Andrew Dixon is Founder of Fairer Share.
Levelling up has repeatedly been framed as a means of making the UK fairer, but ministers have a problem. While a significant amount of time and effort is clearly being spent on place there has, to date, been very little focus on people – especially young people.
Unless this changes, and quickly, the whole agenda is doomed to fail before it has even started.
Over the past fortnight the Government has taken a step backwards in its attempt to bridge the generational divide. Increasing the tax burden on working age people to pay for the social care of older generations will put a further dent in the pockets of younger people.
The idea of taking from younger workers looks even more unfair if we consider how many older people have accumulated vast amounts of unearned and untaxed wealth through property ownership over the past thirty years.
Pitting grandchildren against their grandparents – which is effectively what the National Insurance policy does – is counterproductive. Show me a grandparent who doesn’t want a better life for their grandchildren. The Government is misjudging the public mood and the deep ties that bind generations.
The row over social care funding highlights the need for renewed effort from ministers to tackle the inter-generational unfairness that exists across the UK, of which the starkest indicator is surely a housing system that has led to younger generations increasingly being shut out of owning their own home.
Ten years ago, the average age of first-time buyers in the UK was 30. The latest English Housing Survey shows that average age of today’s homeowner is now 32, rising to 34 in London. But not only are young people today far more likely to have to rent privately than their parents did at the same age, more than one in five 25-34 years old now live with parents or other relatives in so-called “concealed households”.
Part of the problem with the housing market is that the property tax system in England is not fit for purpose, ensuring that people who live in modest homes suffer a worse deal than those living in the wealthiest areas, while struggling renters are hit just as hard as their, often older, counterparts who have made it on to the property ladder. Earlier this year academics and think tanks from across the political divide united to state that the current council tax system is a “wealth tax” on poorer parts of Britain and is in urgent need of a comprehensive overhaul.
The reality is that the Government’s social care funding plan and our unfair property tax system amount to a double whammy against young people.
A simpler and fairer system would replace both council tax and stamp duty with a proportional property tax set at a flat rate of 0.48 per cent of a home’s value. A proportional property tax would be revenue-neutral for the Treasury and would mean cash savings for the vast majority of people. There is growing agreement that the time has come to open the door to a proportional property tax with David Willetts the latest high-profile figure backing the policy.
Previous analysis has shown that three quarters of households across England would gain from lower monthly bills under a proportional property tax, with some of the most deprived parts of the country benefiting the most.
Now a new report from Fairer Share also shows how a proportional property tax would also increase the number of transactions in the market, while freeing up vacant homes and releasing many thousands of second homes though a surcharge rate on these properties. The combined effect would be many more homes for young people and families who need them.
Around 600,000 homes could be released throughout England. This could mean up to a quarter of a million one- and two-bedroom homes freed up for young people who most need them, along with many more family homes. In London, up to 47,000 one and two-bed starter homes could be released – more than any other part of the country. Meanwhile under the proportional property tax 8.7 million renting households would be removed from property tax.
The Government has rightly strengthened its team of ministers within the newly created Levelling Up Department. The intellectual heft of Michael Gove, Kemi Badenoch and Neil O’Brien – combined with Andy Haldane at the Cabinet Office – will add much needed clout to levelling up agenda. But unless it adapts quickly on hugely regressive areas of policy such as council tax, then the whole project will be stalled before it even gets going.
Ultimately, if levelling up is to have fairness at its heart then it cannot just be about geography, with action only focused on a handful of so-called priority areas and young people across the country losing out. Instead, real levelling up will require policies such as a fairer property tax system to help reduce the intergenerational inequalities which exist across the country.