Opinion: Opportunity knocks

I've been reading Roy Jenkins' masterful biography of Gladstone. In his 1860 budget, "God's vicar at the Treasury" raised income tax as a punishment on the middle and upper classes. Because they had prospered and allowed government spending to rise, it was "just, even desirable, that they should pay for the laxity they had encouraged" said the grand old man, and hiked income tax up from ninepence to 10d in the pound.

Even with the son of a Scottish minister at 11 Downing Street, you don't get to hear that kind of fiscal moralising these days. On tax, ministers are more likely to be hand-wringing and apologetic. Prudence usually just keeps quiet and slips in her adjustments to the tax burden by stealth.

Yet recently, the Blair government has tolerated, if not actively encouraged, an outbreak of tax talk, and it is all very relevant to social housing.

In his "balance of funding" review of councils' relationship with central government, Nick Raynsford is unlikely to recommend the plan suggested by the Liberal Democrats, to abolish council tax and replace it with a local income tax. But he does seem willing to listen to ideas about a tourism tax, a local sales levy and major council tax reform, which, let's not forget, remains one of the few remaining imposts on property.

Any of these proposals could have profound consequences for what councils can and can't do on issues such as housing and homelessness, planning and development. At a more profound level, tax reform would show whether the government is genuine about the "new localism", and prepared to put its money where local government's mouth is.

Then there's the big game. Chancellor Gordon Brown needs money. If he borrows more, he will break his own rules. New Labour promised not to raise income tax, so he's in the market for suggestions. Treasury denials notwithstanding, tax on property has been actively discussed, both in the context of capturing gains from development and making homeowners cough up some of their ill-gotten gains.

Tax reform would show whether the government is genuine about the ‘new localism’ and prepared to put its money where local government’s mouth is

"They will never touch homeowners," some pundits say, "it's too offensive to middle England". A lot of people have staked their lives, let alone their incomes, on real estate, encouraged by financial institutions and successive governments. But we all know what the pursuit of property in conditions of restricted supply has done: pushed up land prices and increased costs for those seeking to build affordable accommodation. Homeowners and the homeless are tied together in a causal chain.

As pamphleteers have recently pointed out, taxing gains in the value of domestic property could give Brown more money while re-equilibrating the market and putting housing policy on a more equitable footing.

Critics say such a move would constitute political suicide. Two decades ago, the prospect of abolishing relief on mortgage payments filled the then-prime minister with horror, but chancellor Nigel Lawson had other ideas. Under Margaret Thatcher and her successors the benefit – hailed as an essential prop of middle English existence – was slowly constricted.

When Gordon Brown finally did the deed and killed it off, the operation felt remarkably painless. Might capital gains tax follow a similar treatment?

This will depend on interested parties ensuring the subject does not drop. It would be good to have a social housing party line in favour of property tax. Couldn't the National Housing Federation, the homelessness charities and the sector's big players come out and bang the drum for capturing some of that house price inflation in which homeowners have been swimming? These gains in value are fortuitous, unjustified and detrimental to a fair housing policy, after all.