Mansion tax details: can Balls placate Melvyn and Glenda?
Labour’s plans for a mansion tax are now a little clearer: but what will the policy cost the party?
Shadow chancellor Ed Balls has tried to head off a revolt by Labour luvvies Lord (Melvyn) Bragg and Glenda Jackson who are outraged at the damage the mansion tax could do to Labour’s chances at the 2015 election in London seats such as Hampstead.
Bragg, who lives there, has warned that it could cost Labour the seat of Hampstead and Kilburn where 4,700+ properties would be hit by the tax and where Jackson only just won in 2010, with a miniscule majority of 42.
The double-Oscar-winning former actress is stepping down at the general election and the new Labour candidate is Tulip Siddiq.
Lord Bragg has told his local paper, the Ham and High, that he hopes the mansion tax won’t cost her the seat. And, as the Mole reported earlier this month, Jackson wants reassurances that there will be “extra provisions made for those who live in London where a two-bed flat can easily cost more than £2 million”.
It’s not just in plush Hampstead that Labour is experiencing wobbles over the mansion tax. All the potential Labour mayoral candidates for 2016 have lined up to attack the idea, including Margaret Hodge, David Lammy, Lord (Andrew) Adonis, Tessa Jowell and Diane Abbott.
“I’m not keen on a mansion tax,” Lammy has said, despite the fact that his current constituents in Tottenham would not be greatly affected. Hodge has said: “I would rather we did it in a slightly different way.”
The clear message is that you won’t have a hope of running for Mayor of London – to replace Boris Johnson - unless you oppose the mansion tax. As the New Statesman pointed out, although only 13 per cent of the UK’s population live in the capital, 90 per cent of the properties that would be affected by the mansion tax are here.
So, will those Labour candidates for mayor – not to mention Melvyn and Glenda - be calmed by the rather sketchy details of the new tax as laid out by Balls for the London Evening Standard yesterday?
These were his main points:
- The tax will start on properties worth £2 million or more and rise in bands;
- For the lowest band - £2m to £3m - the tax will be set at £250 a month or £3,000 a year;
- Owners who earn a low enough income to mean they pay only the lower-rate 40p tax – currently up to £42,000 a year – would be allowed to defer the annual charge until death or when they sell the property;
- Owners and investors in properties “worth tens of millions of pounds” will make a “much bigger contribution” – though Balls has no details yet;
- Overseas owners of second homes in the UK will have to pay a higher tax than people living in their only home – again, there are no precise details.
Critics of the mansion tax have always argued that it takes no account of people’s ability to pay: it would hit cash-poor, asset-rich pensioners who are living in the family home, which has risen in value through no fault of their own. Balls has tried to address this point with the deferment option.
Balls says he wants the new tax to raise £1.2 billion a year to go towards an increase in spending on the NHS and that owners of the highest value properties will bear the brunt.
“It’s no surprise the Tories are opposing this,” he said. “Since 2010 they have chosen to give the top one per cent of earners a £3 billion a year tax cut, while working people are paying more.”
But critics say the scheme is full of loopholes: for instance, a Russian or Chinese investor who buys a £5 million in Hampstead will pay the tax, but if they buy five flats for £1 million each – not unheard of in Hampstead this year - they will escape it.
And there are bound to be questions about how the value of your house is calculated. Owners will be expected to submit a self-assessment to HMRC to establish their liability, says Balls. How accurate will that be?
The taxman could check your calculation by using an online property website such as Zoopla, but there would be questions about the accuracy of such rule-of-thumb assessments.
But the big question remains: while the mansion tax is popular with the public at large – it affects a tiny minority – might it cost Labour a seat or more in May 2015? And could it lose them the London mayoral election in 2016?
The mansion tax idea was nicked by Balls from the Lib Dems (old socialist Vince Cable, who has a modest semi opposite Twickenham rugby ground, is an enthusiastic advocate). And some believe the policy cost the Lib Dems the leafy west London seat of Richmond Park, won off them by Tory Zac Goldsmith at the 2010 election
If Labour wins the upcoming general election and imposes the mansion tax, the upside for the Tories is that it might enable them to hold on to the mayoralty in 2016 when Boris Johnson steps down.
However, it would be wrong to assume the tax is unpopular: polling shows the vast majority, whose homes don’t come anywhere near the £2m threshold, like the tax.
As one reader posted on the Ham and High website: “I have no sympathy for anyone sitting on unearned wealth, but these are exactly the people you are expecting us to sympathise with.”
Said another: “Buy a cheaper house if you don't want to pay.”