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Hello and welcome to this week’s Home Front. Across the country, parents are breathing a collective sigh of relief as schools return. Politicians, equally, welcome a return to Westminster, where, they hope, they can control the media narrative as opposed to scrabbling around while journalists fill the void.
This August, one story from the “kite-flying” rumour mill was about what the Chancellor might do with property taxes come her Autumn Budget.
“Kite-flying” is a metaphorical description for the practise of governments leaking policy ideas to see how they “fly” with the media and public.
This summer, there have been a series of leaks about possible tax rises which could be included in Reeves’s next Budget.
They include the potential introduction of national insurance (NI) for landlords on their rental income and a rumour that Reeves would like to scrap stamp duty and council tax, replacing them both with a more general annual property tax. The latter would constitute the biggest shake-up of homebuying in a generation.
Understandably, politicians and policy advisers want to take the temperature on their ideas, particularly over the summer, when their bosses are on holiday and journalists have pages to fill. But all of this prospecting for public opinion comes at a cost.
As housing market expert and veteran buying agent, Henry Pryor, told me: “Careless talk costs confidence.”
Since these kites started flying, Pryor says his clients have been constantly “emailing, calling and WhatsApping” him to ask “what the implications of the latest nonsense being reported are”.
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These clients, Pryor says, are “people with serious brains and serious budgets” that, in total, mean he has a “£100 m shopping list of people” he’s trying to find houses for. They are concerned about whether to “postpone” or “speed up” their transactions because the implications of tax changes could cost them money.
“We are not talking about non-doms here,” Pryor stresses. “We are talking about people who want to plan for 2026 or 2027 – it’s about people’s lives and where they put the pillows they will lie their heads on at night.”
Pryor wishes Westminster would “get a grip!”. When the rumour mill starts whirring, he says, “the market stalls because people put their plans on hold, which invariably leads to price uncertainty and obscures house values as people rush to bring deals forward or pause them”.
Regardless of the respective merits and pitfalls of adding NI to landlords’ tax bills or replacing stamp duty and council tax with a more comprehensive property tax, Pryor has a point. The risk is that all of this uncertainty spooks landlords and gives them time to increase rents (the Renters’ Rights Bill will make it harder to do this when it becomes law) while they can to protect themselves from higher taxes.
At the same time, it could prevent people from buying more expensive homes because they don’t know exactly how much tax they’ll have to pay if a property tax replaces council tax. And, on top of all of that, lots of people may decide to hold off on moving because they want to know if they’re about to get a stamp duty break. Hi, that’s me!
Stamp duty has a huge impact on what I’m able to do next in my life. I’d like to sell my one-bedroom flat and buy a home where I can have a family because, at the moment, even my boyfriend won’t fit. But if stamp duty stays as it is, the options in my current area are somewhat limited. An annual tax, however, might change things.
There is merit in briefing the press. The last time the Government announced a tax change without any kite-flying, it was a disaster. Remember how Reeves sprung a NI contribution rise on employers in her last Budget? Remember how the markets reacted?
But there is a balance to be struck. This is a delicate game which involves giving people just enough information, in just the right amount of time, but not allowing the story to take on a life of its own.
So, if these policy leaks have not come from the top, the Government should come out and clarify what’s what. And, if there’s truth in any of the proposals, they should have waited and been more considered in their briefing.
In the vacuum of information, right-wing newspapers are already describing a potential annual property tax as a “mansion tax”, which may or may not be the case. There’s every chance that a new taxation system would be fairer, but without proper information, how it would work in practice is anyone’s guess.
For his part, Pryor “doesn’t think any of these suggestions will come to pass”. He describes NI on landlords’ income as “a political hand grenade”.
Landlords will never like the idea of paying NI on rental income. However, it strikes me that landlords want buy-to-let investment to be respected as work. All workers pay NI, including tenants who must also pay rent. So, if landlords don’t want to pay it, they must come up with a compelling argument as to why?
On the other hand, Pryor thinks that the introduction of an annual property tax via changes to stamp duty, council tax and land taxes, as leaked, “could be useful”.
Indeed, as I’ve written, economists on both the left and the right support council tax and stamp duty changes.
Nonetheless, the housing market does not like uncertainty. It has been in various states of stall for years now as a result of economic turbulence. The last thing anyone – buyers, sellers, homeowners, movers, renters or investors – needs is more volatility.
Are you struggling with your council tax bill? I’d love to hear from you. Please email [email protected]
All the above being said, there is some good news in mortgages. UK lenders approved the most mortgages for six months in July. This suggests that buying, selling and moving have recovered somewhat from the dip which followed the end of a stamp duty break for homebuyers in April.
Reeves does need to reform property taxes. Both because it’s an important source of revenue for the Treasury and because the current system penalises buyers, fails to incentivise downsizing and completely ignores renters. But, if she does it, she must reform very, very carefully.
Vicky’s pick
I took a week off last week. I spent it on my own in Cornwall, save for an afternoon spent with my uncle, who has recently moved to Falmouth. He is, as he joked, someone who has paid a lot of stamp duty because he has moved around Britain for work many times. Another reason why stamp duty is bad for the economy: it makes it difficult for people to move around in the labour market.
While away, I chose to delete Instagram and X from my phone and opted, instead, to consume the news via the four main television channels. I watched local and regional news every evening and, if I stayed awake long enough, also Newsnight.
Reader, the upshot is that I feel less frazzled and more informed than usual because I was exposed to stories I would not usually consume: about unregulated funeral directors and the impact of climate change on “stressed out” trees (have you noticed them shedding leaves a little early this year). in a normal week, I probably would have missed all of this because of the way algorithms work on my various social media apps.
I also read several books, including The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era by historian Gary Gerstle. If you’re interested in the transfer of economic power to private markets and deregulation that took place from the 1970s onwards, this book is for you!
Whenever I visit Cornwall, I opt to stay in a hotel as opposed to an Airbnb if possible because, as I’ve written, hotels support local economies by employing people in a way that Airbnbs do not. This time, I stayed at The Scarlet in Mawgan Porth. That wasn’t a press stay, it’s just a brilliant, locally owned eco hotel.
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