European Commission calls on the UK to overhaul its council tax system and rein in Help to Buy

3rd June 2014


The European Commission is urging the UK government to revamp its council tax system and rein in its Help-to-Buy scheme in order to get the country’s heated housing market under control.

The recommendations from Brussels also call for Britain to build more houses as it asserts that while the supply of new properties has risen, it still remains low and has “fallen short of demand by a considerable margin”.

It adds that the combined impact of low interest rates and easier terms for mortgage lending has pushed up house prices in certain parts of the United Kingdom particularly in London.

It also recommends that the government continue to monitor house prices and mortgage indebtedness and stand ready to take action, such as reducing its Help to Buy loan guarantee scheme – designed to help get people onto the housing ladder – if necessary.

In its annual review where the body offers advice on how member states can ensure long term growth, in regards to the UK’s council tax system it says: “At the moment, increasing property values are not translated into higher property taxes as the property value roll has not been updated since 1991 and taxes on higher value property are lower than on lower value property in relative terms due to the regressivity of the current rates and bands within the council tax system.”

It added: “Remove distortions in property taxation by regularly updating the valuation of property and reduce the regressivity of the band and rates within the council tax system. Continue efforts to increase the supply of housing.”

The advice from Europe comes as Nationwide Building Society reports that UK house prices rose by 0.7% month-on-month and 11.1% year-on-year in May, the highest level since June 2007.

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