Eric Pickles's plan to abolish council-tax discounts makes very little economic sense, writes Philip Johnston.
A year or so back, David Cameron said that second homes were "not necessarily splendid" for the economy and were, therefore, a legitimate tax target (though whether he intended to include Chequers and his constituency home in this broadside was unclear). None the less, the scene was set for second-home owners (boo, hiss) to get what was coming to them. However, the reform that Mr Pickles is due to announce today is somewhat less dramatic than billed, because in many areas the discount for second properties has already all but disappeared.
Once, it amounted to 50 per cent, but is currently more likely to be 10 per cent at best. In Wales, it has been abolished as it now will be in England under Mr Pickles's plan. I don't have any objection to that.
In any case, it hardly seems fair that we are able to pay less than our neighbours who live in the village all the time, except, of course, that they regularly receive all the services for which the tax is supposedly raised, whereas we only get them sporadically.
But if the change can be justified on grounds of equity, I find it hard to understand how it is going to enable councils to cut taxes for everyone else. "By removing the subsidised tax breaks for empty homes and second homes, we can cut £20 a year off families' council tax bills by treating everyone equally and fairly," Mr Pickles said yesterday. But will it raise enough money for such an (admittedly meagre) return? Take a council like Brighton and Hove, where there are 1,223 second homes. There, the 10 per cent discount currently costs the council £177,000 in lost revenue, which hardly seems sufficient for £20 off everyone else's bill.
Moreover, it is not in the gift of Mr Pickles. What guarantee is there that the money will be passed on in lower taxes rather than frittered away on myriad wasteful projects that continue to absorb our taxes, even in these allegedly austere times for the public sector? When councils reduced the concession from 50 per cent to 10 per cent a few years ago, they justified the move by promising to use the additional revenue to provide affordable housing – so where is it?
This, surely, should be the Government's priority: to ensure that the money already raised is wisely spent before imposing even higher taxes. Council taxes have more than doubled since they were introduced in 1993, but the services are not twice as good. Far from it. In many local authorities that have moved to fortnightly bin collections, they are worse. Furthermore, how will it encourage second-home owners to give up their properties so that they can be bought by local families, as the Coalition also seems to want? The amounts of money involved are far too small. Perhaps ending the discount will act as a disincentive to someone thinking of buying a second home, but it is hardly likely to convince an existing owner to sell up. Certainly, if the property is still (unusually) receiving a 50 per cent discount this will be a serious blow; but most will already be paying 90 per cent of the tax and are, in any case, in low bands.
There are so many myths surrounding second homes that they feed into an irrational animus against their owners. They are not all the properties of City plutocrats who pop down for a week's sailing once a year; nor do they all suck the life out of local communities and deny rural families a home. Some do, it is true, but most do not. The bigger, more expensive houses are beyond the reach of young couples in any case, just as they are in cities as well. High house prices are not a phenomenon unique to the countryside. However, what drives youngsters out is not a dearth of affordable housing, but a lack of jobs. The long decline of rural Britain will be reversed by an influx of people from the cities looking to buy homes, start up businesses and raise families.
For some people who have worked hard all their lives, a second home is part of their pension planning, a flat or house that can be sold towards the end of their lives to pay for care. Many second-home owners also put a lot into their villages when they are there. They tend, as we have done for the past 20 years, to take the majority of their holidays there, spending money in local shops and pubs and employing local builders and gardeners rather than pouring it into the economies of Brittany or Tuscany. Near our cottage in Devon, a farmhouse remained unoccupied and derelict for more than 30 years before it was bought and renovated (by Kirstie Allsopp, as it happens).
This was a good thing for the community, not an imposition upon it. Mr Pickles is right to want to reform council tax and second-home owners should pay their fair share. Vilifying them, however, helps no one.
This, surely, should be the Government's priority: to ensure that the money already raised is wisely spent before imposing even higher taxes. Council taxes have more than doubled since they were introduced in 1993, but the services are not twice as good. Far from it. In many local authorities that have moved to fortnightly bin collections, they are worse. Furthermore, how will it encourage second-home owners to give up their properties so that they can be bought by local families, as the Coalition also seems to want? The amounts of money involved are far too small. Perhaps ending the discount will act as a disincentive to someone thinking of buying a second home, but it is hardly likely to convince an existing owner to sell up. Certainly, if the property is still (unusually) receiving a 50 per cent discount this will be a serious blow; but most will already be paying 90 per cent of the tax and are, in any case, in low bands.
There are so many myths surrounding second homes that they feed into an irrational animus against their owners. They are not all the properties of City plutocrats who pop down for a week's sailing once a year; nor do they all suck the life out of local communities and deny rural families a home. Some do, it is true, but most do not. The bigger, more expensive houses are beyond the reach of young couples in any case, just as they are in cities as well. High house prices are not a phenomenon unique to the countryside. However, what drives youngsters out is not a dearth of affordable housing, but a lack of jobs. The long decline of rural Britain will be reversed by an influx of people from the cities looking to buy homes, start up businesses and raise families.
For some people who have worked hard all their lives, a second home is part of their pension planning, a flat or house that can be sold towards the end of their lives to pay for care. Many second-home owners also put a lot into their villages when they are there. They tend, as we have done for the past 20 years, to take the majority of their holidays there, spending money in local shops and pubs and employing local builders and gardeners rather than pouring it into the economies of Brittany or Tuscany. Near our cottage in Devon, a farmhouse remained unoccupied and derelict for more than 30 years before it was bought and renovated (by Kirstie Allsopp, as it happens).
This was a good thing for the community, not an imposition upon it. Mr Pickles is right to want to reform council tax and second-home owners should pay their fair share. Vilifying them, however, helps no one.
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