Local tax and stamp duty are “unfair and unpopular” taxes that should be abolished, says the economist who developed the Covid short-time work program.

Tim Leunig, who has advised a number of cabinet ministers during his time as prime minister, including Rishi Sunak, said it was time for a new and radical approach that would abolish the two taxes and replace them with proportional levies.

While figures from across the political spectrum are calling on Finance Minister Rachel Reeves to think radically about fairer taxation as she considers what tax increases to implement as part of her autumn budget, Leunig said there was no justification for keeping the council tax.

He said that under the existing system, “a terraced house in Burnley fetches more than a villa in Kensington”.

The council tax has come under heavy criticism from economists because it is based on property prices in England 33 years ago.

The Institute for Fiscal Studies (IFS) recently mocked a system based on home values ​​“when Mikhail Gorbachev was president of the Soviet Union and Chesney Hawkes was topping the charts with The One and Only.”

In private life, many politicians agree that the system is outdated and that wealth is generally taxed too low compared to the income of the population.

The IFS described stamp duty, which is usually paid when someone buys a property for more than £250,000, as “one of the most economically damaging taxes imposed by the Government”. The tax is also blamed for holding back growth by discouraging people from moving to more suitable homes.

In a paper for the centre-right think tank Onward, Leunig proposes a radically different system in which council tax would be replaced by a levy on property values ​​up to £500,000 to fund councils, set at a level that would generate the same revenue as the existing system.

A national levy will then be levied annually on all houses valued at over £500,000 to replace stamp duty revenue in the long term.

Leunig said the change would ensure that poorer areas with lower property values ​​would only have to pay for local services, while wealthier areas with more expensive homes would contribute more to the state coffers. The new taxes would be paid by owners, not renters.

Keir Starmer has put economic growth at the heart of his plans to revive public services after years of decline. Leunig said a new approach to household taxation was needed because it was currently undermining economic growth.

“Local tax and stamp duty are terrible taxes,” said Leunig, chief economist at Onward. “They are unfair and unpopular and should be replaced by proportional property taxes. These proposals would make moving, getting a better job or being closer to family easier and cheaper, and would also be fairer.”

“It should not be the case that a terraced house in Burnley fetches more than a villa in Kensington – and that would not be the case under these proposals.”

In his report, he describes council tax as a “particularly regressive mess”. For example, a Category D household in Blackpool pays £2,277 in council tax per year, while in Westminster they pay less than half that – £973.16 per year.

Stamp duty also has a significant impact on a homeowner’s willingness to move. In the South East, homes valued under £250,000 sell every 11 years, while more expensive properties sell only once per generation – every 26 or 27 years.

Under his proposed system, Leunig recommends a minimum payment of £800 for each property. An average rate of 0.44% would replace council tax revenue. The national rate, applied to property values ​​above £500,000, could be 0.54% for property values ​​between £500,000 and £1 million, and 0.81% for all values ​​above that.

He is the latest prominent figure to call for local tax reform. Patrick Diamond, who worked in Downing Street for Tony Blair and Gordon Brown, wrote in the observer Earlier this year, he said there were “overwhelming economic and ethical reasons” for Starmer to impose higher taxes on wealth, including a revaluation of local council tax.