Mansion tax 'could trigger huge crash in property prices': Owners' lobby group claim that 'economically illiterate' levy is just politics of envy
03-17-2014
New lobby group launched by multi-millionaires in West End restaurant
They claim property prices will fall and hope to overturn public opinion
Experts claim homeowners will be hit with £50,000 bill to live at home
By Glen Owen and Mark Hollingsworth
Warning: Property agent Trevor Abrahmsohn predicts £50,000 bills to the Treasury just to stay in your home
A powerful new lobbying group containing dozens of the country’s super-rich – and backed by a Tory MP – has been set up to thwart moves to introduce a mansion tax.
The secretive outfit hopes to overturn public support for the proposed levy on multi-million-pound homes by arguing that it is ‘economically illiterate’ and would trigger a devastating crash in property prices.
Chancellor George Osborne has repeatedly blocked efforts by the Lib Dems to impose the annual tax of 1 per cent on homes worth more than £2 million – but Labour leader Ed Miliband has vowed to introduce it if he comes to power in next year’s General Election.
London Mayor Boris Johnson has launched an outspoken attack on the proposed tax, describing it as ‘brutally unfair’ and saying it is ‘time that people woke up to the horror of what is being planned’.
In an article for today’s Mail on Sunday, Mr Johnson says: ‘Labour and the Lib Dems would have you believe that the people they want to hit are oligarchs and international bankers.
‘But the overwhelming majority of victims would be Britons who find themselves living in a house that has nudged over the threshold.
‘That includes people who currently have no idea of the risk they face.
‘It is hard to think of a tax that is more viciously unfair. It hits families who have worked hard and traded up the property ladder only to find themselves walloped for their success.’
Mr Johnson’s robust intervention is bound to lead to further speculation about his political ambitions at Westminster.
The new lobbying group, organised by a property mogul who operates in some of the capital’s most exclusive areas, was discreetly launched last November at a meeting in a West End restaurant attended by 65 of the richest people in the UK – including Russian oligarchs and multi-millionaires from the Middle East.
They were addressed by Tory MP Richard Harrington, who urged them to ‘donate to the Conservatives’ if they wanted to stop the levy.
Chancellor George Osborne has made repeated blocks to the Lib Dem motion but now Ed Miliband has pledged to carry it through
Despite Tory opposition, Lib Dem leader Nick Clegg has warned that the tax, which would affect about 60,000 homes, would be a ‘die-in-the-trench policy’ in any future coalition negotiations.
It would mean that the owner of a £2.5 million house having to pay £25,000 a year to the Treasury just to stay in their home.
Mr Miliband’s support means that only a Conservative majority at the Election is now likely to prevent it being introduced.
Last night, Mr Harrington, the Tory MP for Watford and a shareholder in a property development company, said: ‘I am all for everyone paying their fair share to help the economy, but this is not the right way to go about it.’
Mr Harrington’s £3.5 million house in Hampstead, North London, would result in him having to pay £35,000 annually.
Trevor Abrahmsohn, the luxury property agent who has set up the group, predicted that the tax would cause owners to sell their homes en masse.
Nick Clegg has told Cameron the tax will be his 'die-in-the-trench policy' in any future negotiations
‘Three out of four enquiries we get about homes above a certain value now concern the tax,’ he told The Mail on Sunday.
He claimed a typical salary for someone in a £5 million house is about £150,000 a year, leaving them less than £100,000 in take-home income – around half of which would have to be paid to the Treasury in tax.
‘There would be no alternative but for them to sell, which would cause a crash in property prices all the way down the scale. And not just in the capital, the ripple effects would be felt far and wide.’
He declined to identify the guests at the meeting or even the restaurant where they met.
Mr Abrahmsohn has sold more than £3 billion of property for clients including Britain’s richest man, Lakshmi Mittal.
He added: ‘We need to get the message across – this is not about rich people furthering their own interests.
'It will raise a tiny amount of money in the scheme of things, perhaps £1 billion, but cause mayhem in the process. It is economically illiterate and class warfare. The politics of envy are back.’
Opponents of the tax also say the tax would require a new bureaucracy to value every home, and an expensive appeals procedure.
The construction trade would be hard hit, and foreign investors deterred from settling in the country.
Mr Abrahmsohn, 60, added: ‘The Lib Dems and Labour feel this primitive tax has been very well received amongst their core voters. As might be the erection of 20 crucifixes along the Mall with bankers firmly pinned to them, but that does not make it good policy’.