Rachel Reeves faced a furious backlash yesterday over a possible and highly controversial shake-up of property levies.
The Chancellor was warned that proposals to replace stamp duty with an annual charge on homes worth more than £500,000 would damage the market as well as punish people who have worked hard to own their houses.
And one of her Treasury ministers refused to rule out the possibility of her introducing the radical change in the Budget as she seeks to fill a £50 billion black hole in the public finances.
Labour vowed before the last election that it would ‘not increase taxes on working people’, ruling out rises in National Insurance, income tax or VAT.
But that language seemed to soften yesterday. Shadow Chancellor Sir Mel Stride said: ‘Labour can equivocate all they like, but we know they are drawing up plans to raise taxes yet again at the Autumn Budget.
‘Keir Starmer and Rachel Reeves promised not to raise taxes on working people, then introduced a £25 billion Jobs Tax – which will leave the average working household £3,500 worse off.
‘Now, after their botched welfare reforms and economic mismanagement, they are clearly gearing up to do it all over again this autumn.
‘The British public simply cannot afford Labour. Only the Conservatives believe in sound money and low taxes.’
Rachel Reeves is facing a furious backlash after she was revealed to be plotting a radical shake-up of property taxes
Ms Reeves is understood to have asked officials to look at a potential overhaul of property taxes (stock photo)
Keir Starmer (pictured) previously promised not to raise taxes on working people
As part of her efforts to fill the Government’s coffers and boost economic growth, Ms Reeves is understood to have asked officials to look at a potential overhaul of property taxes.
She has already been called on by economists to scrap the current system in which buyers having to pay thousands of pounds in stamp duty on house sales, which they say deters people from moving.
The Guardian reported that owners of houses worth more than £500,000 could have to pay a ‘proportional property tax’ based on the value of their properties when they sell up.
However, sources played down the claims that Treasury officials are looking at this proposal or threshold.
Sources also moved away from suggestions that civil servants are drawing on the findings of a report published last year by think-tank Onward, which proposed that only future owners could pay an annual tax based on the value of the property instead of stamp duty.
Under the plan put forward by economist Professor Tim Leunig, current homeowners would not be hit by the charge but if they do sell up in future, their buyers would pay the levy each year instead of stamp duty at the point of purchase.
Kirstie Allsopp, the TV presenter who fronts Location, Location, Location, led a furious backlash over the reported plans
It is intended to open up the property market by making it less expensive to move and encouraging those in large homes to downsize.
TV presenter Kirstie Allsopp warned the Chancellor not to risk destabilising the market by ‘flying kites’ about potential new property taxes, telling Times Radio: ‘It’s not Rachel’s to go after because it’s their homes.
‘It’s the roof over their head. And this Government seems to want to punish people for making the sacrifices they’ve made to buy their own homes.’
James Browne, senior economic policy adviser at the Tony Blair Institute, said: ‘While replacing stamp duty with a new annual property levy on homes worth more than £500,000 is economically sensible, it would be politically challenging.
‘Either long-standing homeowners who are asset-rich but cash-poor would be hit with much larger bills or, if it only applied after a property changed hands, would discourage moving just as much as stamp duty does at the moment.’
Treasury minister Torsten Bell told Sky News: ‘Tax decisions are made by the Chancellor. I’m not going to start speculating on individual taxes.’
Last night a Treasury spokesman said: ‘We are protecting payslips for working people by keeping our promise to not raise the basic, higher or additional rates of income tax, employee National Insurance or VAT.’
