Labour’s progressive property tax explained

Labour is considering replacing council tax with a new “progressive” property tax that would be set nationally and paid by property owners rather than tenants.

The proposals are part of a raft of policy recommendations in a Labour-commissioned report on land use. The aim is to reduce the tax paid by the majority of households and discourage the use of homes as financial assets.

The report - written by a group of academics, economists and land experts and titled Land For The Many - calls on the party to make a string of “radical but practical changes in the way land in the UK is used and governed” if it wins the next election.

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“We recommend that a Labour government replace the regressive and unpopular council tax with a progressive property tax based on contemporary property values,” it says. “Unlike council tax, this tax would be payable by owners, not tenants. This would result in significant administrative savings, lower levels of arrears and less court action”, the authors say.

The market value of land in the UK is believed to have quadrupled over the past two decades, contributing to a rise in house prices. A recent study of 14 advanced economies found that an estimated 81% of house price increases between 1950 and 2012 were down to rising land prices.

As well as introducing a progressive property tax, the report calls for the valuation of properties for tax purposes to be updated annually. It also argues that empty homes and second homes should automatically be taxed at a higher rate.

In addition, Labour is considering introducing “compulsory sale orders” giving public authorities the right to seize land left vacant or derelict and to sell it at auction, says The Times.

The new report also suggests abolishing the Stamp Duty Land Tax for people buying homes they intend to live in; abolishing inheritance tax; and the introduction of a lifetime gifts tax levied on the recipient.

“Dig deep enough into many of the problems this country faces, and you will soon hit land,” writes George Monbiot, one of the report authors, in The Guardian.

“Since 1995, land values in this country have risen by 412%. Land now accounts for an astonishing 51% of the UK’s net worth. Why? In large part because successive governments have used tax exemptions and other advantages to turn the ground beneath our feet into a speculative money machine,” he says.

Labour’s shadow Cabinet Office minister Jon Trickett said his party would be “studying these recommendations in detail”.

He added: “So much of this can be traced back to the broken system of land ownership. Concentration of land in the hands of a few has led to unwanted developments, unaffordable house prices, financial crises and environmental degradation.”

But not everyone is convinced. “This is confirmation that Labour would bring the policies of Venezuela to Britain,” Tory MP Priti Patel told the Daily Mail.

Housing Secretary James Brokenshire describing them as a “tax bombshell”. He said: “These proposals are extraordinary and deeply damaging in equal measure. Labour will stop at nothing to hammer families with more tax and make home ownership a pipe dream for future generations.

“Plans to seize land into public ownership also show Labour’s true colours of more and more state control.”