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Will Cameron and Osborne cave to pressure over mansion tax?

Sam Dale MM blog

At the Conservative party conference in October, prime minister David Cameron and chancellor George Osborne were emphatic – there will be no mansion tax.

Osborne warned against “clobbering” people who lived in expensive homes, while Cameron said simply it is “not going to happen”. Osborne repeated his robust opposition in the autumn statement in December.

A mansion tax is the Lib Dem policy for a 1 per cent annual levy on residential property worth more than £2m. It would mean people with a £2m house would be forced to pay at minimum £20,000 fee to the Government.

A tax on expensive land or property has been a 100-year-old Liberal Democrat dream to move the tax burden from earned income to so-called unearned and unproductive wealth.

But despite the two most powerful politicians in the country rejecting it, the mansion tax is back with a vengeance. Cameron and Osborne have been caught in a pincer movement by business secretary Vince Cable and Labour leader Ed Miliband.

Last week, Miliband unveiled plans to introduce a 10p tax rate for people earning £1,000 above the personal allowance. It currently stands between £8,105 and £9,105 with plans to rise to £10,000 to £11,000 by 2015.

The giveaway to the low-paid would be funded by the exact same mansion tax proposed by the Lib Dems.

Thinktank Policy Exchange says the 10p tax rate will not give those affected £100 a year more, as suggested by Labour, but around 67p a week extra when in-work benefits are taken into account. The Institute for Fiscal Studies also questioned whether a narrow mansion tax would raise enough to pay for a new 10p income tax rate.

While the economics may be shaky, the politics are clear. It is now highly likely that Labour will propose a motion in parliament and dare the Lib Dems to oppose their cherished mansion tax policy.

Cable has indicated his party would support such a Labour move, while ex-Lib Dem Treasury spokesman Lord Matthew Oakeshott is actively urging Miliband to push ahead with a Commons vote.

Lib Dem MP and current Treasury spokesman Stephen Williams slammed Labour for “stealing” Lib Dem policies but was silent on whether he would join forces with Miliband. Some Tories may also vote with Labour, leaving Cameron and Osborne in a possible minority within parliament.

When Labour and the Lib Dems last joined forces to back a Commons motion to block News Corporation’s bid for BSkyB in July, the Tories quickly caved and followed suit. Then they feared being seen as a crony of Rupert Murdoch and now they may fear being labelled as the party of the rich.

The Lib Dems are even proposing a mansion “super-tax” by extending the levy on the cumulative value of all property owned including buy-to-let and holiday homes.

The annual Budget battle between Lib Dems and Tories over a mansion tax has a new dimension with Labour support. The only question is whether Cameron on Osborne will cave to the pressure or stand firm.

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. As someone who would love to own my own home etc, and struggles month on month, I still think this proposed mansion tax is disgusting! There people have paid Stamp Duty Land Tax to buy the properties, they pay Income Tax on any income they make from the properties and they pay Capital Gains Tax on disposal (not to mention the fact that they have probably paid IT/CGT when accumulating the deposits to start their protfolios and on the monies they fork out to pay the interest on their mortgages) and when they die they will pay 40% Inheritance Tax – seriously Government get a blooming grip and stop giving all our money to the lazy people who ‘can’t work’ (yes I know some are genuine but in my experience most are not – harsh I know but seriously sit down a pub of an afternoon and the ‘can’t work, bad back’ crew dancing along to a duke box – and spending more than I can afford to on luxuries such as booze – tells you the story). Wrong wrong wrong.

  2. With respect to these ‘mansion tax’ properties in Central London, the Government is playing a very dangerous game.

    Because these properties are often owned by non-doms, who have business interests here in England, employing our people.

    So, hack off the non-dom enough, and he/she will depart, possibly taking their businesses with them and leaving our people unemployed.

    All-in-all, less than a zero sum game.

    PS. The Government should live within its means rather than looking around to see who else can be squeezed for ever more taxes.

  3. If the Lib Dems pull this off they will gain some of my respect. Taxing income is very regressive, taxing someone who has inherited land and wealth with little work is the way to do it- no wonder the Tories don’t like it!

  4. Anon @ 3:31

    So how do we discriminate for this ‘mansion tax’ between those who have inherited land and wealth and those who have earnt it by the sweat of their brow?

    Or should we not bother and just tax them all, tax them all, tax the long and the short and the tall.

    The politics of envy is a truly odious thing.

  5. When oh when will the Labour and Lib Dem politicians and their Anonymous supporters(see above) grow up and learn the basic facts about running a business/running a country. You cannnot keep spending more than you earn/collect in taxes. The bank will impose a limit on your borrowing and could potentially close you down with all that entails and the cost of borrowing as a country will rise as the more indebted it becomes. If only they would use as much energy on making sure we as a country live within our means rather than using as much energy as they do in dreaming up new taxes. We have to cut spending in the same way a business has to cut expenses in times such as now. Living in the hope that we can increase income/increase taxes is like living in a fools paradise.

