The European Commission has called for the British government to reband properties and increase council taxes. The call was amongst the Commission’s 2014 economic policy recommendations, which also said the government should use the higher tax revenue to cut the deficit in preference to reducing spending.
The European Union’s executive body complained that house prices were rising too fast in London and the South-East and that tax rises might help control them. It was especially keen to see the Council Tax system reformed to ensure taxes could be heaped on in these parts of the country.
It said: “At the moment, increasing property values are not translated into higher property taxes as the property value roll has not been updated since 1991 and taxes on higher value property are lower than on lower value property in relative terms due to the regressivity of the current rates and bands within the council tax system.”
Changes to property tax, particularly rebanding, have filled successive generations of politicians with fear. The problem for leaders is that any changes, including those that do not boost tax revenue, will still see winners and losers. In previous reforms, the winners have kept quiet whilst the losers have fought extremely successful campaigns.
The most recent example of this was the Community Charge or Poll Tax introduced by Margaret Thatcher in 1990. The tax ended the system by which people paid tax based on the value of their property but instead paid for how many people lived in it, and therefore how many local services they consumed.
The proposal led to riots and was a contributing factor in Thatcher’s resignation. The current system was brought in by John Major in 1991 and is similar to the older rates system than the Poll Tax.
The desire of the European Union to increase Council Tax has been seized upon by campaigners as evidence of how out of touch they are. Matthew Elliott, chief executive of Business for Britain, told Sky News: “This is further evidence that the EU should be let nowhere near tax policy of its member states.
“Leaders in Brussels appear not have taken on board the resounding message from the recent elections that Britain wants less interference from the continent, not more.”
The debate comes at a time when David Cameron is fighting to avoid Jean-Claude Juncker becoming President of the European Commission. Juncker is lead candidate for the European People’s Party, the centre right federalist grouping that won the election last month.
Juncker is the former Prime Minister of Luxembourg and is committed to creating a United States of Europe.