Commenting on the establishment of Andy Burnham as the new Prime Minister, Antonia Jennings, CEO, stated:
“It’s refreshing to hear a politician praise London, while being honest about the challenges we face. Andy Burnham has already, rightly, acknowledged both. London remains the powerhouse of the UK economy, but it is also home to people struggling with poverty, a deepening housing crisis and increased pressure on public services. It’s hopefully the start of a balanced, mature conversation about the capital which has been missing for too long.
Burnham’s only got a few years until a general election will be on the horizon. He’ll have to act fast and make some difficult decisions.
The challenge now is to translate that political ambition with action in policy – giving Londoners and the capital the tools we need to thrive.”
Centre for London provides insights into Burnham’s discussed policy change – the reform of property taxation
One of the clearest signals Andy Burnham has sent so far is his support for major property tax reform. For London, and indeed the rest of the country, that debate is long overdue.
The current system is broken. Stamp Duty disincentivises moving – making it harder for first time buyers getting on the ladder, preventing families from accessing larger homes, and leaving many older people stuck in properties that no longer meets their needs.
Council Tax is equally outdated. Based on house values from the 1990’s, it no longer reflects any meaningful relationship to housing wealth. For example, a homeowner in a £1.8m five-bed home in Kensington faces a similar bill as a two-bed renter in Croydon.
Property tax reform is increasingly attracting support across the political spectrum, but not all models would deliver fair outcomes for London. Many proposals favour a flat-rate tax, levied nationally and returned to the Treasury. Under the most commonly discussed model, households would pay 0.48% of their property’s value each year.
That approach would disproportionally affect London households, and remove one of the few tax setting powers available to local councils.
Centre for London’s proposal takes a different approach.
Under our model, those with homes worth up to £800,000 would pay 0.39% of the property value each year. Properties valued between £800,000 and £1 million would pay a slightly higher rate, with further gradual increases for properties above £1 million. The result is a system where those with the greatest housing wealth make a fairer contribution, without penalising households whose homes are worth more simply because they live in London.
For the London home, worth around £600,000, a flat national PPT would generate a bill of £2,880 a year, around £812 more than the average Band D Council Tax bill. Centre for London’s model would reduce that increase to around £272 annually, while also abolishing Stamp Duty altogether to cut costs long-term.
Our proposal would also:
- Retain tax-setting powers for local government, consistent with Burnham’s commitment to devolution.
- Generate an additional £912 million a year for social housebuilding in London, enough to double annual social housing delivery.
- Remove Council Tax bills for renters, by levying the tax on property owners rather than occupiers.
- Create a fairer and more efficient housing market by replacing both Council Tax and Stamp Duty with a single modern tax.
Antonia Jenning’s, CEO at Centre for London, comments below:
“One of the clearest signals Burnham has sent so far is his support for major property tax reform. It’s widely accepted that the current outdated and unfair system of Council Tax and Stamp Duty needs reform. But not all reforms would necessarily improve outcomes.
The proposal of a national, flat rate would work for London, and wouldn’t work for councils across the UK. 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.
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.
We’ve got a choice. Either, we create a nationally controlled property tax, that asks Londoners to pay more while giving them less say over how money is spent. Or we create a devolved model, that creates a fairer housing market, strengthens local government across the entirety of the UK and raises significant new funding for social housebuilding.
If Andy Burnham is serious about devolution, that principal should apply first and foremost to tax policy.”