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24 September 2014

Labour’s mayoral frontrunners criticise Ed Miliband’s mansion tax

13 per cent of the UK’s population live in the capital, but 90 per cent of the properties that would be affected by the mansion tax are in London. 

By Tim Wigmore

For all the focus on what Ed Miliband forgot to say in his speech, his new proposal of a new mansion tax on homes over £2m to fund extra spending on the NHS is extremely popular: a YouGov poll finds that it is supported by 72 per cent of people. But the frontrunners to be Labour’s candidate for Mayor of London in 2016 were not among them.  

A revealing moment in a fringe event yesterday evening during Labour party conference on the future of Labour in London – an ill-disguised early hustings event – concerned attitudes to the mansion tax. The speakers – Andrew Adonis and Margaret Hodge, who are both tipped to stand, as well as David Lammy, who has already declared, and the outsider candidate Christian Walmar – were asked to raise their hands if they were in favour of the idea. None did so.

For Adonis, Hodge and Lammy, a re-evaluation of council tax bands – which has not occurred since 1991 (the rates were subsequently changed in 1993) – represents a preferable option to the mansion tax. “I’m not keen on a mansion tax.” Lammy said. Hodge admitted that “I would rather we did it in a slightly different way.” Diane Abbott and Tessa Jowell, two other probable mayoral candidates, have already spoken out against the mansion tax.

Adonis appropriated the language of the left to defend his opposition to the mansion tax. “Expensive property should be taxed more fairly,” he said. “Equally, people whose houses have been inflated into much higher values and suddenly find themselves therefore facing a much higher tax bill, many of whom will not be people of means – we need to play fair by them too.”

Even Christian Wolmar, perhaps the most left-wing Labour candidate running, only supported the mansion tax with a significant caveat: that it only be applied on properties that were bought for over £2m, thereby preventing the tax affecting those whose houses have hiked in value but may still be cash poor.

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It was a significant exchange, for several reasons. It served as a reminder of the exceptionalism of London. While 13 per cent of the UK’s population live in the capital, 90 per cent of the properties that would be affected by the mansion tax are in London. What is good for Labour in London – support for immigration, the EU and opposition to a mansion tax – may not be good for Labour in Liverpool. The party could soon have its own version of the Conservative debates about prioritising winning in Cambridge or Clacton.

Opposition to the mansion tax also encapsulates why all the mayoral candidates are calling for greater powers to be devolved to London. Currently the Mayor and boroughs keep only seven per cent of the taxes they raise. “The money spent on health – 90 per cent of it will not be spent on the health service in London,” Lammy said. “That is the problem.” Speaking earlier in the event, Diane Abbott offered a similar analysis. “London is as big as Scotland and Wales put together,” she said. “You cannot debate devolutionary powers to Scotland without devolutionary powers to London.” To Adonis, allowing London to keep more tax revenue in return for taking responsibility for infrastructure projects represents a “something for something” deal.

Whichever Labour candidate takes on the Tories – Tessa Jowell is the favourite – will be expected to become Mayor in 2016. But Labour’s weakness in the last two Mayoral elections has been its lack of appeal to outer boroughs. It is a problem that the mansion tax has the potential to exacerbate. The upshot is that an Ed Miliband victory in 2015, if it leads to a mansion tax seen as disproportionately affecting London, may make a Labour victory in the capital in 2016 considerably less likely. 

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