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We’re only kidding.  In a sense.  No, Sajid Javid is not on the record as having asked what the problem is with a Mansion Tax.  Despite claims in the Daily Telegraph that one has “been discussed on separate occasions in the past few weeks at the highest ­levels of the Treasury and No 10”.

But, yes, a Conservative Chancellor did say so.  The man in question being George Osborne – at least according to Matthew D’Ancona in In It Together, his account of the Coalition.

And there is further evidence for this claim.  In his autobiography, For the Record, David Cameron writes gnomically that Osborne wanted “a version of one”.  What was going on?

Cameron and Osborne and Nick Clegg and Danny Alexander – “the Quad – were trying to agree a tax package that would balance the objectives of the two parties.

Osborne wanted to cut the top rate from 50p back to 40p: where Nigel Lawson had taken it, and where Labour had left it for most of its three terms – until Gordon Brown hiked it in 2009 to create a political dividing line between his party and the Conservatives.

The Liberal Democrats had committed in their 2010 general election manifesto to a mansion tax of one per cent for properties worth £2 million or more.

So there were the makings of a deal here: a shift in taxation from income to property, with the top rate coming down to where Osborne wanted it to go and a Mansion Tax going to where Clegg (or perhaps rather Vince Cable) wanted it to go.

But Cameron was “appalled by the idea”, as D’Ancona puts it; or, to use the former’s own words, “it was something I found unpalatable”.

The former Prime Minister was particularly worried by the political impact of a Mansion Tax in London and the South-East.  “How are we going to get Boris re-elected?” he asked.

So it would be a pippin of irony were a Johnson premiership to introduce a Mansion Tax in his administration’s first budget.

We doubt very much that this will happen.  The story looks like a kite-flying exercise by the Treasury to see what Tory reaction would be.  (Harry Phibbs wrote on this site earlier this week about how the Telegraph is vigorously proving its independence by fighting back against the plan apparently being mulled its one-time columnist).

But maybe Cameron’s account gives a hint of where the Chancellor might decide to go.

“After many lengthy discussions,” he writes, “the leading option became having two additional council tax bands with a percentage rate of the value of the house: one for homes over £2.5 million and one for homes over £5 million”.  The idea, he adds, “has merit…there is a strong argument that in the UK they are under-taxed”.

Current spending is tight.  The Government is distancing itself further from “austerity” – i.e: reductions in the rate of public spending.  Tax rises in “the rate of income tax, VAT or National Insurance” have been ruled out.  So Javid will be looking to find others – and Chancellors tend to hike taxes in the first Budget of the political cycle if they can.

Cameron points out that council tax bands treat houses worth £500,000 and £5 million the same.  If the Government is to avoid tax hikes of this kind in future, it will need to be more ambitious with spending control than currently; or revert to more printing or borrowing or both; or else, as Ryan Bourne argued recently, act to raise the growth rate.

As it happens, it is reported this morning that Britain had “the third-fastest growing economy in the G7 group of advanced nations last year” – 1.4 per cent.  Not bad under current conditions.  But nothing like “the historic 2.8 per cent growth rate that Sajid Javid aspires a return to,” as Bourne put it.

So what happened to that earlier incarnation of the Mansion Tax?  In a nutshell, Cameron saw it off.  The eventual bargain between the two parties was as follows: the top rate came down to 45p rather than 40p, and the Liberal Democrats got a big increase in the personal allowance.

Which had been another of their 2010 election signature policies.  And which Osborne and Cameron later presented as a solid Conservative achievement during the 2015 Tory election campaign.  Which ushered in the EU referendum.  And everything that has followed – including this.

120 comments for: A Mansion Tax. “What is really the problem with this?” asked the Conservative Chancellor

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