Kemi is wrong about council tax

Spectator

2 days ago

From Lord Kinnock's demand for a wealth tax and VAT on private health fees to Gordon Brown pressing for gambling taxes, it is plain that Labour has run out of ideas other than dreaming up new ways to part us from our money. Even so, Kemi Badenoch is ill-advised to go on an all-out attack on council tax reform, as she did in a Mail on Sunday column yesterday.
According to the Conservative leader, Rachel Reeves is plotting to do as Labour have done in Wales: to set up an IT system to analyse our homes – even down to the size of our garden shed – in order to use it as a valuation tool for new council tax bands. Not only that, Labour think tanks are dreaming up a 'land value tax' which would tax us on the value, or even the potential value, of the land beneath our homes. 'There would be no discount for single people,' writes Badenoch. 'Widows and widowers would be hammered. And pensioners would be forced to pay this new bill even after death – a 'pay as you die' tax that's basically inheritance tax in disguise.' The Tories, she adds, were 'pressurised to do this' for 14 years while in power, but refused.
Actually, some of the chief proponents for a land value tax were themselves Conservative. One of the chief advocates was Tim Leunig, who later served as an adviser to Sajid Javid and Rishi Sunak – although Eric Pickles, who was communities and local government secretary when the idea was most in vogue, condemned it as 'socialism' and so it never happened. One of the arguments for a land value tax was that it would discourage developers from sitting for years on land which had been granted planning permission – and would therefore increase house-building. But then it would also hammer people who have homes with large gardens which could potentially be developed – the idea of a land value tax clashed with another Tory policy of the Coalition years: trying to end 'garden grabbing'.
But if not a land value tax, council tax is begging for reform. You don't have to be a socialist or even a Labour supporter to see that is horribly regressive. Tax for the grandest property is set at just three times that for the meanest hovel. And no, it is not true that the occupants of large homes only use the same public services as small ones. A sprawling villa in Highgate might have ten times the road frontage of a small two up to down in Edmonton – if an area were made up entirely on the former there would be ten times as much road, ten times as many street lights to maintain. Moreover, such is the disparity in council tax levels across the country that the owner of a one-bedroom flat in some council areas might actually be paying more than the owner of a mansion.
Council tax was set up in a hurry to replace the even more faulty poll tax in 1991, yet the Conservatives always seemed blind to its faults while in power. While leaving council tax alone, they jacked up stamp duty – an even worse tax which acts as a huge brake on labour mobility in Britain. Rather than condemn Labour for wanting to address council tax reform, Badenoch should come up with her own proposals. Why can't we have a council tax which is proportional to property values? True, there are some objections to one which is based on current valuations: it could mean a widow of little means in Hackney, for example, facing soaring bills on account of her street being gentrified. But it is easy to deal with this problem: you put a property into a council tax band when it is sold, and then leave it in that band until it is sold again – so long-term residents aren't penalised.
There is no need for an expensive revaluation of properties, nor the IT system that Labour in Wales is building. Houses can be banded according to their most recent sales price, adjusted for average house prices at the time. Taxing mansions would allow most people's council tax bill to be cut – which could be a winning policy for the Tories (as much as they have a chance of winning the next election at all).
At the same time, why don't the Conservatives propose to abolish stamp duty and raise the lost revenue from council tax instead. In 2024-25, £13.8 billion was raised from stamp duty and around £50 billion from council tax – so abolishing the former would raise council tax bills by around a quarter if you wanted the move to be revenue-neutral. That is a small price to pay for being whacked with a bill for tens of thousands of pounds when you want to move home.
If the Conservatives want to run the country again they are going to have to be imaginative, rather than simply damning the Labour party. There is, after all, an alternative repository for protest votes in the shape of Reform UK. Council tax reform would not be a bad place to start.