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Vince Cable's mansion tax idea is 'crackpot', say critics

23 September 2009
Written by rosalind renshaw

The Lib Dems’ idea of raising £1bn by taxing people in houses worth £1m has been shot down in flames.

The party’s Treasury spokesman Vince Cable announced the ‘mansion tax’ plans at this week’s conference. If adopted, owners of properties would have to pay 0.5% tax on any excess of £1m valuation, meaning that the owner of a £1.5m property would have to pay £2,500 tax a year, and the owner of a £4m property would pay £15,000 a year.

But one pundit called it a ‘crackpot idea’ and agents in the south said it would be a tax on London and the south-east, and very hard to implement.

Douglas McWilliams, chief executive of the Centre for Economics and Business Research, warned that it would reduce house prices. Buyers of more expensive houses would take the tax liability into account and pay less, and reduced prices would trickle down the rest of the market.

“So some home owners would face a double whammy – more tax and a cut in their wealth,” he said. “The tax would add to Council Tax and Stamp Duty as yet another heavy tax on home owners. It would be regionally unfair, since virtually the entire tax would be raised in London and the south-east.”

Liam Bailey, Knight Frank’s head of residential research, said: “Stamp duty and HIPs already discourage free movement of capital within the housing market and the mobility of the UK’s workforce. The spectre of another property tax is not what an extremely unsettled market needs.”

He said there would also be serious issues about how to value houses for the purposes of tax. “House prices are extremely volatile. A property worth £1m last year may be worth significantly less today. The cost of both initial valuations and the resulting appeals would be welcomed by the property industry as a new source of income – but would make serious inroads to the actual tax-take.

“Although it is easy to brush aside the proposal because it is unlikely to ever be implemented, it will only add to the growing perception held abroad that the UK is becoming a high-tax environment for the successful.”

London agent Eric Walker of Bushells said: “This can only be seen as another tax on London. The so-called ‘mansion tax’ will apply not just apply to mansions, but flats in central London.”
He added: “The last thing the property market needs is another tax. On the plus side, I wonder how many predict that the Lib Dems will mount a serious challenge for Government when, according to a Newsnight poll, 36% of people hadn’t heard of Nick Clegg.”

Who?

Comments

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    What a bonkers idea; that's Vince's reputation for having any idea how tax collection actually works handily dispatched .... and he was doing so well .... no wonder he left Shell, or did they leave him.

    Still the civil service will love it. Let's see if they can persuade the tories to take it up after the next election.

    I smell a new breed of home assessors out their pounding the streets to sniff out million pound properties.

    • 24 September 2009 17:55 PM
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    Actually, I hear from the front line that Vince's colleagues are incandescent with rage over this unapproved policy announcement. 4 MPs claim that he may have cost them their seats!! This was told to someone who was at the Lib Dem conference in Bournemouth.

    • 24 September 2009 15:10 PM
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    Calm down Dahlings, it's only a commercial ....just the Lib Dems chasing the publicity wagon yet again.

    It's not going to happen - open the bubbly, take a sauna then do a few lengths in your pool. Later you can retire to your home cinema or the Billiards Room and forget all about those nasty politicians

    • 23 September 2009 17:53 PM
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    Silver Surveyor. To set the record straight I do not applaud the idea. I too, think G8 countries are grossly overtaxed to pay interest to International Bankers and give the money we have borrowed from them to Banks in which they have shares. The Money is going round in circles ( back to the Lenders)and we are caught in the middle paying ever increasing taxes to cover the Interest.

    • 23 September 2009 13:54 PM
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    Did the Lib Dems sit there and think 'right then lads who do we make sure we finish a distinct 3rd in the next election?'. Pretty much g'teed now!!

    • 23 September 2009 13:45 PM
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    Wes- just at a time when everyone agrees that government is bloted overpaid and overstaffed you applaud an idea that will require yet another 1000 jobs in the Inland Revenue. Anyway the tax would never be economically viable - Are you sure you thought this through?

    • 23 September 2009 11:50 AM
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    Vince Cable's boss is Nick Clegg who came from Chalfont St Giles (near God'd own Gerrards Cross
    ) Chalfont St Giles is, of course, well known Cockney rhyming slang for a pain in the arse. QED

    • 23 September 2009 11:48 AM
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    Its frankly insane and unfair and will only be supported by people who are jealous. People with £1m homes may have equity, but they aren't always cash rich. Many have lost their city jobs or have had bonuses slashed, some have large mortgages and cant sell as values have dropped. High earners already pay 40% income tax. Many owners of expensive homes are often retired people who wont sell their family homes as they consider them an inheritance for their families - a lots of which will be lost in inheritance tax. Often their incomes have been affected as well as a result of low interest rates.
    Its seems that this policy is one to appeal to the masses rather than be based on sound economic fairness. Often, large family properties have one breadwinner. A married man earning £100k will have deductions of £34,688. A professional couple each earning £50k each will pay a total of £28,400. The high earners are already taxed more heavily and often have dependents. This new proposal will alienate the Lib Dems with some key voters and is a flawed policy designed to get votes. On the plus side, there is no chance of them ever getting into power, so its purely hypothetical.

    • 23 September 2009 11:08 AM
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    I think it sounds like a pretty sensible idea. Better than raising income tax. A similar system works quite well in France. Anyone who has a £1 million property could easily afford to pay and has probably benefited from absurd house price inflation over past 10 years. Most people did little or nothing to earn this money and therefore a small tax on the benefit seems appropriate given the need to raise revenue.

    • 23 September 2009 10:54 AM
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    Not totally crackpot. The French have had a Wealth Tax for years. Any Assets over 790,000 euros are subject to an annual tax. The Calulation includes the House, Cars and Furniture (except antiques) which all must be valued annually in order to be taxed ! The New World Order is here!

    • 23 September 2009 10:43 AM
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    Ridiculous proposal which would cost more to implement than it would gain in tax revenue. Why didnt they propose just council band G & H properties, which would do the same job and not discriminate against the South East and would cost significantly less to implement. Muppets!

    • 23 September 2009 10:26 AM
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