Second homes facing tax hike

UP to 500,000 second homeowners face a doubling of their council tax under proposals unveiled by John Prescott on Wednesday. The Deputy Prime Minister is ready to give councils the power to remove the 50% tax deduction on thousands of holiday homes in a move that is expected to raise more than £200m a year.

Critics warned that his plan would force second homeowners to pay the full council rate on properties they may only use a few weeks every year and condemned it as a 'stealth tax' on better-off families.

At present, the full council tax is payable on a main home but that falls to 50% on any other properties bought for personal use. Rental properties are not eligible for tax relief. The Government estimates there are more than 500,000 homes which are not a main residence and are therefore eligible for council tax relief.

About 250,000 are second homes, while the remainder are defined as 'long-term empty homes' - properties which have fallen into misuse.

Prescott's tax swoop, revealed in a local government Bill on Wednesday, follows controversy over the impressive property portfolios of a string of his fellow Ministers. It seems certain to catch several of them in its net as well as scores of MPs who have homes in London and their constituencies.

Prescott has a grace-and-favour apartment in Admiralty House and an eight-bedroom house in Hull. He also has the use of a low-rent union flat in London. His record is put in the shade by Environment Minister Michael Meacher, who owns as many as 12 properties. Three are for his personal use - a £550,000 London townhouse, a £400,000 country retreat in the Cotswolds and a constituency home in Oldham - while he rents out the rest.

Home Office Minister Lord Falconer and his wife own six properties. Four are rented out but they have two for their personal use - one in London and another in Nottinghamshire. And Foreign Secretary Jack Straw has three homes - in London, Oxfordshire and his Blackburn constituency.

The Tories condemned the proposal as a tax on success. Local government spokesman Eric Pickles said: 'Once again, Labour are trying to get away with sneaking through a stealth tax in the hope people won't notice. Council tax has already increased every year since 1997, meaning that many people are already facing payment problems. Now people are once more facing higher taxes, with no guarantee of seeing any improvement in the public services.'

The move was given a guarded response by the Country Land and Business Association. It said the extra millions raised must be spent on building affordable homes for young people in rural areas.

The Countryside Alliance criticised Labour's failure to tackle the shortage of affordable homes in many rural areas. Spokesman Jill Grieve said Labour had promised 3,000 more affordable homes a year in small rural communities. But since 1997 the number built annually has fallen from 2,020 to 1,371. However, she added: 'We think getting rid of the relief is broadly a good thing. People buying second homes - and getting council tax relief - are pushing up prices in many rural areas, well beyond what young people in those areas can afford.'

Local Government Minister Nick Raynsford defended the move. 'In areas where there are lots of second homes, local people - especially young families - are being squeezed out,' he said. 'At the same time, the local council struggles to provide services because lots of council tax payers in their area are only paying a 50% rate. We want to give local authorities the power to get rid of the relief on second homes and use the proceeds to improve local housing and services.'

Prescott's Bill will also remove the cap on top performing councils and allow them complete freedom to set their council tax rates. They will also be allowed to borrow money to pay for initiatives and charge residents for 'extra' services like security patrols. Councils will also be able to increase business rates to pay for pet projects.