Simon Fell MP argues for a radical overhaul of Stamp Duty and a Proportional Property Tax to replace Council Tax

I appreciate that transformative tax changes can make politicians nervous. Indeed, one of my earliest political memories is of the Poll Tax riots. We all know the consequences of trying to shake up the domestic rates system.

Our current property taxes unfairly favour the wealthy, burdening lower-value homes. They discourage efficient housing use, under-tax larger properties, and penalise homebuyers and sellers. These issues affect us all. Property taxes fund our important local services and infrastructure, and impact owners and renters alike. When these taxes are ineffective, society suffers. Council Tax and Stamp Duty are the main culprits.

Council Tax places the greatest burden on the young, on low-earners, and on residents in less prosperous regions, while benefiting wealthy homeowners and property investors. As property prices have soared, average incomes have stagnated. Research by the think tank Onward shows that households spend between 0.80% and 4.5% of their disposable income on Council Tax, with the highest payments in the north east and south west, and the lowest in London. This is not the mark of a fair tax.

In theory, Council Tax is fair and progressive, supposedly based on a property’s value: if your house is worth more, you pay more in tax. This seems legitimate, and it certainly would be if those valuations weren’t made thirty years ago, with price inflation startlingly unequal since. Now, Council Tax is effectively a levy which targets the wealth of low and middle-income families, the young and people who live in poorer areas. Meanwhile those fortunate enough to reside in the townhouses of SW1, for example, or indeed those with multiple residences, typically benefit the most.

The banding system entrenches this inequality, with homes at the bottom of each band paying proportionately more than those at the top, the value boundaries of each band having been warped by unequal growth. To illustrate, in Westminster, a £30 million mansion pays £1,828 in Council Tax, while a family in a modest Band D home in my constituency of Barrow & Furness pays £2,068.

How in the world can this be seen as fair?

Happily, this Council Tax conundrum has a fair and simple solution, long advocated for by the Fairer Share campaign: a Proportional Property Tax. This would see homeowners (and crucially not renters) pay a flat rate of 0.48% based on current valuations, updated annually, rather than the outdated 1991 numbers.

Fairer Share’s analysis shows this would lead to significant tax cuts for 76% of families, saving £6.5 billion per year for households outside central London and the southeast (or £556 per household), helping to level up communities and boost local economies.

Not only that, but this reform would bring the Treasury an extra £5.4 billion per year, which I would argue should be used to remove the burden of Stamp Duty.

While Stamp Duty is progressive, with higher rates for larger transactions, it still exacerbates the housing crisis by hindering efficient property use. By taxing transactions, it discourages homeowners from moving – whether be it an older couple downsizing or a growing family upsizing. The economic impact extends to job opportunities rejected due to moving costs.

The Chancellor’s Stamp Duty holiday gave the UK property market a much-needed boost during the COVID-19 pandemic but it also highlighted the merits of abolishing it altogether. Stamp Duty hampers housing stock utilisation and residential mobility.

Abolishing Stamp Duty on owner-occupied properties would unleash transactions and alleviate the housing crisis. Stamp Duty should, however, remain in place for second home and non-resident buyers.

Nationally, voters overwhelmingly back this policy with a ratio of 3:1, and in the North, it is 9:1. A majority of voters in every constituency support this reform. If either of the main political parties includes this in their manifesto for the next election, it could be a game-changer.

This is not about more tax. This is about smart tax. And more importantly, fair tax.

Of course, this proposal is no silver bullet. There will inevitably be those who do not benefit from the scheme, which is obviously why politicians have been so reticent to take this particular bull by the horns, though by design these losers would be the best placed to cope, and there are plenty of thoughtful mitigations available to ease the passage from one system to the next, including cost caps and a deferral mechanism so that tax payments are only recovered at the point of a property’s sale for those unable to pay. 

I was fortunate enough to lead a Westminster Hall debate on this topic in mid-May and was struck by the volume and energy of its proponents, from the North, certainly, but also from across the political spectrum.

Council tax and stamp duty are fundamentally flawed, and for an hour on a quiet afternoon in Westminster it was very good to see a rainbow coalition of politicians stretching from Barrow to Hartlepool, from Fife to Dorset, all recognize this. We aren’t alone: think tanks like Bright Blue, IFS, IPPR, and campaign groups such as PricedOut, Generation Rent, and Intergenerational Foundation, have also endorsed the transition to a Proportional Property Tax, as have prominent economists from respected publications including The Financial Times, The Daily Telegraph, The Economist, and The Guardian.

Any political party willing to back this bold policy will enjoy the benefits at the ballot box. But, politics aside, it is also the right thing to do.

If enacted, these policies would significantly increase the disposable income of individuals across the country, directly benefiting households and improving the quality of life in local communities. It would free up properties, encouraging efficient use, and crucially, it is based on fairness. 

It’s beyond time for us to be bold. It’s time for us to act.

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Simon was elected as the Member of Parliament for Barrow & Furness in 2019. 

Prior to entering Parliament, Simon worked as a director at a not-for-profit company which prevented fraud and other financial crime, and protected vulnerable people from falling victim to fraud and scams. Before this, he worked in telecoms, helped run two charities, and alsoran his own communications business for a number of years. Until his election, Simon was Chair of the Barrow and District Credit Union for two years.

In Parliament, Simon is a member of the Home Affairs Select Committee, Chair of the All Party Group on Cyber Security, and also Chair of the APPG on Aquaculture. 

He lives in Ulverston, has three young children, and is married to Pippa.