Hello! This week's edition of the In Common newsletter comes from Craig Dalzell, head of policy and research at Common Weal
The Scottish Government just saw a warning shot fired that almost resulted in them being outflanked on progressive tax reform by the UK Government. That the shot wasn’t aimed over their own heads and that it missed its intended target should not detract from the warning it sent.
With the King in the North (by which we, of course, mean half-way up England rather than the North of Britain) Andy Burnham now safely ensconced in the Palace in the South, a group of his former colleague MPs in the north felt that they may have had a bit of leverage or favour over him.
Reports early in the week came out that they had been lobbying Burnham on a plan to scrap Council Tax and to replace it with one of two options – either a proportional tax based on a percentage of the present market value of the house or as a tax not on the building but on the value of the land underneath it. If you recognise particularly the first option, that is because it is pretty much the one Common Weal has campaigned for in our policy paper A Property Tax for Scotland.
The numbers are a little different. We called for a tax initially set at 0.63% of the present value of the house (£1260 per year for an average priced £200,000 house) whereas Burnham’s MPs called for 0.48%. I’m not entirely sure why the English proposal is lower but there may be a few reasons.
The first is that house prices in England are generally higher than in Scotland so a smaller percentage of a larger price might bring in the same amount of tax. The second is that in many places in England, Council Taxes are incredibly low. As I write this, there’s a townhouse in Mayfair, London on the market for just shy of £50 million. It’s a Band H property but will pay just £2100 per year in Council Tax. This about the same as a typical Band E property in Scotland and barely more than twice what I pay in my Band A house in South Lanarkshire. Council Tax is just about the most unfair tax in Britain and the one most desperately in need of reform.
But you can see the problem the northern MPs had trying to lobby their former King. The plan failed. Burnham has ruled out reforming Council Tax into something that would tax houses fairly based on their actual value. Doing so would mean a tax cut for the vast majority of people (our plan would mean a tax cut for 90% of homes) but it would also mean a tax rise for a few, very, very wealthy people. The owner of that Mayfair townhouse would see their Council Tax rise to £240,000 per year under the MP’s 0.48% rate and up to over £300,000 per year under ours. Even more modestly rich folk in houses just barely into the top 10% would have to pay more and many of them live in London, many of them vote, and many of them have the ear of the now-PM in a way that distant MPs do not. See my article in Common Weal’s Magazine this week for more on how that works in practice.
The Scottish Government has been similarly resistant to Council Tax reform and for similar reasons but this episode should be the warning shot that they listen to. The public appetite for reform of Council Tax is massive and is being actively resisted only by a few. The Government’s excuse that the Parliament “lacks consensus” on a way forward is insufficient given that they also refuse to say what their preferred proposal would be.
Reform does require that we revalue all 2.5 million houses in Scotland and this is an issue but it’s not as horrifying as the Government wants it to be. First, many houses have sold since Council Tax came in so valuations have been updated at some point. Second, markets like Zoopla already use those sales to estimate prices of neighbouring houses to a fair degree of accuracy. Third, people often have to submit valuations as part of mortgage or insurance applications.
All of this data can be used to give a fair estimate for most houses. We can also learn from the Danish example of having a National Valuation Day every five or ten years and we can set up a mechanism where people can dispute their assigned valuation estimate providing they pay for an individual survey – given the cost of the survey might be a couple of hundred pounds and may result in their valuation and tax bill going up, there is a natural incentive to accept good enough over perfect.
That lesson is the one that the Scottish Government should learn now. They’ve been blocking Council Tax reform for the nearly 20 years that they’ve been in power. That their now-opponents also failed is no longer an excuse. That they can’t agree their own version of “perfect” is also no excuse – especially since they also failed to deliver on a promised Citizens' Assembly designed to outsource the solution to people since parties evidently couldn’t do it.
A warning shot was fired at Andy Burnham this week. He ignored it but he may not ignore the next one. The Scottish Government certainly shouldn’t. The best time to reform Council Tax was 30 years ago. The second best time to do it is now.
