How Labour will pressure Tories on the Mansion Tax

8:10 pm - February 18th 2013

by Sunny Hundal    

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Last week Labour announced it would force a vote in the House of Commons on the Mansion Tax. This follows Ed Miliband’s speech on the issue.

Vince Cable has since told the Guardian that Lib Dem support would depend on how Labour phrased the motion.

I asked Ed Miliband’s office of their plans, and this is what I’ve been told.

We don’t know when the vote will take place yet. Labour are waiting for the government to grant an opposition day debate time, and will use that for a discussion of the Mansion Tax and a vote.

If the government don’t grant such a day before the Budget, I’m told Labour will try and force the issue anyway by putting forward an amendment to the finance bill (the upcoming Budget).

The Labour leadership are confident that the Mansion Tax will prove popular with voters and want to push it in Parliament any way they can.

What if they get the debate? I was told: “We want to show there is a majority in House of Commons on the Mansion Tax,” — which suggests that Labour will try hard to ensure they have Lib Dem backing on the motion.

Lib Dems are very lukewarm towards the 10p tax proposal; I’m told that will be left out of the motion, so Labour can reach a consensus with them on the Mansion Tax alone.

The motion won’t call for any binding action (they can’t) – which should make it easy for Lib Dems to support it.

A spokesperson from Ed Miliband’s office said that they hoped the vote would “put political pressure on the government” to seriously consider a Mansion Tax. That is as far as Labour can go for now, and if they get that I expect they’ll be happy with it.

It will be interesting to see if the Lib Dems will vote against their own proposal or side with Labour on it.

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Story Filed Under: Labour party ,Libdems ,News ,Westminster

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Reader comments

What a ridiculous tax it is…let’s have a quick look at a few of the many problems with it.

In no particular order:

– it’s a tax on earned rather than unearned income (houses are bought with money already subject to income or inheritance tax)

– it is purely on the value of a property, with on regards to the actual financial position of the owner (asset rich but cash poor old people)

– how exactly do you value a property? Last sale price or government evaluation? Can’t see any legal challenges to the latter….

– it’s incredibly easy to avoid. Do as Chris Huhne does and simply buy more smaller properties under the 2m mark rather than bigger ones over the cap.

– it dramatically distorts the housing market. An annual percentage tax on a property turns it quickly from an asset to a liability.

– it barely raises any revenue, and given houses over the 2m mark will be harder to sell and lose value quickly, the extra revenues are likely to be counteracted by lower stamp duty and CGT revenues.

I’m sure there are other reasons why this tax is simply a terribly stupid idea, but i’ve focused on the financial and economic ones.

That said, if Labour do persue this policy, all it shows it that they are more interested in politics and headlines, and a lurch back to the politics of envy and jealousy rather than making wise considered decisions.

2. James from Durham


Please come back to the real world.

So, houses are bought with money already taxed. All money has been taxed at some point in the past. I pay VAT on goods I buy out of my already taxed wages, for example.

Increasingly houses are bought with inherited money not earned income. Even back in the day, housing wealth was acquired with the help of massive inflation which efefctively paid off the mortgages. In addition, many owners acquired the properties with the help of tax relief on the interest. A government subsidy, fortunately now terminated, but the legacy lives on.

Reductions in property value seem like a good idea. They will help younger people get on the property ladder, thus reconnecting the work with the ability to buy a home.

No, it’s not perfect. A Land value tax would be better, but it is not on the table at the moment.

And we are not going back to this tired old idea that anyone left of the far right is solely motivated by envy, surely?

I am sure there are even more refutations of your rather hysterical post, but I am getting bored now.

@ JfD

“Increasingly houses are bought with inherited money”

Which, if you read my post properly, is also taxed. As is the transfer of inherited property.

“Reductions in property value seem like a good idea.”

