Why Andy Burnham won’t reform Council Tax either

Andy Burnham was given a chance to make the most necessary reform of British taxes that he possibly could do. He declined. The reasons he did are the same as the reasons the Scottish Government haven’t reformed Council Tax either.

Something interesting almost happened down south that would have had major ramifications if it had. It didn’t, and thus we probably now go back to politics as usual, but the reason we couldn’t see some positive change is worth exploring.

A group of MPs in Northern England tried to lobby new Prime Minister Andy Burnham on a plan to reform Council Tax in England. They proposed replacing it (and Stamp Duty) either with some rather undefined Land Value Tax or with a more rigorously defined Property Tax based on the present value of a home (unlike Council Tax which is a banded tax that is based on what your home might have been worth in the early 1990s). The Property Tax proposal is a bit more defined, setting the tax at a single national rate of 0.48% of a house’s present market value.

This is very similar to our own Property Tax proposal which set an illustrative national rate of 0.63% as that would have been the rate in 2020 (and in 2025 when we recalculated it) that would raise the same amount of revenue across Scotland as does the present Council Tax. Of course, we are very clear that local councils should control their own local taxes and that includes setting the rates as well as defining subsidies (such as for single-occupancy or low income) and surcharges (e.g. for multiple home ownership).

I don’t know if the Northern MP proposal aims for revenue neutrality. I suspect that it is actually a bit too low for that, particularly as they also want to fold Stamp Duty (the English equivalent of our Land and Buildings Transaction Tax) into it. A couple of things swing towards that lower number though. The first is that houses in England are generally more expensive than in Scotland. The second is that Council Tax in the richest parts of England is particularly low. I mention this in my article in In Common this week but 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 £2,100 per year in Council Tax. This is just over 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.

This also shows why it is so difficult to reform. Not because it’s technically challenging (my In Common article lays out how we’d go about revaluing houses using data we already have) nor because people are against it (the vast majority of people in Scotland want to see it reformed) but because of the specific people who don’t want reform because it would negatively affect them personally.

Our Property Tax proposal, if set at a national revenue neutral rate, would result in a tax cut for every house worth approximately £400,000 or less. This covers 90% of homes in Scotland. There are going to be examples of even more expensive homes that will pay less or break even under our scheme. A Band H house in Edinburgh worth £632,000 would break about even after the tax change (that kind of money would almost get you a three bed flat just north of The Meadows if you’re interested – though you could also get a substantially cheaper house elsewhere and donate the balance to Common Weal).

Houses more expensive than this have been underpaying their property taxes for over 30 years and everyone under this line have been subsidising them.

“The problem isn’t that the top 10% outnumber the bottom 90% in numerical terms. It’s that they outnumber us in power.”

If we implemented the Common Weal Property Tax then my own house would see its tax due drop by about half. And this is before we even think about things like progressive taxation on more expensive properties with surcharges like “mansion taxes”. That £50 million house in Mayfair shouldn’t be paying £1,800 per year. Under the Northern MPs’ scheme, it would owe about £240,000 per year in Property Tax. Under the Common Weal plan, it would owe closer to £300,000 per year. Someone who puts £50 million in the bank could expect close to £2.5 million per year in interest. If they’re buying property as an investment rather than a “nice place to live” then they must be expecting to earn more than this otherwise a passive bank account would be much less hassle. In short, I’m saying that they can afford to pay a fair Property Tax.

But they won’t want to. And this is the reason that neither the SNP in Scotland nor Andy Burnham in England will reform Council Tax unless they are dragged kicking and screaming to the table to do it.

The problem isn’t that the top 10% outnumber the bottom 90% in numerical terms. It’s that they outnumber us in power.

What the very, very top have is lobbying power. They can afford to pay think-tanks (though, for obvious reasons, not us) to tell everyone why it would be a bad idea to tax them fairly. They can bankroll political campaigns. They can buy media outlets to tell us what we should think about their situation and how terrible it would be if they were taxed like the rest of us.

What the people just below them but above 90% of the rest of us have is voting power. They are the ones who consume those media outlets and use it to inform their vote. This Professional Class tends to consider themselves to be about average in our society rather than being amongst the bottom edge of the elite.

So what we get is a democracy where the 1% tells the 9% that they will be hard done by if their wealth taxes increase even a smidge and so the 90% must continue to subsidise them.

This isn’t just a UK problem, it happens in Scotland too. The Scottish Government currently has a “mansion tax” consultation out there that folk should respond to. For a £1m house, the proposed rate is actually almost exactly the equivalent of the 0.48% proposed by the Northern MPs but it only goes down from there. A £2m house would pay only 0.38% and that £50 million Mayfair Townhouse, if it was in Edinburgh, would pay an effective rate of just 0.015% (the extra zero is not a typo). Meanwhile, my wee house – which is amongst the cheapest 10%-15% of houses in Scotland – pays an effective Property Tax rate of 1.3% (again, not a typo). My property tax would be, under the Scottish Government’s “mansion tax” proposal, eighty-six times higher per pound of total value than someone who could afford to buy what would be the most expensive house in Scotland.

So no, I’m nor surprised that Burnham bottled the chance to fix the mess that Council Tax is just as I’m not surprised that the Swinney continues to do so. This isn’t an excuse for them to change tack though. Or to admit failure and tell us who’ll do it for them instead.