Ed Miliband woos voters and Lib Dems with mansion tax

Feb 15, 2013

Labour leader's proposal to tax the homes of rich to help poorest pay less is judged to be smart politics

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ED MILIBAND'S two-pronged proposal to use a property tax on houses worth more than £2m to fund the reintroduction of a 10p income tax band, is a savvy political move that provides "important common ground" with the Liberal Democrats, commentators say.

The Financial Times's political editor, George Parker, says Miliband's decision to "copy" the Liberal Democrats' mansion tax will be seen by some as an overture to its architect, Business Secretary Vince Cable, who is known to favour closer relations with Labour.

Gary O'Donoghue, the BBC's political correspondent, agrees that the mansion tax represents "sensible political positioning". The Lib Dems have championed the same policy for several years, but haven't been able to get it past their Conservative coalition partners, he says.

"If coalition politics is here to stay, then Labour's tax shake up could provide some important common ground [with the Lib Dems] if Labour found itself the largest party after the election but without an overall majority," writes O'Donoghue.

Figures compiled by the Institute for Fiscal Studies (IFS) suggest the owners of the 70,000 homes in the UK worth more than £2m would pay an additional £30,000 a year in tax if Labour was to raise the £2bn it needs to implement its plan.

Some commentators have suggested that Miliband's first real policy announcement was a pre-emptive strike against the Conservatives, whom he suspected were about to revive the idea of a 10p starter rate of tax in their own election manifesto.

If that was the case, it appears to have worked. The New Statesman reports that Labour's pledge to reintroduce the 10p tax rate has frustrated Tory MPs who have been pushing for the same reform for some time. The end result is that chancellor George Osborne will now be under "even greater pressure" to announce significant tax cuts when he delivers the Budget on 20 March.

The 10p starting rate of income tax may be good politics, but it received a cooler reception from economists. The IFS said the measure had "no plausible economic justification", would complicate the income tax system and achieve nothing that "could not be better achieved in other ways".

In an article for the Liberal Democrat Voice website, Stephen Tall calls that assessment a "little harsh". Labour has recognised that "you can help the low-paid by cutting the tax taken from them", which is "a significant step for the party".

Tall suggests Labour is moving away from Gordon Brown's "well-meaning, but ridiculously complex" ways of helping the poorest, taxing them with one hand then giving back with the other, through benefits and tax credits.

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It is grossly immoral to determine tax policy purely on the basis of vote buying.

- And of course politicians of other colours never do this?

Get real; every political proposal has to be a combination of 'what needs to be done' and 'what will gather support'. The Tories' cut in tax for millionaires wasn't done solely (or at all) on economic grounds. And there is a very good argument for reducing the tax burden most on the poorest earners, since they are the group who spend the highest proportion of their earnings -so multiplying the impact on the economy.

And yet Labour's higher taxes lead to lower tax takes on higher earners. Its self defeating vindictive envy politics at its most stupid. Its also unforgivable as those who propose it know it will harm the state and the people they claim to want to help - but think it might win them power on the back of it.

...I can hardly contain my indifference over the millipede's latest ill-considered vote grabber - when (or, rather, if) this latest economically and socially illiterate proposal is analysed in the light of day it will disintegrate like Count Dracula.

OMG! Please send him away, he only wants the dosh to pay the Romanians and Bulgarians coming in next year which we will be obliged to look after under the EU laws.