If you own property, the government is on your tail. The idea of increasing taxes on property has been building up for several years. Now the election is out of the way – and there is a big government budget deficit to fix – it won’t be long now.
Ministers are bursting with ideas and are asking others to come up with more. A government policy document proposes that council tax in Northern Ireland should be based on home values. The idea could be tried out there and then applied nationwide.
If ministers don’t go for that one, they will get suggestions from a review of council tax by Sir Michael Lyons later this year. He is likely to recommend changes to council tax which will result in many people paying more.
Don’t let us forget second homes. Next month a ‘rural housing commission’ will start looking for ways in which to hurt those with a place in town and a hideaway in the country. This could be done through planning restrictions or by raising council tax for second home owners. Yvette Cooper, a minister in John Prescott’s department, has said it might be a good idea to tax second home owners because this could make more homes affordable for local people. As ever, the government is keen to blame problems on other people. The real reason property is expensive is that we have a rising population (partly through immigration), more people living alone because of family breakdown and very restrictive planning laws. The result is inevitable and not the fault of second home owners.
Gordon Brown has already got ‘form’ on taxing property. He has increased the rate of stamp duty several times since he became chancellor and he has kept the increases in stamp duty thresholds – the point at which the higher rates apply – far below the increases in house prices. The top rate of stamp duty is now four per cent and many people who once thought the higher rates would never affect them are finding they are getting close to them.
Mr Brown also increasingly taxes property when people die. As with stamp duty, he has raised the inheritance tax threshold as slowly as possible. As property prices have risen, there are millions of people alive today who will not be able to leave their homes to their children, free and clear. They will be forced to leave up to forty per cent of the value to Gordon Brown.
Why does Labour government have it in for property?
One reason is grubbily political. Property taxes genrally raise money without hitting Labour’s supporters in areas where property prices are relatively low. In Scotland and the North of England, some 60 per cent of property purchases do not attract stamp duty at all. That compares with only 13 per cent in the South East and less than five per cent in London. Similarly less than 10 per cent of purchases in Scotland, the North, the North-West, Yorkshire and Humberside and Wales attract the the three per cent or four per cent bands of stamp duty. In contrast, the higher rates are paid in close to 40 per cent of purchases in London. Stamp duty is a tax on the south and on Conservative Party supporters.
Gordon Brown has also got Left-wing theorists egging him on towards higher property taxation too. The Institute for Public Policy Research has called on the government to “reduce the under-taxation of home ownership” arguing that more tax would reduce the gap between the homes lived in by the rich and those of the poor. Another argument in favour of hitting home owners is the suggestion that, Britain has “too much owner” occupation and is “out of line” with the lower levels on the Continent.
Is it right that our property should be taxed more? Is it a ‘good thing’ we would be selfish to oppose?
Actually a high rate of home ownership is a positive thing. People look after their own homes better than, say, homes belonging to a council. The total destruction of many council estates over the years – both in Britain and abroad – is testament to this fact. The reason home ownership is less widespread in many Continental countries is probably because they have taxed it so heavily. Some Continental countries have made it disastrously expensive to buy and sell houses. The rules are far from simple but in France, for example, stamp duty is between 10 and 12 per cent for properties older than five years. In Italy the rate is 11 per cent. So what happens? People don’t buy and sell. They rent, not through choice but because the government pushes them that way. These countries have made a mistake. They should change, not us.
Labour is missing the most profound point about property. A house or flat may seem to be just a piece of land with some bricks – a good target for taxation. But to each of us as individuals, an owned home is profoundly important. It is somewhere we can go to whenever we want and for as long as we want. It is financial security. Even if we lose our jobs or our shares go down, we feel that we will still own something if we own our home. And it will very probably keep, or increase, its value.
A house or flat is a way in which we try to improve our circumstances. We typically start off in a small place. But we hope to save, get promotion or an inheritance and then move on to something better. The desire to take ourselves and our families to better things is a natural part of human behaviour. It benefits ourselves, our families and the national economy.
These are things Tony Blair appeared to understand before he became prime minister. When out canvassing for votes, he met ‘Sierra Man’ polishing his car – the sort of person who had done well out of Lady Thatcher’s years. Sierra Man had bought his council house and had been able to get his car because of lower taxes. ‘Sierra Man’ had ‘got on’ with the aid of property ownership and low taxes. It was because Mr Blair saw the importance of this that he got his landslide.
Unfortunately Tony Blair has not been in charge of the taxing and spending of this government. Gordon Brown has. What is more, he is likely to get the top job in the next few years. He subscribes to the idea that taxing property is good. So look out, home owners, you are first in line for the coming rise in taxes.
(This is an unedited version of an article that appeared in the Daily Express today.)