Call for bigger taxes on homeowners

Homeowners should be taxed more heavily to close the gap between the rich and poor, a new report says.

The proposal, from a leading Blairite think-tank, says loopholes shielding first-time buyers from inheritance tax, when they have inherited wealth from parents or grandparents, should be closed.

The Institute for Public Policy Research (IPPR) also says full council tax rates should apply to all second homes, while stamp duty should be used as a lever to regulate the levels of house purchases and sales.

The report, Housing Equality and Choice, concludes that "housing poverty" is Britain's most potent social inequality.

It says the polarisation of housing provision has a negative effect on school standards, public services, crime and neighbourhoods. The thinktank, which has a good track record in getting its proposals adopted by Labour, recommends the diversification of ownership on social housing estates.

It also wants landlords to buy homes to rent in neighbourhoods of predominantly-private housing. London authorities-should be able to buy as well as build more homes for rent in both outer London and the home counties, the IPPR says.

Chris Holmes, author of the report and IPPR visiting research fellow, said: "Housing equality has not been a shared national priority since the end of the Second World War. If we are to tackle what has become the most extreme form of social inequality in Britain, we need to look to that level of mobilisation of public support and political will."

Researchers said there was a growing divide between people living in the North and in the South-East and between the home-owning majority and people who rented.

The number of homeless families in temporary accommodation has risen from 5,000 to 80,000 since 1980.

Mr Holmes added: "These changes are also very relevant to the reforms suggested in the Chancellor's assessment that the UK housing market as it currently operates is a major barrier to entry into the single currency."

The Chancellor has warned that joining the euro could bring back the boom-bust cycle in the housing market that caused misery for homeowners in the late Eighties and early Nineties.