PLANS to replace a myriad of unpopular taxes, including council tax, with a flat-rate 1 per cent levy on the value of all homes are to be considered by the Conservative Party.

In its submission to the party’s Tax Reform Commission, the influential Conservative Bow Group has proposed that four separate taxes — council tax, inheritance tax, capital gains tax on property sales and the TV licence fee — be scrapped and a new single-rate property levy introduced.

Under the “land value tax” wealthy homeowners in London and the South East would see their annual bills rise, and would pay more than the rest of the country. But the authors of the report say that it would remove the one-off burden of inheritance tax now faced by thousands of middle-income families in the South East.

The cheapest 20 per cent of properties, worth £70,000 or less, would be exempt from the tax entirely, meaning that thousands of low-income homeowners would pay no levy.

According to the Land Registry, the average house price in London is about £307,000 while in the North of England it is £129,000. The average land value tax on a residential property in London would be £2,370 per year, slightly more than the current council tax bill plus TV licence fee, but only £590 per year in the North, a significant reduction. The tax on a £1m property would be £9,300.

The author of the report says that the scheme would encourage older couples and single pensioners living in large homes to move into smaller properties, freeing up larger homes for young families.

Aspects of the plans are certain to appeal to the tax commission, which is being conducted by Lord Forsyth of Drumlean, the former Scottish Secretary, on behalf of George Osborne, the Shadow Chancellor.

Mr Osborne has already made it clear that it is “very unlikely” the Tories will promise specific tax cuts at the next election because economic stability must come first.

However, he has promised a radical overhaul of what he says is an over-complicated tax system and called for submissions on how it can be done.

The Bow Group submission addresses another key concern raised by the Shadow Chancellor and Lord Forsyth. They believe that hundreds of thousands of people have been unfairly drawn into paying inheritance tax because their parents’ property has increased in value.

In a recent speech, Lord Forsyth said that there was no moral case for inheritance tax. “It is double taxation and it discourages thrift and self-reliance,” he said.

It is estimated that about one third of households would now be subject to inheritance tax.

The Conservatives’ tax commission is due to report in the autumn.

Mark Wadsworth, the author of the Bow Group report and a chartered tax adviser, said that Gordon Brown’s “increasingly complex tax system is not just an obsession of accountants and tax professionals. It does real damage to our economy and harms many of the poorest in our society. These proposals are not about whether taxes are too high or too low, they are simply about replacing a complicated and bureaucratic system with one that is simple, fair and difficult to defraud.”

Mr Osborne is likely to come under growing pressure to cut tax rates from rightwingers. The Lib Dems have managed to outflank the Tories by proposing a 2p cut in the basic rate of income tax and an increase in personal allowances.