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20 October 2014

David Lammy stands firm on opposition to mansion tax despite Balls concessions

The Labour London mayoral hopeful wants higher tax bands introduced by local councils. 

By George Eaton

Against expectations, the biggest policy disagreement of last month’s Labour conference was over the party’s plan to introduce a mansion tax on properties worth more than £2m. Most of Labour’s prospective London mayoral candidates (David Lammy, Tessa Jowell, Diane Abbott, Margaret Hodge), along with several party donors, criticised the idea, with only Sadiq Khan backing the party line. 

Ed Balls’s piece in today’s Evening Standard is aimed at resolving their concerns. After previously announcing that the threshold for the tax would be increased in line with house prices, rather than overall inflation, and that those who are asset rich but income poor (and who may struggle to afford the tax) would be offered protection, Balls has gone further today. He has announced that:

1. The threshold for the tax will be raised in line with house price rises over £2m, rather than the average increase. This will ensure that the number of properties paying the tax does not rise. 

2. Those on incomes below £42,000 (who do not pay the 40p rate of tax) will be “guaranteed” the right to defer the charge until the property changes hands. 

3. A household in the lowest proposed band (£2m-£3m) will only pay an extra £250 per month – the same as the average top band of council tax. Balls added that he would look at asking overseas owners of second homes in the UK to make “a larger contribution”. 

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But despite these clarifications, Labour’s mayoral hopefuls retain concerns over the policy. A spokesman for David Lammy, the only officially declared candidate (with the exception of transport expert Christian Wolmar), told me that while he “welcomed” the changes announced by Balls, he felt it remained “a tax on London”. Rather than a Treasury-imposed mansion tax, he would like the policy to be introduced by local councils in the form of higher bands, ensuring that the capital (which accounts for 86 per cent of the properties that would be affected) gets to keep the majority of the revenue raised. “If London has to pay more, London should get to keep more,” a source said. Labour has pledged to use the £1.2bn it expects to raise from the tax to fund higher NHS spending. 

Meanwhile, Tessa Jowell also said that she “welcomed” Balls’s announcement but that she remained concerned about the implementation of the policy and disliked the “mansion tax” label. 

She said: 

The fact that he has made two things clear, first the banding of liability, and the second that if you are a basic rate taxpayer then any liability is deferred until the property changes hands, is a welcome recognition of the anxiety that has been caused to thousands of people, some of whom I represent, who, by and large, are elderly and are living on pensions.

But let’s stop calling it a ‘mansion tax’, these are not mansions, these are family homes that have accured in value. When people think of mansions they think of great big Scottish estates, or Cotswold estates, or whatever, this is a feature of the London housing market. These are people who do not think of their home as this fast appreciating capital estate but as their family home. They’re the kind of people who open their house to the Labour Party, where we can have our garden party in the summer, or whenever’s there’s a space needed for something in the community, they tend to be the people who offer their houses for that. It’s this sense of settlement in constituences like mine, which is so incredibly important. The reason I’ve been speaking out against this is that I did not want a situation to arise where these people felt helpless and anxious in ways that meant the only option open to them was to sell their homes.

I hope that Ed Balls’s piece will reassure them. I think, however, this is going to be complicated to implement, it will be important that when the detailed implementation plan is published that there is plenty of discretion to deal with the really difficult cases. 

When I asked whether she now supported the policy, she told me: 

I don’t think it’s over yet. I think that what Ed has set out today is a welcome outline but as with all of these policies the test is in the implementation. I look forward to talking further with him about how this is implemented in order to prevent bad cases discrediting what is a policy intended to increase fairness. 

Update: Diane Abbott, another likely mayoral candidate, has tweeted: “My view on the mansion tax. Good idea in principle. But you cannot escape the fact that it is a tax on London.”

Update 2: Margaret Hodge told me: “I think the detail Ed Balls has set out today is a step in the right direction, although I do have reservations about a mansion tax. Of course it cannot be right that you pay the same amount of council tax on a property worth £320,000 as one worth £3m. The challenge is finding a solution that is as fair and as effective as possible.”

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