Land value tax ‘would price people out of their homes’

Council tax replacement based on value, size and location would ‘hit London and South East hard’

Anna Mikhailova

Gordon Rayner

REPLACING council tax with a land value tax would “price people out of their own homes” by charging thousands of families more than £10,000 per year, it has been claimed.

Homeowners in council tax band D properties, who currently pay an average of £1,671, would see an average rise of £717 to £2,388 – up 43 per cent, according to a document prepared by the Labour Land Campaign (LCC).

It suggests charging as much as £96,534 per year for a three-bedroom home in the richest part of London. B and D homes in wealthy parts of Manchester would pay £11,239 per year and in Bristol £9,567.

The figures will reignite the debate over Labour’s tax and spend policies as the country prepares to go to the polls in Thursday’s local elections.

The tax would hit London and the South East the most, putting lower income households and people who bought their ex-council houses at a discount under the right-to-buy scheme at risk, a minister warns today.

The LLC is not affiliated to the Labour Party but it has been praised by both Jeremy Corbyn and John Mcdonnell, the shadow chancellor.

The LLC prepared an illustration to help inform the party’s thinking as it drew up last year’s manifesto.

The Labour Party has said that the LLC is not affiliated to the party and that its research does not inform Labour Party policy.

Supporters of the tax – based on property value, size and location – argue that it is fairer than the “regressive” council tax, which they say swallows up a greater proportion of the income of those who are least well off. It would replace council tax, stamp duty, inheritance tax, capital gains tax,

the TV licence fee and insurance premium tax.

The LLC has suggested several different methods by which a land value tax could be calculated.

The document seen by The Daily Telegraph – which groups properties into around 8,100 postcode areas – uses a method of charging homeowners a tax of 26.1 per cent on a “site premium” based on the value of their property.

Around 3,100 postcode areas would be charged more than £2,000 per year and in 185 postcode areas – encompassing thousands of homes – the annual tax would top £10,000.

Some will see their annual bills fall and nearly 100 postcode areas would be charged less than £100 a year.

Sajid Javid, the Secretary of State responsible for housing, said: “[It] would [see] huge tax hikes. For people living in London and the South East, including council tenants who have bought their houses, [it] would cost tens of thousands, pricing people out of their own homes.” A Labour spokesman said: “This is not Labour party policy.”

Before last year’s general election, the LLC suggested an alternative method of collecting land value tax – in which an introductory rate of 0.85 per cent would be levied on 55 per cent of a property’s value, eventually rising to 3 per cent during a transition period of up to 20 years.

The Conservatives claimed at the time that this method would treble bills for middle-class homeowners.