Cllr Nick Paget-Brown is Leader of Kensington and Chelsea Council
On taking power in 2010, the Coalition was faced with an almighty mess. Some very difficult decisions have had to be taken to clear that mess up. Part of the problem was an addiction to ever higher taxes and borrowing and a lack of willingness to consider value for money, cost-effectiveness and entitlement. Saying “stop” is rarely popular, but that is what responsible Governments have to do.
Now with elections appearing on the horizon, we find Labour and the Lib-Dems both promoting a Mansion Tax. The two versions are pretty much the same: an annual one per cent charge on the value of a home above £2 million. The only real difference is that Labour promises to hypothecate the extra revenue in order to re-create the 10p tax rate they abolished in 2008.
In publicity promoting his tax, Vince Cable indicates that it is aimed at “some of the world’s wealthiest people who own property in the UK worth millions…”.
According to Ed Balls, once part of a Government that proclaimed itself relaxed about people getting “filthy rich”, the tax will mean “that foreign investors who buy up property in London to make a profit will finally pay a proper tax contribution to our country.”
In the UK some 55,000 homes are said to be worth more than £2m, seven out of ten of those are in London and just shy of 12,000 are in my own borough of Kensington and Chelsea.
Who owns those homes? Is it those popular hate-figures – international bankers, oligarchs and corporate raiders – that Mr Balls would have us believe?
Well no doubt some of them are owned by such people but that is very far from the full story. Our council tax database only goes back as far as 1999 but it tells us that of the properties that might be caught by the tax – the ones in Council Tax bands G and H – 7,000 of them have been in the same ownership the entire time. And it’s a safe bet that very many of those homes were bought or inherited many years prior to 1999.
Kensington and Chelsea was still a desirable area back in the eighties and nineties of course, but house prices really were remarkably different. The average price of a semi these days is an unbelievable £4.7 million. In 1995 it was £505,000. An average terrace is today valued at £3.3million. In 1995, it would have cost £423,000. Back then the merely well off could buy in Kensington and Chelsea, today you need to be one of the super rich.
But what gets forgotten by the advocates of a mansion tax is that there is a large chunk of home owners in our Borough who are by no means “filthy rich” or part of the global plutocracy.. Many are retired. Several are elderly. Many are on fixed or relatively modest incomes. Increasing numbers live alone. They purchased their home long ago from post-tax income. What will be the impact of the Mansion Tax on them? Well if they are living in that average Royal Borough semi, Ed Balls and Vince Cable will be expecting them to find £27,000 a year in mansion tax. That’s about £50,000 of pre-tax income and there’s no mansion involved – just a lifetime home.
The inevitable result of that can only be that much of our stable older population will be driven from London and from the homes in which they raised their children thereby exacerbating the already skewed demographics of inner London.
And who will be the long-term beneficiaries of such an exodus? Step forward the very people the Lib Dems and Labour claim to have in their sights: those super-rich overseas investors, for whom the mansion tax will be a mere bagatelle.