Burnham urged to replace stamp duty and council tax with property levy

Some of Britain’s leading economists have urged Andy Burnham to tear up the UK’s tax system, calling for stamp duty and council tax to be scrapped and replaced with a single annual property value tax.

The group, which includes Lord O’Neill of Gatley, the former Goldman Sachs chief economist who advises Burnham, has written an open letter to the man widely expected to become the next prime minister, warning that structural reform can no longer be delayed.

Their intervention endorses Prosperity 2030, a five-year programme from University College London’s Institute for Global Prosperity launching on Thursday, which the signatories say “models how fiscal, welfare, and infrastructure policies can unlock the gridlock that plagues the country”.

Burnham is on course to enter Downing Street on 20 July if he wins the Labour leadership, inheriting an economy weighed down by high debt and stubbornly low growth. Westminster and the City are watching his fiscal plans, and his choice of chancellor, particularly closely after his Manchester speech last week calling for greater devolution. As Business Matters has reported, Burnham has already signalled “room for movement” on tax, pledging a business rates cut for pubs and high street firms.

The centrepiece of the report is a single national contributions levy that would replace six separate taxes: income tax, employee and self-employed national insurance, dividend tax, inheritance tax and capital gains tax. The levy would run from 0 per cent to a 22 per cent base rate, with a 46 per cent top rate applied to a “flat definition” of income, raising an estimated £75 billion after five years.

That “simpler, more efficient system” would fund nine new universal services, transforming the welfare state by delivering support in kind rather than in cash.

On property, the plan would abolish stamp duty and council tax in favour of a 1 per cent annual property value tax, ending what the report calls “the absurdity of a modest terrace paying proportionally more than a high-value mansion”. A deferral option would ensure “no one is forced to sell to pay it”. The idea echoes proposals already circulating in the Treasury for an annual charge to replace stamp duty, and chimes with the Institute for Fiscal Studies, which has long argued the case for the abolition of stamp duty as one of Britain’s most economically damaging taxes.

A new property levy is unlikely to pass without a fight, however. Sir James Cleverly, the shadow secretary of state for housing, communities and local government, has already branded it a “garden tax … straight out of the Corbyn playbook”. Nor is it the first Burnham-linked tax idea to unsettle boardrooms: the debate over what a Burnham wealth tax could mean for UK business and investors is still fresh.

Andrew Percy, co-chairman of the social prosperity network at the UCL Institute for Global Prosperity and the report’s lead author, said it was a “plan to cut taxes for working people, abolish the taxes holding back the housing market, and get young people into paid work. The question is no longer whether Britain can afford reform. It is whether we can afford another decade without it.”

Alongside Lord O’Neill, the letter’s signatories include Professor Dame Henrietta Moore, founder and director of the institute, Professor Jonathan Portes of King’s College London, Professor John Muellbauer of Nuffield College, Oxford, and Danny Sriskandarajah, chief executive of the New Economics Foundation.

Their verdict on Westminster’s recent record is blunt: “Seven prime ministers in ten years have inherited the same challenge and failed to solve it for the same reasons: the problems are structural and systemic.”

Amy Ingham

Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.