In an unexpected turn of pre-election events, Jim Murphy, Labour Leader in Scotland, announced that Londoners would pay for increased NHS spending in Scotland, in a so called win-win.
The Mansion Tax is the latest in a number of ways in which the Labour Party is looking to fund its spending plans. Windfall taxes on tobacco firms and closing loopholes on tax avoiders have already been spent many times over. The problem is that this is not a tax on super-rich Londoners – it is a tax on family homes.
The current proposal is for a tax to start at £2million but previous discussions have seen the threshold at £1million. Clearly this is no small amount of money but the properties are really not what would qualify as a mansion in many parts of London.
Families who bought homes many years ago could find themselves in that bracket without having very much disposable income at all.
The current plan involves a sliding scale so that more is due on properties at the higher end of the spectrum. These plans are vague though and many are starting to question if the figures add up. Labour plan to raise £1.2billion from the tax. Estate agent Savills estimates it will affect 97,000 homes so that’s an average of over £12,000 a home, after tax, every year. It is not hard to imagine the revenues falling short of estimates in which case the threshold would have to be lowered.
The Labour Party’s own website says that the valuation of properties won’t be a problem as it will be clear what band most properties fall into. This is staggeringly naïve as anyone who follows the property market or has bought or sold a home will know. Those for whom it isn’t clear will have to undertake to have their home valued. That’s expensive and also surely open to manipulation. Critics have argued that the only fair way to go forward would be a full revaluation of all homes.
This would mean a complete overhaul of Council Tax bands so even if you don’t pay the mansion tax you would find your Council Tax changes, and it’s safe to say that taxes don’t go down under Labour.
I don’t tend to write about national politics in these columns, and it’s certainly not my style to be overly critical of other parties, but this policy is a genuine attack on Londoners to buy votes elsewhere. My Labour opponent Rupa Huq claims that only 1% of homes would be affected but I suspect that is for the whole of the Borough and the figure is higher in Ealing Central and Acton. Plus of course as prices rise in the area a new raft of properties would be affected each year.
Around £19billion of tax generated in London already goes to other parts of the country. It is not surprising that London Labour MPs are already distancing themselves from the idea. I don’t often quote Diane Abbott but she summed things up well on BBC Radio recently, describing the tax as, ‘effectively a tax on London’, adding, ‘there are all sorts of people that bought houses 30 years ago in what were unfashionable parts of London which are worth at least £1m.’
The Mansion Tax has been described as good politics but bad economics. For Londoners it is anything but a ‘win–win’.