A ‘MANSION TAX’ WOULD HIT MIDDLE-CLASS LONDONERS

First published by This is London

AN ANNUAL LEVY ON THESE HOMEOWNERS WOULD TAKE NO ACCOUNT OF THOSE WHO ARE ASSET RICH BUT CASH POOR

All the signs are that the Liberal Democrats are pressing the Government to include some form of wealth tax in the forthcoming Budget, based on a “mansion tax” on valuable properties. Such a levy would be arbitrary, unfair and unaffordable for many of those required to pay.

An overwhelming proportion of the affected properties, estimated to be 81 per cent of the national total, would be in London, with 40 per cent of those in Kensington and Chelsea. Yet many of these properties are by no means mansions. A three-bedroom flat in South Kensington or parts of Westminster will often cost over £1 million. 

Many £2 million houses in central London are fairly ordinary town houses. These are properties that in any other part of England would sell at a fraction of the price. Such a wealth tax would target not mansions but desirable locations. Likewise, the owners who would be hit hardest are by no means the super-rich. Many are middle-class professionals or business families, with comfortable but not wealthy middle-class incomes. Many have lived in their properties for years, having purchased their home prior to the explosion in house prices. According to figures from Savills, 31 per cent of the properties in London that are worth more than £2 million have been in the same ownership for more than 10 years, 15 per cent for more than 20 years.

An annual levy on these homeowners would take no account of those who are asset rich but cash poor, either because they are elderly and no longer earning a salary or because the increase in the market value of their homes bears no relation to any increase in their income. A property-based wealth tax would also be impractical. Were it introduced, it would be likely to lead to a sharp fall in the market value of such houses in a very short time. Would homeowners remain locked into the liability to pay the tax if the market value of their homes fell below the established threshold?

If a tax on wealth is to be considered equitable, it would have to be based on a person’s total wealth, not just their home. Why should homeowners be singled out as opposed to, say, shareholders, landholders, or those in possession of commercial property, works of art and other valuables? It would be indefensible to subject some to a wealth tax while excluding those with far greater wealth merely because of the different ways in which their money was invested. It would be particularly disgraceful if the asset singled out was the primary home that a family lives in, rather than optional luxury items such as yachts or jewellery — or other assets that might produce a regular income, such as buy-to-let second homes.

As the Member of Parliament for Kensington, I have a special awareness of the effect such a policy would have, and am resolutely opposed to it being incorporated into our tax structure. It would be extraordinary if a Conservative-led Government were to do so. If we are to target the super-rich for taxation, the least we can do is ensure that carelessness doesn’t leave middle-income families caught in the crossfire. Failure to do so could force hard-working Londoners out of homes they have lived in for decades.

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX.

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