In his speech in Bedford the Labour leader Ed Miliband proposed a Mansion Tax. It would be imposed on houses valued at over £2 million, to fund the reintroduction of a 10p Income Tax rate. We are given to understand that the Mansion Tax would be set at 1% of the value of the 70,000 properties affected. It would raise an estimated £1.7 billion to £2 billion which would be used to reduce income tax on the first £1,000 of taxable income to 10%. (The Centre for Policy Studies calculate the Mansion Tax would only raise £1 billion.)
The Labour MP Clive Betts, Chairman of the Communities and Local Government Select Committee doesn't sound keen. Writing in the Yorkshire Post last year, he said that Nick Clegg "hadn't the faintest idea" how it would work but simply chose to support it as it "would make a good headline." How unlike Mr Betts' own dear leader.
Mr Betts went on:
If the Government wants a mansion tax – a sort of council sur-tax, a tax collected locally to go into the national coffers – there will have to be a comprehensive revaluation. Just trying to revalue those properties in Band H – those valued at in excess of £320,000 some 20 years ago – is not a runner.
This, of course, still begs the fundamental question as to whether the Government is serious about enabling local councils to raise and keep significantly more of their income locally.
There "are serious questions about the practicalities." Indeed so. Ominously for Mr Miliband there a rehash by Mr Betts of his Yorkshire Post piece last year for this week's Local Government Chronicle (£).
Mr Betts laments that the Mansion Tax "has had more relaunches than Frank Sinatra had final tours" and adds:
The real moral of this story is that local government finance is too important to be dealt with in headline-grabbing announcements.
If Mr Betts is right that a Mansion Tax would mean a full Council tax revaluation then the admin cost would be £180 million and would herald higher Council Tax bills for large number of families – not just a few olgarchs and Fulham widows.
There are also questions of fairness. The Mansion Tax would be intended to hit the rich. However not everyone that would be caught by it would be is both cash rich and asset rich. Mr Miliband is. His brother is. But many of tthe 70,000 are not.
What of elderly people who live near me in large terraced houses in Fulham?
Some of them live in the house they were born in. Others might have bought 30 years ago when prices were much lower. They worked hard to own their home outright. They are asset rich but cash poor. They certainly haven't got £20,000 a year to spare. Is it fair to drive them out of their homes?
Also what estimates have been undertaken of dynamic modelling of the Mansion Tax? Of behavioural change? Would the French entrepreneurs still be so keen to refugee to London? Would those Indian businessmen that David Cameron was seeking to woo on his visit last week? How many British wealth creators would decide that an extra £20,000 a year was the tipping point to emigrate? The Mansion Tax would be a disincentive. It would jar with the "open for business" message.
On other hand I suppose there would be Stamp Duty proceeds from the houses of bewildered old ladies in Fulham with cockney accents who are suddenly forced to sell up and move out. A prospect to cheer up Mr Miliband as he scribbles figures on his hitherto blank sheet of paper.