Think Tank Says Tax Hikes The Answer To UK Housing Market Reform

by Jason Gorringe, Tax-News.com, London

01 September 2003

A report published last week by the New Labourite think-tank the Institute for Public Policy Research (ippr) advocates radical reform in the UK's housing market and argues for increased taxes to tackle what it calls the most extreme form of social inequality in Britain.

Amongst the many recommendations made by the report's author, Chris Holmes, a Visiting Research Fellow with the ippr and a former Director of the housing charity Shelter, to close the growing "equity gap" is the elimination of inheritance tax exemption on the ownership of first homes; the introduction of higher bands of council tax on more expensive properties; the levying of full rates of council tax on second properties; and more proactive use of stamp duty as a method to control the level of house purchase and sales.

"The growth in inequality has been caused by a succession of different policies: the replacement of older homes by high-density flats; the imbalance of suburban growth, dominated by housing for sale; the resistance to building low-cost housing, so poorer people could move from overcrowded flats in inner cities; the regressive tax relief enjoyed by home owners; the loss of good-quality homes through the right to buy; and inadequate public investment in affordable social rented housing," explained Mr Holmes.

According to the report, the value of the housing stock in the UK has risen from £36 billion in 1970 to £1,525 billion in 2001 and Mr Holmes points out that there are only ten districts in the south east where someone on a salary of £25,000 can afford to buy a property.

"These changes are also very relevant to the reforms suggested in the Chancellor’s assessment that the UK housing market as it currently operates is a major barrier to entry into the single currency," claims Mr Holmes.

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