The right warms to property taxes

Tory MPs and others on the right are beginning to recognise the case for greater taxation of propert

I recently noted that Tim Montgomerie, the influential editor of ConservativeHome, had declared his support for greater taxation of property (including a version of Vince Cable's "mansion tax"), a cause the New Statesman has long championed. Since then, others on the right have joined him. In a piece on ConservativeHome today, Tory MP Mark Reckless, rightly noting that we tax property less than almost anywhere else in the world, calls for a range of new property taxes to replace the 50p rate. He calls for the coalition to ensure the rich pay stamp duty (many avoid it by putting properties into shell companies), to levy capital gains tax on non-UK residents and to introduce a mansion tax, although with the threshold set at £5m rather than £1m or £2m. In return, he says, the coalition should reduce the 50p rate to 45p and the 40p rate to 38p.

Elsewhere, the Spectator's James Forsyth writes about the growth of the "undeserving rich", those who have acquired huge wealth through illegitimate means. Forsyth cites the example of bankers and oligarchs but, to my mind, this category should also encompass those who have benefited immensely, through little effort of their own, from the dramatic rise in house prices over the last decade. As NS editor Jason Cowley argued in a October 2010 cover story ("The coming battle over land and property"), there is a strong meritocratic argument for heavier taxation of unearned wealth (inheritance, property and land) and lighter taxation of earned income. Property taxes are also harder to avoid than those on income (you can't move a mansion to Geneva) and reduce the distorting effect that property speculation has on the economy. For the psephologically minded, it's worth noting that high-end property taxes are popular. Last week's Sunday Times/YouGov poll found that 63 per cent of the public (including 56 per cent of Tories) support a mansion tax, with just 27 per cent opposed (38 per cent of Tories).

Yet most on the right remain instinctively hostile to Vince Cable's call for greater taxation of land and property. They should realise that they are missing a trick. In an age of austerity, the Tories cannot afford to be seen as the party of the wealthy. Replacing the 50p rate with a range of new property taxes would change the terms of debate and send Labour back to the drawing board (the 50p rate may not raise as much revenue as Ed Miliband and Ed Balls hope). Simply abolishing the top rate is neither morally, nor politically, nor fiscally credible. The right should not miss an opportunity to demonstrate that it can think imaginatively about wealth, property and opportunity.

George Eaton is political editor of the New Statesman.

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What type of Brexit did we vote for? 150,000 Conservative members will decide

As Michael Gove launches his leadership bid, what Leave looks like will be decided by Conservative activists.

Why did 17 million people vote to the leave the European Union, and what did they want? That’s the question that will shape the direction of British politics and economics for the next half-century, perhaps longer.

Vote Leave triumphed in part because they fought a campaign that combined ruthless precision about what the European Union would do – the illusory £350m a week that could be clawed back with a Brexit vote, the imagined 75 million Turks who would rock up to Britain in the days after a Remain vote – with calculated ambiguity about what exit would look like.

Now that ambiguity will be clarified – by just 150,000 people.

 That’s part of why the initial Brexit losses on the stock market have been clawed back – there is still some expectation that we may end up with a more diluted version of a Leave vote than the version offered by Vote Leave. Within the Treasury, the expectation is that the initial “Brexit shock” has been pushed back until the last quarter of the year, when the election of a new Conservative leader will give markets an idea of what to expect.  

Michael Gove, who kicked off his surprise bid today, is running as the “full-fat” version offered by Vote Leave: exit from not just the European Union but from the single market, a cash bounty for Britain’s public services, more investment in science and education. Make Britain great again!

Although my reading of the Conservative parliamentary party is that Gove’s chances of getting to the top two are receding, with Andrea Leadsom the likely beneficiary. She, too, will offer something close to the unadulterated version of exit that Gove is running on. That is the version that is making officials in Whitehall and the Bank of England most nervous, as they expect it means exit on World Trade Organisation terms, followed by lengthy and severe recession.

Elsewhere, both Stephen Crabb and Theresa May, who supported a Remain vote, have kicked off their campaigns with a promise that “Brexit means Brexit” in the words of May, while Crabb has conceded that, in his view, the Leave vote means that Britain will have to take more control of its borders as part of any exit deal. May has made retaining Britain’s single market access a priority, Crabb has not.

On the Labour side, John McDonnell has set out his red lines in a Brexit negotiation, and again remaining in the single market is a red line, alongside access to the European Investment Bank, and the maintenance of “social Europe”. But he, too, has stated that Brexit means the “end of free movement”.

My reading – and indeed the reading within McDonnell’s circle – is that it is the loyalists who are likely to emerge victorious in Labour’s power struggle, although it could yet be under a different leader. (Serious figures in that camp are thinking about whether Clive Lewis might be the solution to the party’s woes.) Even if they don’t, the rebels’ alternate is likely either to be drawn from the party’s Brownite tendency or to have that faction acting as its guarantors, making an end to free movement a near-certainty on the Labour side.

Why does that matter? Well, the emerging consensus on Whitehall is that, provided you were willing to sacrifice the bulk of Britain’s financial services to Frankfurt and Paris, there is a deal to be struck in which Britain remains subject to only three of the four freedoms – free movement of goods, services, capital and people – but retains access to the single market. 

That means that what Brexit actually looks like remains a matter of conjecture, a subject of considerable consternation for British officials. For staff at the Bank of England,  who have to make a judgement call in their August inflation report as to what the impact of an out vote will be. The Office of Budget Responsibility expects that it will be heavily led by the Bank. Britain's short-term economic future will be driven not by elected politicians but by polls of the Conservative membership. A tense few months await. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.