Burnham warned mansion tax could leave council’s worse off
Councils have warned the planned “mansion tax” could cause confusion, undermine accountability and impact local services.
The Local Government Association (LGA) said the tax on properties valued over £2 million, announced by Rachel Reeves in the autumn budget, would be “complex” and create an “inefficient parallel system” to council tax.
The consultation on the proposed high-value council tax surcharge closed earlier this month and the government is currently considering responses.
Andy Burnham had previously described the concept as symbolizing the “politics of jealousy” during his unsuccessful bid for the Labor leadership in 2015.
But the Prime Minister has recently backed changes to property taxes, citing “reduced” council tax and a new land value tax as potential focus areas.
Under current plans, municipalities would be responsible for billing, collecting and enforcing the surcharge but would not be able to set the tax rate, eligibility rules or exemptions.
Moreover, municipalities will not retain the surcharge revenue they collect under current plans and the revenue will return to the Government.
In its response to the consultation, the LGA said the plan would create a “complex, costly and inefficient parallel system” to the existing council tax system, with “significant” staff, legal and technology costs, and risk leaving councils “out of pocket” if the Government does not fully fund new burdens.
The government has said the revenue generated will support local government services, but little detail has been given about how this will work in practice, the LGA said, due to uncertainty over whether the funding will be additional rather than offset by cuts elsewhere.
More details about how the surcharge will support services are expected to be set out in the next spending review.
The LGA also warned that a national tax, called a “council tax”, could confuse residents, who may hold their local councilors responsible for a tax “that has nothing to do with them”.
It was also noted that the system could be disproportionately burdensome for areas where there are only a small number of high-value properties.
The LGA has called on the Government to consider national management of the surcharge rather than using councils.
The LGA said that unless an alternative to using councils could be found, the Government should be transparent in bills introduced and other relevant material that the surcharge is a national charge.
Additional upfront investment into the organization should be provided to enable councils to prepare for the surcharge, and the Government should ensure that administrative, legal and enforcement activity costs can be covered.
Kam Rai, chair of the LGA’s resources committee, said: “The surcharge is a national tax, but it will be left to councils to manage it, bear the risk and deal with the confusion it will create for residents.
“Without full funding for implementation costs and clear accountability, this proposal risks increasing costs and complexity at a time when councils are already under huge pressure.
“We need a firm guarantee from the government that the money raised must actually be additional and not used to offset cuts elsewhere.
“Councils should not be expected to run a new national tax system that could leave them out of pocket and undermine local democratic accountability.”
A Government spokesman said: “This tax is expected to raise around £430 million a year to help fund public services and addresses the long-standing injustice in our country where a Band D house in Darlington or Blackpool pays more council tax than a £10 million mansion in Mayfair.”
