Labour urged to scrap council tax for new property tax hitting high-value homes
Labour Together has called on the government to nationalise the funding of adult social care and scrap council tax and stamp duty, replacing these with a unified proportional property tax system.
The think tank, formerly run by Keir Starmer’s recently departed chief of staff Morgan McSweeney, argues that the rising cost of adult social care, which is currently shouldered by local councils, is leading to deficits and cuts in local services that are eroding confidence in the government.
It proposes a more progressive property tax system that will replace stamp duty and council tax, which its said people feel is not being properly used to fund local services.
People feel that they are not getting what they pay for when they pay council tax but see high streets wither, garbage mount, and potholes multiply.
Labour Together noted that the biggest cost faced by councils is adult social care, which each year rises by more than the maximum allowed increase to council tax.
To solve this problem, it has proposed radical reform to property tax, and it said that the cost of adult social care should be funded by introducing a new national tax called the social care contribution levy.
Labour Together admits that under this scheme, people would pay more in national taxes, although it said three quarters of people would pay less in property taxes.
“Labour can tell them that this is a contribution to their own adult social care support,” the think tank said.
It also noted that these reforms would hit those in London and the South East hardest, as well as those who have seen their house shoot up in value. However, it did note that Labour could design policy to shield these groups from the worst of the effects.
“No longer will every council increase council tax by the same amount merely to keep up with social care pressures,” it said.
“Now, if a council wants to raise taxes to provide more frequent waste collection it should be allowed to and judged on the results.”
“If a council puts in real effort to redevelop an area and grow its tax base it should get to keep the additional money it creates,” it added.
Overall, Labour Together recommends that the government implements the following measures:
- Nationalise the funding of social care – funded in part from a new national tax
- Reform council tax and stamp duty into a proportional property tax
- Give councils the ability to vary their rate of the tax and retain extra income they bring in
- Implement these reforms in the first year of the next parliament
- Until then, build capacity in local government and devolve clear areas of responsibility
The think tank pointed to Labour’s ‘mansion tax’ as a promising pilot for a new property tax, noting that this surcharge could be used to develop a way of valuing homes that can also be used for a new proportional property tax.
