On 19 September, Liberal Democrat Conference ratified as official Party policy their new tax plans (Liberal Democrats, Fairer, Simpler, Greener, Policy Paper 75).

http://www.libdems.org.uk/media/documents/policies/PP75%20Fairer%20Simpler%20Greener.pdf

 The small print affirms support for replacing council tax with local income tax of 4.0-4.5 per cent (which will be even higher in high-spending councils). And in a new move, Liberal Democrats also want to introduce a new, additional tax on domestic property. They talk up the prospect of an annual levy charged on the value of the house. This would have the effect of significantly increasing taxation on areas where property values have risen in recent years.

“Conference endorses policy paper 75, Fairer, Simpler, Greener, as a statement of the party’s policies... [Calls for policies to] Enlarge the tax base, tax unearned economic rent and stabilise the property market by further developing policies on land value taxation... Conference calls for further policies for land taxation to be developed, including consideration of the Lyons Review report when it is published” (Official policy motion at Liberal Democrat Party Conference, 19 September 2006).

http://www.libdems.org.uk/conference/agenda.html?id=685&navPage=conferenceagenda.html

 The policy document elaborates,

“Liberal Democrat policy has the effect of removing the main tax on domestic properties (council tax) and replacing it via a non-property tax (local income tax). While we are persuaded of the strong arguments in favour of local income tax… this will leave the UK in a unique position internationally of having no direct taxation of property at all… Taxation of property should be retained if a better mechanism can be found” (Fairer, Simpler, Greener, p.21)…

 “We believe land taxation potentially has an important part to play in a balanced overall tax system” (p.22).

 “There are satisfactory models elsewhere, notably Denmark where a national 1% property tax (with an allowance for low value property) has operated for 80 years” (p.22).

LABOUR’S HOUSE PRICE TAX: IMPLEMENTED IN NORTHERN IRELAND, BRITAIN’S NEXT

 As a testing ground for Britain, Labour Ministers are rolling out a rates revaluation in Northern Ireland, with a revised system of local taxation. Since the Northern Ireland Assembly is suspended, all decisions are made by the Labour ministers in Westminster.

http://vla.nics.gov.uk/index/domestic-reval-2007/domestic-revaluation-faq.htm

 The new system is known as a ‘Discrete Capital Values’ model, where a single tax rate is applied to the house price, each year (akin to a stamp duty being levied on every home every year). This differs from council tax which is a banded system and which caps the highest rate at Band H (twice the rate of Band D).

 Parliamentary Questions have revealed that the average tax rate will be 0.63%, applied to the home’s value to calculate the yearly bill. The precise rate would be set locally. There is no cap on the maximum bill, unlike council tax. Local tax rates in Northern Ireland have always been lower than the British mainland.

 Hansard, 25 July 2006, col. 1409W.

http://www.publications.parliament.uk/pa/cm200506/cmhansrd/cm060725/text/60725w2066.htm#06072811000633

 Government documents explain that this creates a “more progressive” form of taxation (para 3). They admit, this is “a general property tax rather than as a charge for any specific services” (para 207). They concede, “some households will be faced with substantial increases in their rate liability” (para 214). Regular revaluations would take place to ensure the house price data is accurate (Department of Finance & Personnel, Consultation Report on the Reform of the Domestic Rating System, and Annex 1: Reform of the Domestic Rating System-University of Ulster Report, 2005). http://www.nics.gov.uk/ratingpolicy/reformdomestic.htm

 In its “Equality Impact Assessment”, the Government admitted that Protestants in Northern Ireland will pay more under the new system. This is since they are more likely to be middle class – and the new tax will hit middle class households the hardest. Source: http://www.conservatives.com/pdf/revaluation-protestants.pdf

The Government is currently conducting a review into local government finance which will report by the end of 2006. This review was commissioned by Gordon Brown and John Prescott, and is headed by former Labour councillor, Sir Michael Lyons. Sir Michael Lyons previously sat on Gordon Brown’s review of the location of government departments.

http://www.hm-treasury.gov.uk/consultations_and_legislation/lyons/consult_lyons_index.cfm

  In his interim report, published in December 2005, he explained:

 “The extended timetable and wider remit also enable me to consider a broader set of options, possibly including more radical ones. These might include moving to the use of detailed point valuations for properties rather than assigning them to bands. This is what is intended in Northern Ireland” (summary, 61, Lyons Inquiry into Local Government, Consultation Paper and Interim Report, 15 December 2005).

http://www.lyonsinquiry.org.uk/docs/051215%20interim%20report.pdf

In January, the taxpayer-funded National Institute of Economic and Social Research, also called for a similar system to be introduced, but with a 1% levy charged on homes value each year (Guardian, 27 January 2006).

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