Media Release

£421 billion plan to tax rising house prices to pay for the Coronavirus crisis

Tens of billions of pounds of new taxes should be levied on increases in the value of homes to ensure the costs of the coronavirus crisis do not fall unfairly on younger people, a think-tank report says today.

The report from the Social Market Foundation warns that without radical action to raise significant extra tax, Britain faces an unsustainable national debt and stagnant growth that will blight the lives of future generations.

To help avert that, the Treasury should raise £421 billion over the next 25 years by imposing a new “Property Capital Gains Tax” on all homes sold in the UK, the report says. The tax could be set at 10% of the increase in the value of the property since it was last sold.

Written by Michael Johnson, a former banker and actuary, the SMF report says that the fairest place for the Treasury to levy new taxes is “unearned” gains on residential property. Taking account of mortgage debt, the equity in UK homes is worth more than £5 trillion pounds, a figure that has more than doubled in the last 20 years.

Rishi Sunak, the Chancellor, last week ordered a Treasury review of capital gains tax, looking at how capital gains are taxed compared to other types of income. The SMF said that unearned gains on property are a better target for new taxes than workers’ earned income.

Levying a new tax on the gain in property prices when sold would raise £629 billion for the Treasury over 25 years, the SMF paper estimates. Some of this should be used to abolish stamp duty and inheritance tax on property, leaving the Treasury with £421 billion to repair the public finances. (See report for detailed calculations)

The new tax would fall largely on older people, who own most of Britain’s property, and those who inherit property and then sell it. Based on ONS data, Johnson calculates that the average pensioner household has net property wealth of £272,900, compared to £53,700 for those aged 25-34. In total, pensioner households own £2,149 billion in property equity.

Michael Johnson said:

“The vast £5 trillion pool of equity in homes presents the Treasury with an opportunity to pay for the economic damage done by the coronavirus, through the introduction of a capital gains tax on the unearned gains in the value of property.

“The alternative is that the young will have to pay for a debt-laden future. They are already hugely disadvantaged, financially, relative to older generations. Asking them to bear the burden of this crisis in the decades ahead would be unfair and unreasonable.”

The SMF report follows last week’s projections from the Office for Budget Responsibility showing that the huge costs of the coronavirus crisis, coming on top of weak public finances, put Britain on course for record-breaking levels of debt.

The OBR’s most recent figures show public sector net debt (PSND increasing from 86% of GDP in 2017-18 to 283% of GDP in 2067-68. If interest rates turn out to be 1% higher than modelled, then debt would rise to over 350% of GDP.

The same forecast shows public sector net borrowing (PSNB) increasing from 2.2% of GDP to 20.2% of GDP in 2067-68. The UK has never run a deficit in excess of 10% of GDP, except in wartime.

Johnson’s report warns that depending on the bond markets to go on supporting Britain by lending huge sums every year is unacceptably risky: “The UK economy will increasingly be sustained by debt: the question is how high will the debt-to-GDP ratio be permitted to climb before the confidence of the gilts market is shattered. No one knows.”

His report argues that without significant action to arrest the growth of the debt, Britain faces “Japanification”, repeating Japan’s modern experience of low growth, deflation, a huge debt-to-GDP burden and low interest rates, all aggravated by an ageing population.

Johnson writes:

“The coronavirus has, probably, merely accelerated our progress towards a similar destination. However, unlike Japan, we run a current account deficit and rely on large amounts of foreign capital to finance our debt. There is likely to be escalating competition for international capital, putting upward pressure on gilt yields. The Bank of England could step in to fund the Treasury directly, but for how long? Or are we actually destined for quantitative easing in perpetuity?”

James Kirkup, Director of the Social Market Foundation, said:

“These reforms are bold, far-reaching and could be politically controversial: the older voters who own most British property are a powerful group. But the scale of the coronavirus crisis and the unprecedented outlook for the public finances mean that responsible politicians of all parties must be prepared to embrace new ideas and take bold action.

“Failure to act risks severe economic and social harm. A post-crisis era where the costs of the crisis fall more heavily on the young than the old could strain the social contract between the generations to breaking point.”


For media enquiries, please contact Linus Pardoe, SMF Impact Officer –

The report is published at


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