The Labour Party has recently announced new plans to impose a levy on holiday homes, with the proposed money generated used to give a cash boost to councils. Although shadow housing secretary Simon Healey has described this as a move to address families living in “hostels and BnBs” the Communities Secretary James Brokenshire has called this policy out as a “tax raid on Middle England.”
There are significant issues with this policy which the Labour Party has perhaps not taken into consideration. Firstly, the tax will negatively impact local communities. The levy will act as a disincentive for individuals to buy these homes, meaning that they are less likely to visit these areas and contribute towards the local economy.
Simply put, less expenditure on these properties means less spending in these areas. Secondly, it penalises those who choose to invest. Although these homes can be owned as holiday homes, many owners choose to buy to let. An otherwise solid asset which can deliver reliable returns would be priced out of the market for many ordinary people due to this levy, which is, after all, equivalent to double the amount of council tax. As a result, many individuals could lose out on the opportunity to have a steady revenue stream.
The proposal also fundamentally assumes that this new source of income will be spent sensibly and appropriately by councils. What this doesn’t take into account is the evidence which indicates that many councils are not as fiscally responsible as we would hope.
Recent papers from the TPA have shown councils paying their staff millions more than they should in mileage payments - HMRC’s approved rate has been ignored by 173 councils. Besides this, the TPA has published a list of 2,314 staff earning more than £100k a year.