What Andy Burnham council tax plan means for every UK homeowner now he's confirmed as Prime Minister
Andy Burnham is to be sworn in as Prime Minister and he has vowed that he will bring about the 'biggest rebalancing of power our country has seen'.
With 349 Labour Party politicians endorsing his run for power, he's all set to get the keys to Number 10.
As the UK bids farewell to Sir Keir Starmer, who formally resigned on July 20, his lsuccessor is set to shake up the council tax system, as he reckons it is 'highly regressive'.
It comes after almost 80 percent of the Labour Party backed Burnham's bid to win the leadership race before he then earned another 27 nominations on Monday (13 July).
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This made it pretty much impossible for any other candidate to gain the 81 endorsements needed to challenge the 'King of the North'.
The 56-year-old politician's main priorities include devolving power to communities, improving growth across the UK and tackling the cost of living.
Burnham, the former mayor of Greater Manchester, is reportedly also a fan of bringing in Proportional Property Tax (PPT).
What is Proportional Property Tax (PPT)?
This is a single flat rate tax charged at 0.48 percent of a property’s value on an annual basis, and according to campaign group Fairer Share, Brits would be much better off with this.
It is believed that Burnham could introduce PPT while scrapping council tax, which helps fund local services, and stamp duty, which is the tax you have to cough up when you purchase a property in the UK.
According to Fairer Share, that would make things a lot better for everyone, and a lot 'fairer'. The organisation want to 'replace Council Tax, Stamp Duty and the Bedroom Tax with a single flat rate tax that does not reduce revenue for public services, but does cut the tax bill for 75 percent of households in England' - and Burnham backs this idea.
Why do experts think the current council tax system needs replacing?
Explaining what they believe are the issues with the existing system, Fairer Share states: "Expensive properties and areas of the country with greater property wealth pay relatively less in Council Tax as a percentage of the property value. This unfairness has been exacerbated by a lack of revaluations since 1991. The effective tax rate on residential property is just 0.2% in London compared to 0.7% in the North East.
"As with the Poll Tax’s predecessor, Domestic Rates, successive governments have avoided updating property valuations because such a move would be unpopular in their wealthier constituencies.
"All political parties necessarily rely on voters in wealthier areas to win elections, and updating property values for Council Tax would have meant a significant rise in taxes for these voters. They have often been supported in this by much of the mainstream media, who have consistently opposed reform."
The winners and losers under PPT
Fairer Share claims that abolishing stamp duty would also 'remove a barrier to homeownership for millions' of people trying to get on the property ladder.
"Our proposed PPT would instead spread the burden of stamp duty across 23 million homes, which would mean that, instead of one large tax bill each time someone buys a home, the tax is spread across the period of property ownership," it explains.
Getting rid of the council tax system will supposedly save the average household £556 a year, according to Fairer Share.
A whopping 99 percent of people living in Salford would benefit and would save around £700 a year, campaigners say. However, in Westminster, only 12 percent of homes would reap the rewards and they'd save £500.
Lucian Cook, head of residential research at estate agents Savills, told the BBC there are questions about whether the system unfairly targets London and the south-east, where properties are more expensive.
He said: "If you are living in Wandsworth, you may be thinking 'why am I paying for libraries in Wigan?'"
Brits buying a home for the first time who opt for a pad on the dearer end of the spectrum would benefit from PPT, too.
As it stands, eligible first-time buyers do not pay stamp duty on the first £300,000 of a property's purchase price. They pay 5 percent on the portion between £300,001 and £500,000.
If it exceeds £500,000, you can't claim any relief and you'll have to fork out for the standard rates.
But in a world where PPT is the norm, a first-time buyer could save themselves £10,000 on a pad worth that much. People downsizing would also avoid being stung by stamp duty when moving to a smaller home.
However, finance experts have warned that renters might not be able to reap the benefits of PPT, as landlords might pass the fees onto them.
Olivia Burke