Liz Peace: A mansion tax won’t fix London’s housing crisis
08-07-2014
Council tax reform would be a much fairer way of redistributing the property taxation burden
Fair is fair: Instead of introducing a mansion tax, we need a revaluation in whole or part of council tax, with extra bands being added
Liz Peace
The easiest way to discredit any idea for a “mansion tax” is to go on to any property search engine, type in “£2 million plus” and see what pops up. Flats in Hoxton, terraces in Fulham and family homes in East Sheen: not what most of us would consider “mansions”. Clearly this is a tax on London, with about 90 per cent of predicted payers in the capital.
We have a fair few taxes on property in this country already: do we need another? Part of the reason London’s housing market is in trouble is that politicians of all hues have been prepared to abdicate responsibility for keeping council tax properly pegged to property values.
We should start by restoring fairness to council tax. Instead of introducing a mansion tax, we need a revaluation in whole or part of council tax, with extra bands being added. After all, council tax is currently based on the price of our properties in the early Nineties, when Margaret Thatcher had just left No 10, Chesney Hawkes was top of the charts and Arsenal were winning the old first division.
Yes, council tax reform would also see the capital paying more — but that is a fair reflection of what has happened to property values relative to the rest of the country. Independent figures from the Joseph Rowntree Foundation, based on a hypothetical revaluation, show that 52 per cent of Londoners would pay more, compared with 11 per cent in the North and Midlands.
While this may sound like a lot, just under half of Londoners would see no change in their bills; a mere four per cent would see an increase in their bills of more than 50 per cent. It would be a much fairer way of redistributing the property taxation burden, and less likely to hit those who are asset-rich yet income-poor.
We have even found from our members that there is an acceptance that at the top end of the market council tax is out of step with what should be paid. International visitors comment that compared with cities like New York and Paris, council tax on high-value property is low.
What they also say is that a mansion tax sends out bad signals about future governments arbitrarily introducing new taxes. This uncertainty can only be detrimental for London’s investment potential, which hurts us all.
Council tax revaluation, and a thorough rethink of the mansion tax, would also bring about the possibility of more sensible revenue spending. The Lib-Dems would use a mansion tax to reduce the deficit and therefore help ease any further pain on welfare cuts — thoroughly responsible but arguably not a great vote-winner. Labour wants to spend the proceeds on reintroducing a 10p income-tax rate — odd for a party trying to reclaim its reputation for fiscal prudence.
We have a housing crisis in London. Wouldn’t it be a far better use of any additional revenue raised by a reset council tax, or a mansion tax, to spend it on affordable housing? This would put roofs over people’s heads but also support growth, jobs and investment. Labour rightly wants to build 200,000 homes a year. Using a revamped council tax for this would be a good start.
Liz Peace is chief executive of the British Property Federation