A new ‘property capital gains tax’ should be levied on UK homes to protect younger people from the costs of the coronavirus, think tank Social Market Foundation says in a new report.

The think tank says that a 10 per cent tax on increase in the value of the property since last sold could raise £629bn over 25 years, or £421bn if stamp duty and inheritance tax were abolished.

The report has been written by Michael Jonson, former banker and actuary. He says that the £5tn pool of home equity presents, “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.”

He adds: “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 report draws on recent projections provided by the Office for Budget Responsibility, which show that public sector net debt is currently 86 per cent of GDP and could rise to 283 per cent in 2067 to 2068.

A 1 per cent increase in interest rates over this time frame would push this up to 350 per cent of GDP.

Johnson warns that Britain could head into the same economic waters as Japan. “However,” he says, “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?”

SMF director James Kirkup acknowledges that the proposed reforms are bold and far-reaching, “and could be politically controversial: the older voters who own most British property are a powerful group.

“But,” he adds, “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.”