This can be argued is a good idea, in terms of the specific case that it would make it easier foor people to buy property. A mansion tax wouldn’t do this though, as it would make property above the 2m mark come down, but everything below the 2m mark would go up as people sell their expensive houses to buy more cheaper houses, too avoid the tax. You also ignore the fact that it would be bad for the economy as so much value is stored in houses and most credit is secured against property. It would massively damage credit creation and hurt consumers….which the economy is depending on at the moment for growth.

As for envy – what else do you call it? At the moment the left are attacking anyone who has had the gall to do well for themselves.

Try actually arguing my points, not your own ones.

Why don’t the government just tax everything and hand out pocket money? FFS, this country’s a frickin’ joke.

5. gastro george

Poor old rich people – always the victims.

Or, as Mr City Unslicker has rightly pointed out:

Think of the poor people on benefits they say – what of them. The thing is, its the maths that sticks in my craw. Say one earns £500,000 a year, a princely sum for a banker. Already this is taxed at over 50% in its entirety. So take home is somewhere near £250,000, but not quite.

Now if you have this kind of income you could have thought about buying a house at 4x your earnings at about £2 million. You may even have been able to rent your pre-richness property too, or bought a small place in Spain. Now the proposal is to tax this at £20,000 a year, maybe even £100,000 if the plan really is to raise £2 billion (OK so this is an uncosted Labour gimmick, but here we are they are nailed on to win the next election).

Plus you would have bought your house, paying a whopping 7% or £140,000 in stamp duty. Then you have council tax and your rather expensive £1.5 million mortgage at say 5%, so a mere £80 thousand a year in outgoings and upkeep.

So worst case scenario and even on £500,000 a year you could not live in a £2 million house. Even then a well paid FTSE100 executive could not do it. You would have no money left to live or feed your family. Even with a mere £20,000 tax your actual take home is going to be £10,000 a month – which is loads, but blimey, it’s getting on for a total tax rate of 80% – this is before VAT, APD, Insurance taxes, MOT’s etc.

If this really gets discussed seriously it will certainly hammer house prices at the top end. What gets me is that two public or private sector workers on good salaries of say £60,000 each are going to be taking home a total sum of about £8,000 a month.

Why be successful in the UK – the marginal taxes will be so high that it just won’t be worth it. It’s scary, the 1970’s were supposed to be history, not a roadmap to the future.

My problem with the proposal is mostly practical.

How do you assess value – for properties that sell for much more than £2 million, that will be relatively easy – but what about at the margin? How do you limit the scope for argument – without handing more work to people like me (lawyers who practice in the areas of property litigation).

The next practical problem concerns what happens when you have achieved the unstated intention of reducing property prices – in Wales, property prices have fallen by about 25% in the period between 2008 and today. How is that to be reflected in the tax – and when the impact is on London prices what impact will it have on the revenue raised.

I suspect that those advocating this are overstating the revenue that is likely to be raised by making assumptions about the resiliance of the market in property that are unlikely to be realised.

The last practical problem concerns avoidance. We will not know what schemes will be created to avoid the duty until the scheme is set up – but it does now seem to be accepted across the political divide that the more complicated the tax regime, the more opportunity for avoidance.

My view is that tax should be, above all, be effective. But taxing a single asset, property, as a tax on wealth, while ignoring other assets (a portfolio of property for example) is not something that I would consider sensible.

Instead of fiddling with the tax system why not propose something truly radical? E.g. LVT and a guaranteed citizen’s basic income. Most people will be better off, including the people Labour ostensibly represents.

9. gastro george

“Why be successful in the UK – the marginal taxes will be so high that it just won’t be worth it.”

Indeed – marginal tax rates on the poor are considerably higher than on the rich.


A thought experiment:

I buy a house in 1980 for £30,000.

It is now worth £2,000,000 thanks to whacky house prices rises we have seen the past 30+ years.

If I sell this house I have instantly made, not adjusting for inflation, £1,970,000 (or around £65,000 for every year I’ve owned the house).

In what sense is this “earned income”?

how exactly do you value a property? Last sale price or government evaluation? Can’t see any legal challenges to the latter….

Well there is one tried and tested solution you might have heard of

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