  6. Can Clegg and Milliband please answer me this,

    Will taxing the sale of a few £2million properties;

    1. Put the funding of the NHS on a long term stable footing?

    2. Will it create 1,000,000 new private sector jobs?

    3. Will it provide sustainable long term care for the elderly?

    4. Will it fund say, 5000 new coppers on the beat?

    5. Will fund say 50 fire stations?

    6. Will it help pay for the £1 TRILLION public sector pensions liability?

  7. Anonymous | 19 Feb 2013 3:31 pm

    What about a farmer who inherits a farm but is earning a pittance from the farm?

  8. In answer to Anon 4:04pm – No it won’t.
    But, getting a grip on the tax avoiders such as Starbucks would.

  9. @ Anaon 4:01pm.

    It’s not the politics of envy, it’s the politics of wanting to live in a fair society such as Sweden or Norway for example.

  10. Anon @ 9:50 am

    Denmark is a good example of a ‘fair’ society, where the people, according to one survey, are the happiest in Europe, despite some 60% of their income being taken in taxes.

    This is because the Danes know how to run a bureaucracy properly and the taxes are spent carefully, handling all of the citizens major life-events, from cradle-to-grave, as it were.

    However, we live in Engand, where, despite some 50% of our income going to the Government in taxes, the bureaucracy has squandered vast amounts of the money, to general dissatisfaction all around.

    When England is properly England again, in the politicial sense, we may start to get our house in order and thus improve the lot of the everyday people living here.

  11. My son attends a University where course work forms a significant part of the final marks. Groups of half a dozen or so students work together on a project and at the end of the project mark each other. Junior was unable to attend a meeting at the weekend as he is a keen sportsman and so the others said that the meeting had to be arranged during “half term” 100 miles from his home (local to the others). Outvoted, he had to attend at his expense by train – a £35 rail fare. The implication being if you do not do what we say, we will give you a poor mark. Using a voting system the majority bullied the other – and he paid the bill.
    1% of the population pay 50% of all income tax. 99% are quite happy to override the 1% and spend their money however wrong that may be. The 1% have no say. These proposals are just like that.
    If you have to go back to those that have earned and paid their taxes for more money, then it is clear you have got your current budget wrong.

  12. To Steve B

    Glad you agree that the Mansion Tax would be pointless.

    Anyone who believes the real problems of this country can be solved by taxing the sale of a few expensive houses is living in economic cloud cookoo land (pls note messrs Clegg, Cable and Milliband)

    Labour have cleverly linked the M tax to the 10% tax band thus making thousands of voters believe the plight of low earners is solely caused by a few people living in expensive homes which any idiot knows is not true.

    But it has raised the good old British traits of envy and class war politics to the fore.

    As for Multinationals not paying their dues, if these companies chose to open shops, distribution depots, factories, R & D labs, warehouses, etc etc in the UK then they will go someway to providing the 1,000,000 new PRIVATE sector jobs we sorely need. These jobs will result in personal tax and NI going towards our beloved NHS.

    As for avoiding tax I assume you use government encouraged tax avoidance schemes such as ISA, Pension, Unit Trust, cash ISAs etc to shelter you money from income tax and CGT?

    Or do you nobely shun these avoidance schemes can place all you savings in a taxable enviroment?

    Are you buying your own home? If yes you are using the biggest government backed tax avoidance scheme as you can sell your home completely free of tax.

    Millions of households avoid tax.

    I also assume when a plumber offers to fix your bath for cash rather than paying VAT you say no and do your tax duty and pay the VAT.

    By the by paying the plumber cash is tax EVASION which is not legal avoidance but millions of household evade VAT every chance they get.

  13. Perhaps an overlooked a point or two.

    A 1% tax on a £2million home is £20k p.a. Now not everyone living in a £2 million home is a millionaire. Let’s just say perhaps some are no more than 40% taxpayers (some old folks may not even be that). So in order to pay this tax they will have had to earn £33,333 (which is taxed at 40%). What if they don’t have the money – will Clegg accept a couple of windows and a door in lieu?

    Just think £90k isn’t a bad income (amongst the top 5%), but at 40% tax (after personal allowance) and including employee NI the poor bugger is left with £58,936. He’s then got to find £20k for the mansion tax – leaving £38,936. From this he has to pay his council tax! His fuel bills. He has to eat and has all the other normal expenses. Where is the money coming from?

    This is a tax rate of 56.7%. Shades of the Wilson era!

    If you are lucky enough to earn (say) £150k it gets worse. You get no personal allowance and you will pay 45% tax. Do your own arithmetic.

    And this proposal is from one of the contributors who is supposed to have a doctorate in economics!
    Do you wonder what the UK is deep in the sewage?

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