Tax expensive homes more, European Commission tells UK

Harriet Green
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George Osborne’s been urged to up council taxes on higher value properties today - by the European Commission.

The commission’s said that, in order to keep house prices under control, the UK also needs to build more houses and trim the Help to Buy 2 scheme - where the government advances 15 per cent of a property’s price.

The country-specific recommendations on long-term growth, which it releases each year, have been deemed “in line” with the UK’s approach, by the government, who says it'll listen to them "with interest". But he suggestion that the government’s flagship Help to Buy scheme could be fuelling surging house prices will no doubt irk ministers.

The commission said Britain’s current system of council tax is “regressive”, because it’s relatively high on lower value properties.

Reforms to the taxation of land and property should be considered to alleviate distortions in the housing market.

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.

And when it came to the supply squeeze, the commission highlighted the impact of the government’s slow response, particularly in London.
The risks in the housing sector relate to a continuing structural undersupply of housing; intrinsic supply constraints, particularly in London, and the relatively slow response of supply to increases in demand continues to drive house prices higher, particularly in London and the southeast, and also leads to buyers taking on high mortgages.

It’s also called on the UK to prioritise capital spending, saying it should: “pursue a differentiated, growth-friendly approach to fiscal tightening by prioritising capital expenditure.”