Andy Burnham‘s plans for a new land tax could trigger a house price slump in parts of the south, according to a new analysis.
The incoming prime minister has repeatedly backed the idea of imposing a new Land Value Tax, describing it as ‘aspirational socialism’.
The plan would replace both council tax and stamp duty, which have long been criticised by economists.
A new analysis reveals that the idea could slash annual council tax bills in the north, but lead to huge increases in parts of the south where the average value of land is higher.
The scale of the increase in parts of London and the south east is potentially so great that it could knock 20 per cent off house prices in some areas.
The findings will fuel fears that Mr Burnham, who plans to move part of his No 10 operation to Manchester, is plotting to launch a tax raid on middle class southerners to fund lavish spending in the north.
Shadow chancellor Sir Mel Stride described the plan as an ‘unfair tax on aspiration’ โ and urged Mr Burnham to focus instead on cutting Britain’s bloated benefits bill.
The new analysis conducted by the Tax Policy Associates think tank models the impact of levying an annual tax on land of 1.28 per cent โ the level needed to replace the ยฃ56.7 billion annual revenue raised by both council tax and stamp duty.
Mr Burnham’s plans for a Land Value Tax could cut his own council tax bill in Wigan
It found that overall, 69 per cent of households would gain from the change, with 31 per cent losing out.
But it also revealed sharply differing regional outcomes.
In Blackpool, which has some of the cheapest house prices in the country, the average Band D council tax bill of ยฃ2,392 a year would be replaced by an annual Land Value Tax of just ยฃ662. The analysis suggests the scale of the change could spark a housing boom in the town with prices jumping by 28 per cent.
In Wigan, where Mr Burnham has his family home, Band D council tax of ยฃ2,031 would fall to ยฃ1,355 with properties in the town potentially benefiting from a nine per cent rise in house prices.
At the other end of the scale, Band D council tax in Bristol of ยฃ2,584 would be replaced by a new annual levy of ยฃ4,808 โ almost double the amount. House prices could suffer a 12 per cent slump.
In Brighton, a Band D bill of ยฃ2,457 would jump to ยฃ4,284, with house prices taking a 10 per cent knock.
Worst hit would be London. In Kensington and Chelsea, which has some of the highest house prices in the country, a Band D council tax bill would more than treble from ยฃ1,592 to ยฃ5,455 a year. House prices in this bracket could drop by 21 per cent.
The impact on more valuable properties would be even starker.
A band H property in the commuter belt city of St Albans would see its annual council tax bill of ยฃ4,612 jump to a staggering ยฃ24,854, triggering a house price fall of 23 per cent.
Mr Burnham has indicated that he is planning new taxes on the better off to fund giveaways on things like energy bills. Asked about a potential wealth tax this week, he said people may be asked to pay ‘a little more’ to fund his plans. He said he would not ‘shy away’ from taking difficult decisions to balance the books but insisted it was too soon to set out his plans in detail.
But the former Greater Manchester mayor, who will become Labour leader on Friday, has campaigned for a Land Value Tax for years.
Speaking during last month’s Makerfield by-election he said he had ‘long been persuaded of the argument for a Land Value Tax’. Mr Burnham described council tax as ‘very regressive’ and said basing bills on valuations dating back to 1991 was ‘not justifiable’.
Sir Mel warned against the move, saying: ‘If Andy Burnham is planning a new property tax, that risks being an unfair tax on aspiration.
‘Nothing is safe under Labour – they’ve raised taxes on jobs, savings, pensions, and now possibly your home too.
‘The best way to reform property taxes would be to abolish stamp duty – which can be funded if we get on top of the ballooning benefits bill. That is what the Conservatives will do.’
Dan Neidle, founder of Tax Policy Associates, said the estimated impact on house prices was relatively ‘crude’.
But he said a blanket tax could produce ‘very substantial tax increases for some people’ creating a ‘sudden shock that, overnight, greatly reduces property prices in some parts of the country’.
Mr Neidle suggested the impact could be reduced by applying the policy on a regional basis, with each region collecting an amount equal to the sum raised locally in council tax and stamp duty.
He said that replacing stamp duty and council tax โ two ‘terrible taxes’ โ could also boost economic growth.
But designing a new property tax could take years.
Danny Sriskandarajah, chief executive of the Left-wing New Economics Foundation think tank, which has close links to Mr Burnham’s team, said he was more likely to focus on short term tax grabs, such as raising the rate of capital gains tax.
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