LibDem MP Supports Progressive Council Tax Reforms

mansion08:21 Wednesday 23rd October 2013
BBC Radio Cambridgeshire

[D]OTTY MCLEOD: Cambridge’s MP is calling for an overhaul of the system of council tax. Julian Huppert says he wants to move from a system that was botched together to one that includes more income and wealth taxation. But how feasible is it to change from a tax system that’s based on property values to something that takes into account how much people earn? Julian joins me now. So Julian, first of all I think we just need to explain how council tax works at the moment. Everyone has to pay it of course, and the amount that you pay depends on what local authority you live in, but also how much your house is worth. That’s right, isn’t it?
JULIAN HUPPERT: That’s roughly right, but only roughly. It’s based on different bands of valuation. But it’s actually based on how much your house was worth in the early 1990s, and that’s why, if you ever look at your bill, you’ll see that it lists your house as being worth £60,000 or something like that maybe, which doesn’t fit very well with what you may have paid for it more recently. So it’s very problematic. It’s also not progressive, because the very very largest house pays only three times more than the very tiniest flat in the whole country.
DOTTY MCLEOD: In terms of the valuations being outdated, surely it doesn’t matter in a system where everything is relative,
surely. It’s not really to do with how much your house is worth, it’s how much it’s worth compared to others in the area. So it doesn’t matter that these are outdated valuations.

JULIAN HUPPERT: Well it does matter, because it looks very odd to people, but also because when new houses are built, it means that somebody has to go through the complicated process of saying this new house that’s being built now in 2013, how much would that have sold for in the early 1990s. So I think there are some complexities are added. But also just the fact that anybody who pays council tax will know that it’s been shooting up. When it was set up in ’93 the average was £470. It’s now £1500. Even though in the last couple of years it’s pretty much levelled off, it’s only going up by a little bit, it’s still becoming more and more of a factor. So to have a bad tax and this odd way of working it out, and having it shooting up, is a real problem. I think we should look at better ways of doing it.
DOTTY MCLEOD: So you don’t like it. But don’t bring me problems Julian. Bring me solutions. What are you going to do about it?
JULIAN HUPPERT: Well there are a few things one can do relatively easily. One would be to have some more council tax bands, so that you would add some higher levels for places which are even bigger, because that would make it a more progressive system. Finally we should definitely do the revaluation, so we’re basing values on what houses are worth now. I would also like to see a mansion tax, so that very high value homes pay an additional amount. So if you have a home worth over £2 million, a charge of 1% of the value over £2 million. So if you have a house that’s worth £3 million, you pay an extra £10,000 a year.
DOTTY MCLEOD: This is a drum that the LibDems have been banging for years and years and years Julian, but doesn’t it just punish people who have worked hard and earned their money, and have managed quite reasonably to buy themselves a nice house?
JULIAN HUPPERT: No I don’t think so at all. The issue is that somehow somebody has to pay for council services. The taxation has to be raised somehow. And so the question is who can actually afford to pay that. It seems to me that if you are fortunate enough to have a house that’s worth £3 million, you’re in a much better position to be able to contribute towards the cost of services than somebody who doesn’t own a house but has something much smaller. So it strikes me as a progressive way. It’s also quite an easy tax to collect, because whereas people can move assets into the Cayman Islands or hide them away somewhere, it’s quite hard to move a large house. We’d also making sure that anybody who didn’t have the cash on hand could delay the price. So if you have a little old lady living in a home that they’ve had for ages which is now worth £3 million, they would just have the money to pay when they sold the house finally.
DOTTY MCLEOD: And how much would it raise? What’s the benefit?
JULIAN HUPPERT: It would raise a very large amount of money. It depends on exactly how you set it up. We’re talking about hundreds of millions around the country. And that is very very useful money. And targeted again at those people who do actually have money. It’s not a punishment. It’s merely that people with more money are in a much better position to be able to contribute.
DOTTY MCLEOD: I suppose an obvious point is that the Tories are never going to buy into this, are they? And as long as you’re in coalition, it’s very unlikely to happen.
JULIAN HUPPERT: Well indeed. We’ve tried this out with them and they’re not prepared to see it happen. So we focus for now on other things, like lifting poorly paid people out of income tax, so that nobody will pay any income tax on the first £10,000 they earn, which a thing I’m really pleased about, because it helps people at that end. But I hope at some time we’ll be able to move on to this, because council tax currently is a really problematic tax. There are people who earn very very little who still have to pay council tax. It can be a huge amount of their income.
DOTTY MCLEOD: Julian Huppert, MP for Cambridge, LibDem MP for Cambridge. Thank you for joining me this morning.