A clear market failure in the UK economy is that of regional disparities. It is clear that in the UK, London is very much further ahead than the rest of the country in terms of the wealth and income of its citizens alone. For example, London's GDP is the highest in the UK, where it contributes to 23% of total GDP (£500 billion) despite only having 13% of the population. For the North East, it is only around £55 billion to the UK's GDP every year. The gini coefficient for the UK is now at 35.7%, one of the highest rates in Europe.
I believe that a leading way to fix regional disparities is to reform the council tax system. In the UK, at the moment if you live in a poorer part of the UK such as Burnley, you will pay more than 1.1% of the value of your home on average. However, if you live in a richer area such as Kensington and Chelsea, you would pay only 0.1% of the value of your home. There are of course different bands for different values of houses, so an example would be that for the highest council tax band of more than £320,000 in 1991 money (worth more than £700,000 in today's money), in Kensington and Chelsea you would pay £3,059.70 whereas it would be £4,694.24 in Burnley. However, it is clear that this system is not right, as the average property price in Kensington and Chelsea is around £2 million, whereas it is only £130,000 in Burnley.
Therefore my policy would be to equalise council tax, and set it at 0.5% of the value of a house on average. I would still keep the existing bands system, but under my policy council tax will be cut for 75% of all households. This is because poorer households will have to pay less of their income on council tax, and more on richer areas. This would modernise the tax system, as the council tax was only introduced in the 1990s after the failure of Margaret Thatcher's poll tax. Since then, London house prices have tripled, even after accounting for inflation, so the burden of council tax is ten times as heavy on poorer areas as in richer ones.
Thus my policy will level up the country, more so than any measures introduced by Boris Johnson famously after his 2019 election victory. This policy could also result in more geographical mobility of labour, as lower tax rates in poorer areas would aim to attract more consumers and businesses rates to set up there, rather than in areas like London. I would also suggest that it would go alongside more investment into poorer areas, as right now 58% of London's working-age population have a degree or equivalent qualification, compared to the national average of 42%. In addition, it would be possible to use the money gained from higher tax rates in richer areas to fund infrastructure or education projects in less affluent areas. My policy will aim to reduce wealth inequality that arises from such regional disparities.
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