Property tax would bridge the wealth gap between ages

It is more than ten years since I published The Pinch, setting out how huge intergenerational injustices were opening up across Britain. Or to use the more provocative wording on the cover, how baby boomers took their children’s future — and why they should give it back.

The issue has risen up the agenda in recent years but it has been harder to take the action needed to bridge the divide. We hear a lot, rightly, about levelling up the regions of the UK but far less about levelling up the generations.

The way that property is taxed in this country is a major contributor to the wealth divide between old and young. Council tax is based on property valuations from 30 years ago and is deeply regressive. Lower value properties pay much more proportionately than high value properties. The system is particularly hard on young people who are renters, dreaming of owning a home of their own, but still pay the tax.

There is a way to fix the council tax problem. Support is growing for replacing council tax and stamp duty with a proportional property tax. Research has shown that such a tax set at about 0.5 per cent of a property’s value would result in lower bills for three quarters of households, while reducing them to zero for renters.

New research from the Fairer Share campaign shows it would pave the way for the release of many thousands of extra homes for young people and families who need them. In the most optimistic scenario, almost 600,000 homes would be released within five years of such a tax being introduced to replace the other two taxes. Of these it is estimated that about a quarter of a million would be one and two-bed homes suitable for first-time buyers.

Politicians cannot afford to ignore these kinds of policies if the generation gap is not to widen further in the years ahead. We need a massive boost to home ownership. When I updated The Pinch in 2019, I said that political parties should use the upcoming election to start healing these divides with a policy programme that appeals to and benefits young and old alike.

At the Conservative Party conference we will hear more about how the government’s levelling-up agenda will attempt to close Britain’s deep-rooted prosperity gaps. The challenge is ensuring that it also goes some way to closing the widening generational gap. A reform of council tax contributes to both sorts of levelling up. It eases the burden of tax in areas with more low value properties and it also eases the burden on young people, in particular renters.

First published in the Times