The Centre for London is urging Andy Burnham not to press ahead with a new property tax he has previously backed, warning it would mean an £812 annual increase for owners of a £600,000 home in the capital.
Flat-rate tax proposal criticised
Burnham, the new Prime Minister, has supported the Fairer Share Campaign to replace council tax and stamp duty with a 0.48% tax on property value, rising to 0.96% for second homes, empty properties and those owned by foreign nationals. The think tank said this flat rate would cost London homeowners around £2,880 a year, £812 more than the average Band D Council Tax bill.
London would be hardest hit, facing an additional £7.5 billion bill under the scheme, according to the Centre for London.
Alternative proposal offered
The Centre for London proposes an alternative model that also replaces council tax and stamp duty but cuts the increase to about £272 annually. Their plan would see homes worth up to £800,000 pay 0.39% of property value each year, gradually rising to 0.43% on properties worth £5 million or more.
The system would have three rates: a national rate set by central government, a local rate set by local authorities, and a regional rate set by the London Mayor. For revenue neutrality, the overall average rate outside London would be 0.8%, comprising 0.07% national and 0.73% local/regional rates.
Impact on London
London's high property values would mean lower replacement rates even with falling prices. An average effective rate of 0.39% would raise £6.8 billion annually for local and regional government, plus an extra £912 million from higher rates on the most valuable properties, which could boost social housebuilding spending.
Antonia Jennings, chief executive at Centre for London, said: “This approach would hike up bills for many London households, while removing one of the few remaining tax-setting powers available to local government through council tax. That would represent a step backwards in the fight for more local control of taxes and is out of step with Andy Burnham’s commitment to devolution.”
She added: “Centre for London’s proposal offers a better alternative. It’s designed so those with greatest housing wealth contribute more, while avoiding unfair penalties for households whose homes are more expensive simply due to London’s inflated housing market. Crucially, it would also preserve rate-setting powers at local, regional and national level, strengthening democratic accountability rather than centralising it.”
The think tank argues the current property tax system is broken, with stamp duty discouraging moves and council tax outdated based on values set decades ago.
