Labour’s Ed Balls has offered further details of the party’s plans to introduce a “mansion tax”. In an article in the Evening Standard, Mr Balls explains that homeowners whose properties are worth between £2m and £3m could expect to pay no more than £3,000 a year, while homeowners with incomes of less than £42,000 a year will be allowed to defer the charge until after the property changes hands. However, he also states that “owners and investors in properties worth tens of millions of pounds should make a much bigger contribution.” Concerns had been raised by senior Labour figures that the proposed tax could have “perverse effects” on long-standing residents with relatively modest incomes, particularly in London and the southeast. The Times reports that research from Hometrack suggests owners of houses worth more than £3m face being taxed around £28,000 a year if Labour is to meet the £1.2bn total it says the new levy will raise. Richard Barber, director of estate agents WA Ellis, said Mr Balls’ remarks “may provide some reassurance” for the owners of homes worth £2m-£3m, but added there was “continued uncertainty and hesitancy” for the owners of homes worth over £3m.
According to the Torygraph, even some Labour MPs are describing this as “dysfunctional and misconceived” – though whether they are talking about Mr Balls or his policy may be open to doubt. This proposal is wrong on so many levels, the most obvious of which is that it’s a Wealth Tax by the back door – and, even worse, it’s a poorly-targeted Wealth Tax aimed at a very specific form of wealth which happens to be concentrated in a single asset. It’s a case study in how not to design a tax, and offering deferral for a very small number of people goes no way to remedying its many flaws.
For more responses from us to “Mansion Tax” news stories, do take a look at these blog posts from recent months. We are nothing if not consistent. Did someone say “fixated”? We plead guilty.