New property tax demanded by MPs who want more money for councils

A group of MPs has suggested the government consider a “proportional property tax” to replace the current council tax, in a bid to fund the growing cost of social care.

The idea has come from the all-party Housing, Communities and Local Government committee, which is led by Labour MP Clive Betts but with the majority of members being Conservative MPs. 

In a new report the committee says "reforms are needed to ensure the sustainability of local government finances, including an urgent solution to the funding of social care in England.”

One of its recommendations says the government should “implement changes to council tax and consider wider options for reform” while Betts states specifically: “In the longer term the government should consider options for wider reform of council tax and business rates, including possibly replacing them with a proportional property tax.”

Other recommendations include widening the funding base of local government to make it less vulnerable to shocks such as the pandemic, including by giving councils more flexibility over local taxes and other revenue-raising powers.

Various bodies have called for proportional property taxes in recent times.

Most recently a cross-party think tank called Bright Blue wants the government to introduce such a tax as a replacement for stamp duty, urging instead an annual proportionate property tax on the current capital value of houses with a tax exemption for properties worth up to £50,000 and a 25 per cent surcharge for second home owners. Liability to pay would be with owners, not occupants.

For over a year now there has also been speculation of possible changes to Capital Gains Tax on the sale of homes to help fund additional spending to cope with Covid.

The latest proposal from the Housing Communities and Local Government committee of MPs is in response to the need to fund social care.

Clive Betts says: “A solution to social care funding would go a long way to restoring local government finances. Covid-19 has also hit councils hard and, while the government responded to the pandemic with substantial financial support, they now need to come forward with a long-term sustainable way of funding councils and the services they provide.

“The system of local government finance should enable councils to increase revenue by growing their tax base while protecting those councils who are less able to do this, through no fault of their own.”