”, adding: “It will not happen and cannot happen in the immediate future. So there’s got to be a grounding of reality in politics, as well as radical thinking in economics.”
Rotheram echoed these concerns in an interview with The i Paper last week, saying politicians needed to learn the lessons of the poll tax and consider the impact on people who may be “capital rich” but not necessarily have high incomes.
“So there’s ways in which we would have to look at all of those implications and considerations in developing something, but the fairness thing is going to be one of the overriding drivers and everything that Andy will do,” he added.
Last week, Rotheram hinted Burnham could introduce a wealth tax, telling this newspaper voters must be told what it would “achieve” for Britain, warning it could come across as simply being punitive towards people who had done well.
Lord Blunkett, who was singled out for praise by Andy Burnham after he became Labour leader, would not be drawn on whether Burnham should introduce a wealth tax, but said Chancellor John Healey should rapidly explore “creative ways of using the resources that currently exist” or persuade the bond markets that “slight changes to investment will not undermine the fiscal structure”.
He said maintaining fiscal discipline was essential “if we’re not going to go down the Liz Truss road to disaster.”
In 2022, Truss announced £45bn in unfunded tax cuts which sent the financial markets into turmoil and had a knock-on effect of sending interest rates and mortgage rates spiralling and was a key factor in her resignation after just 49 days as Prime Minister.
Asked about tax on Sky News the Prime Minister said: “We’ll take decisions on tax at the Budget. This is about reprioritising in this phase. As I say, going to the public’s priorities, the cost of living crisis, the housing crisis. How much longer are we going to talk about these things without actually doing something to help people?”
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