Property Tax Ambitions Face Reality Check as Burnham Prepares for Power

Attempts to overhaul the property tax system would face significant practical and political barriers under an Andy Burnham government, according to a former Treasury special advisor.

Measures such as aligning capital gains tax and income tax rates, introducing a new land value tax, updating council tax or devolving tax-raising powers for property would not be straightforward for any new Chancellor, said James Nation, speaking on the latest episode of Housing Unpacked.

James is also a former deputy head of the Number 10 Policy Unit and is currently managing director at political consultancy Forefront Advisers.

Speculation around property tax has intensified in recent days as Keir Starmer prepares to leave office. With Andy Burnham likely to succeed him, attention has focussed on what changes he may try to implement, including a land value tax, an idea he has previously supported.

“Don’t take every Burnham comment from the campaign as gospel,” said James. “The economic advice might be that this is a good thing to do but it hasn’t been done before for various reasons. The complexity involved in the full-scale replacement of council tax, but also I think business rates, would be enormous.”

That doesn’t mean it won’t remain a long-term aim or that the conversation across the political spectrum is shifting towards taxing the asset rather than the transaction. The Conservative Party has also pledged to scrap stamp duty and we explored the merits and pitfalls of a plan by campaign group Fairer Share last week.

“We are talking about a process that takes years and I think is probably one of those that Burnham might be tempted to kick into the next manifesto bucket,” said James. “My view is that you are far more likely to see the Treasury dial up the current high value property council tax. It might be that a process or a consultation is kicked off to have the appearance of being bold, I'm just a bit sceptical of what can change given the time we've got left in the parliament.”

Following comments from Wes Streeting, who is one rumoured candidate for the job of Chancellor, there has also been conjecture that rates of income tax and capital gains could be aligned.

That would be bad news for landlords at the higher or additional income tax rate and potentially see more of them sell up, squeezing supply and increasing upwards pressure on rents. Landlords have faced a series of other challenges in recent years including higher rates of stamp duty and the Renters Rights Act, a new piece of legislation introduced in May that creates uncertainty around rent increases, repossession rules and what happens if they try to sell. 

Future changes related to energy performance certificates may also prove to be disincentive, as I discussed on a recent episode of Housing Unpacked.    

The possibility of aligning capital gains and income tax rates has been floated for decades, with Tony Blair recently saying he had dismissed the idea.

“Sometimes you have to ask yourself why ideas knock around for so long and don’t get implemented,” said James. “I remain sceptical that full alignment raises anywhere near the sums that people on the outside have been speculating about and that’s certainly what I saw in government around the HMRC and Treasury behavioural modelling.”

Listen to the podcast to also hear why James thinks Council tax reform is politically difficult, especially for MPs with seats in London and the south-east, and whether any devolution of tax-raising powers is likely to include stamp duty.