The Mansion Tax isn't good for Labour
There are not many people who think that the taxation of residential properties in the UK is done either justly or efficiently. To be fair, it has to be based on valuations which are kept reasonably up to date but there has been no revaluation carried out since 1991 — the baseline for when the current residential tax system was introduced in 1993. To be efficient in terms of fairness, there needs to be, if not a progressive element to the system, at the very least a way of avoiding it being heavily regressive. By a long margin, the present arrangements fail this test. The bands for collecting council tax stop at Band H, which leaves all properties worth over £320,000 in 1991 paying the same amount. A band H property in Westminster this year pays £1,353. The London average is about £3,000. This is clearly unfair.
Taxing residential properties, however, if done efficiently and fairly, does have substantial merits. Collection is relatively cheap. Collection rates are high. There is some sort of correlation between the value of the houses and flats in which people live and their income and assets. As there has long been a tradition in the UK that residential taxes are a major contributor to the cost of local services, there is a strong link between what people pay and what they receive in return. All these factors cry out for reforms to the system. We need current valuations; we need extended bands beyond H; and we need to ensure that harshness is avoided by reducing the payments due from those who really cannot afford to pay — especially those who live in properties which have risen enormously in relation to their incomes — to make the system generally acceptable. No one likes paying taxes but the money to pay for public services has to come from somewhere.
Why, then, with a tried and tested way of taxing residential properties in place have proposals for a mansion tax surfaced? This is essentially a way of raising significant sums of money only from those with very high-value residences, usually with £2 million being the cut-off point, while leaving the existing council tax system where it is. The advantages are not hard to see. There are not that many properties worth £2m or more, so the electoral damage from introducing this new tax would not be that great. A high proportion of those with properties worth more than £2m are not voters in UK elections. And no doubt for many people soaking the rich via a mansion tax has an appeal of its own. Why then have many people who support the idea of local property taxation and who believe that more expensive properties should pay a higher amount come out against the mansion tax? The answer is partly on issues of principle but much more on questions of practicality.
First, who is to get the money? The proposals floated so far suggest that all the proceeds of the mansion tax should go not to local government, though this badly needs extra funding, but to the centre, possibly to finance increased spending on the NHS. Is further centralisation and less autonomy for local authorities really the direction most people want to go? Probably not.