IPPR Urges Labour to Reform UK Tax System, Targeting Wealth and Property
A prominent think tank proposes significant changes to UK taxation, including higher levies on expensive homes and wealth. The recommendations aim to address economic inequalities and reform the "outdated" council tax system.
The Institute for Public Policy Research (IPPR), a Blairite think tank, has proposed substantial reforms to the UK tax system, urging Rachel Reeves to implement changes that would increase levies on expensive properties and wealth. The IPPR, which held significant influence during the last Labour government, has described the current council tax system as "outdated and regressive" and called for its overhaul.
Among the key proposals, the IPPR suggests adding two new higher council tax bands to the existing eight, potentially raising more revenue from larger homes. This recommendation comes as part of a broader push to address economic disparities and reform property taxation in the UK. The think tank advocates for replacing the current council tax system, introduced in 1993, with a "proportional property tax" set at 0.48 percent of a house's value.
The IPPR's proposals extend beyond property taxes. They recommend aligning capital gains tax rates with income tax rates, arguing that the current system unfairly taxes income more heavily than wealth. This suggestion aims to address the imbalance in the UK tax system, which has been criticized for benefiting those who derive their income primarily from wealth rather than work.
"Right now, the UK's tax system is skewed, holding back attempts to reduce regional economic inequalities and benefiting a lucky few who largely get their income from wealth, not work."
Inheritance tax reform is another focal point of the IPPR's recommendations. The think tank proposes replacing the current system, introduced in its present form in 1986, with a "lifetime capital acquisitions tax" designed to reduce intergenerational wealth inequality. In the short term, they suggest capping inheritance tax reliefs on business and agricultural transfers to minimize tax avoidance.
These proposals come at a time when the Labour Party, led by Sir Keir Starmer, is considering potential tax increases, particularly targeting higher earners. With the Autumn Statement scheduled for October 2024, there is growing speculation about potential changes to the UK's tax landscape.
The IPPR's recommendations reflect a broader debate about wealth distribution and economic fairness in the UK. As of 2021, the country's Gini coefficient, a measure of income inequality, stood at 0.35, indicating significant disparities. The think tank's proposals aim to address these inequalities while modernizing a tax system with roots dating back to the 17th century.
As the UK approaches the end of the current parliamentary term, likely in 2024 or 2025, the debate over tax reform is expected to intensify. The IPPR's proposals offer a blueprint for potential changes, challenging policymakers to reconsider how wealth, property, and income are taxed in an effort to create a more equitable economic landscape.
