Tories warn of new property tax threat

The Conservative party has warned the Lib Dems and Labour are planning new property taxes.

Lib Dem leader Menzies Campbell is planning to tax "unearned economic rent" to "stabilise the property market" by introducing a Danish model of a "national one per cent property tax", the Tories report.

And Labour backs similar proposals, with Northern Ireland residents set to pay a house price tax of 0.63 per cent of their home's value every year, the Conservative party states.

"It is clear that both Gordon Brown and Menzies Campbell are plotting to introduce a house price tax - and cynically tap into the rise in property values in England in recent years. Brown and Campbell are conspiring to pick the pockets of middle England," said shadow local government minister Caroline Spelman.

"Families and pensioners who have saved and improved their homes face the threat of soaring tax bills, without any improvements in their local services.

"Just because house prices have risen doesn't mean that local residents can afford higher local taxes; law-abiding, decent people are already struggling to meet the rising cost of mortgages, utility bills and local taxes."

Liberal Democrat party members will vote on the new property tax tomorrow at their conference in Brighton.

Their policy motion states: "[Proposals will] tax unearned economic rent and stabilise the property market by further developing policies on land value taxation."

However, the party plans to scrap council tax, and replace it with a local income tax – which levies taxes based on earnings rather than the value of a property.

Because of this it is looking at ways of taxing income from property price growth in a new way.

"Liberal Democrat policy has the effect of removing the main tax on domestic properties (council tax) and replacing it via a non-property tax (local income tax). While we are persuaded of the strong arguments in favour of local income tax... this will leave the UK in a unique position internationally of having no direct taxation of property at all... Taxation of property should be retained if a better mechanism can be found," party literature explains.

In Northern Ireland, Labour ministers are rolling out a "discrete capital values" tax model, where a single tax rate is applied to the house price, each year. This differs from council tax which is a banded system and which caps the highest rate at Band H.

The average tax rate will be 0.63 per cent, Labour has said, applied to the home's value to calculate the yearly bill. However, the exact rate would be set locally. XXX