Labour leader Ed Miliband has proposed a return to the 10p tax rate — paid for by a tax on properties worth over £2m.
Former prime minister Gordon Brown abolished the 10p rate in 2007, in a move which Miliband describes as ‘a mistake’, but critics say the proposed cut would make the low-paid just £100 a year better off (or 65p after tax credit withdrawals). In the meantime, owners of houses valued at over £2m could face bills of £30,000 per year, raising a potential £1.7bn.
Amid reports of London’s overheated property market, partly fuelled by a high level of foreign investment (itself driven in part by tax loopholes), Miliband’s proposal will probably meet with a certain amount of approval. But prime minister David Cameron has previously rejected similar proposals for a tax on property put forward by the Lib Dems.
According to the Standard report, there are 74,000 homes worth £2 million in the country with 91% of them in London and the south east — a fairly big net. A snoop through Rightmove shows properties ranging from a £2m three-bed in Notting Hill to a £70m town house in Belgravia. We applied the mantra of ‘if you have to ask, you can’t afford it’ to the properties marked POA (Price on application) though we don’t think there’s enough change down the back of all the sofas in London to even afford the £70m one.
One of the thorny issues around introducing a property tax is that it assumes an owner is cash-rich. Overseas investors may well be but the owner of a £2m house in central London may simply be the beneficiary of a steadily rising market and property inheritance. Shadow chancellor Ed Balls has not said how the tax would be levied or if valuation of properties would be required. Lib Dem business secretary, Vince Cable, a champion of the party’s previous property tax proposals, said:
We have a lot of rich foreigners buying property in the south of England driving up prices so that local families can’t get property.
The mansion tax is not just about fairness, it is also about giving the right signals to the economy.
Photo by victorianlondon in the Londonist Flickr pool.