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23 September 2014updated 06 Aug 2021 2:03pm

Labour, Lib Dems and a mansion tax: what’s the story?

Ed Miliband has announced that he will fund the NHS using a mansion tax. What’s the story of how Labour came to adopt this Lib Dem policy?

By Anoosh Chakelian

During his final speech to Labour party conference before the general election next year, Ed Miliband made a headline pledge. He said he would boost funding to the NHS using a crackdown on tax avoidance, hitting tobacco firms, and introducing a mansion tax.

He said:

We will use the proceeds from a tax on houses worth over £2m.

The party has briefed a few basic details of this tax proposal:

  • The £2m threshold will rise in line with property prices, to stop more properties being drawn into the tax.
     
  • There will be protections in place for people who don’t have high income but happen to live in an expensive property.
     
  • It will be progressive tax, so that properties worth tens of millions make a bigger contribution than those just over the limit.

If you want to know exactly how a mansion tax on properties over £2m would work, click here.

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Miliband’s NHS funding announcement had the conference auditorium cheering in a standing ovation, and such a tax is a straightforward popular move.

The tax was initially a Lib Dem plan. The party came up with it in 2009 and has been attempting to fight for it ever since. As Ed Balls mentioned during an event at Labour party conference yesterday evening – to explain to one audience member who said the phrase “smacks of hatred and class envy” – the name of the policy came from the Liberal Democrats, who formulated the plan.

It was early in 2013 that Miliband joined Nick Clegg in proposing a mansion tax. But it was not until June this year that Ed Balls tweaked Labour’s plan for a mansion tax to match the Lib Dems’ model. This change meant introducing additional tax bands above £2m, rather than having the tax as a percentage of the property’s value.

When Balls revealed his alignment with the Lib Dems’ model, the latter’s website celebrated his decision:

Ed Balls has announced he agrees with the Liberal Democrats’ mansion tax. Lib Dems are pleased that Labour have finally come around after years of not supporting these proposals.

This overlap in Lib Dem and Labour policy proposals led to the mansion tax being a notable of example of how the two parties could work together in a potential future coalition. George has written about the policy overlap between the two parties, citing the mansion tax as one of 14 policies on which they agree.

However, Labour’s adoption of the policy hasn’t always been smooth, particularly among its London representatives.

The Tories (who oppose the measure) pounced on remarks made by the Labour peer and shadow infrastructure minister Andrew Adonis earlier this year. He appeared to condemn it as an unpopular policy, although he was simply talking about the reaction of well-off people to the idea of having their properties taxed. However, he did tell George at the time that it had to be introduced “in a fair way”, “particularly in respect of existing homeowners whose houses have appreciated dramatically in value.”

Tessa Jowell – a London MP and Labour’s most popular potential mayoral candidate – has also voiced her concerns about the policy’s shortcomings. She said in November 2013, “I’ve thought a lot about the mansion tax dilemma and I represent a constituency where it would be an issue for some people . . . It’s fine to say we’ll impose a mansion tax, but for these people they would have to move out of their family homes. Let’s be wary of the perverse effects of that.”

Other mayoral hopefuls, Diane Abbott and David Lammy, have both warned in the past that it feels like “a tax on London”.

However, these concerns were voiced before Balls clarified that the tax would go by the Lib Dems’ model.

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