Lib Dem members back Vince’s ‘mansion tax’ – but views differ about whether on house values of £1m or £2m

Lib Dem Voice has polled our members-only forum to discover what Lib Dem members think of various political issues, the Coalition, and the performance of key party figures. Some 570 party members responded, and we’re publishing the full results.

81% yes to mansion tax – but pretty even split on £1m or £2m levy value

LDV asked: The ‘mansion tax’ would levy a 1% annual charge on properties above a certain value. Would you support or oppose this new tax?

    7% – I support: for houses worth more than £5 million
    39% – I support: for houses worth more than £2 million
    35% – I support: for houses worth more than £1 million
    15% – I oppose the ‘mansion tax’
    4% – Don’t know / No opinion

In total, 81% of Lib Dem members in our survey back some form of mansion tax. However, the level at which the tax should be levied provides a more varied response. £1m was the value originally proposed by Vince Cable when he sprung the policy on the 2009 Lib Dem conference; it was later revised upwards to £2m after the ensuing internal row, and that was the proposal in the party’s 2010 manifesto.

Here’s a sample of your comments:

The property ‘market’ has been insane for a decade – anything that helps bring ‘values’ back to reasonable levels is intrinsically a good thing.

I’ve said £2 million because of the wide regional variation in house prices. A local variation index could be introduced to level it out, in which case a £1 million levy would best represent many areas outside the South East.

A progressive income tax with higher rates for larger incomes remains the best way of fairly raising revenue.

Political dynamite for us in the London area

£2M is a value which would tax a great many of the wealthy but would also mitigate somewhat against the argument that this tax will be applied to a large number of ‘average people’ who happen to live in expensive areas in the South East.

I tend to oppose it because if there is to be further property taxation we should start with LVT not this halfway house bugger’s muddle.

Support – as long as the tax can be “rolled over” to be paid on sale of the house and if the threshold is varied regionally or locally according to local house prices. A £1m house in Doncaster is a mansion, in Twickenham it’s a three-bed semi.

I’m afraid that property taxes like this are a gimmick. Like taxing windows or chimneys. Tax should be based on income and the ability to pay and not property.

I support extra bands in council tax – which is what this policy approximates – but with an immediate re-valuation of property. It is ridiculous to be basing one of the most unequal taxes in the country on 20-year-old prices, and even more ridiculous that someone in a mansion often pays the same as someone in an ordinary family home.

I’m not sure how this would work in practice? Why not a general land value tax? I’m not sure ‘mansion tax’ sends the right message either. The phrase seems to be based on envy, rather than on fairness.

Needs to take account on individual circumstances. Forcing people out of their homes is a bad idea.

I don’t understand the argument that some poor, penniless families in London just happen, by bad luck, to live in £2m+ homes and therefore the mansion tax is bad. If you live in a house worth £2m+ and are penniless then sell your house!

This should be set based on economic efficiency and by looking at the people living in the households and the money they already pay/whether their wealth is subject to any other tax. Taxes should not be set by what feels right, or what makes the best headline.

Only as a temp measure while Land Value Taxation is brought in

At the moment the government needs to get up to at least 0 on their year-by-year balance sheets. Therefore every little bit of tax on the rich will help. The mansion tax is potentially useful, but not as useful as other taxes, therefore I support but only for stupidly expensive houses (i.e. more than £5million)

  • Over 1,200 Lib Dem paid-up party members are registered with LibDemVoice.org. Some 570 responded to the latest survey, which was conducted between 31st January and 4th February.
  • Please note: we make no claims that the survey is fully representative of the Lib Dem membership as a whole. However, LibDemVoice.org’s surveys are the largest independent samples of the views of Lib Dem members across the country, and have in the past accurately predicted the winners of the contest for Party President, and the result of the conference decision to approve the Coalition agreement.
  • The full archive of our members’ surveys can be viewed at www.libdemvoice.org/category/ldv-members-poll
  • * Stephen Tall is Co-Editor of Liberal Democrat Voice, and editor of the 2013 publication, The Coalition and Beyond: Liberal Reforms for the Decade Ahead. He is also a Research Associate for the liberal think-tank CentreForum and writes at his own site, The Collected Stephen Tall.

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    21 Comments

    • It has to be £2m+, without any further discussion or confusion, as stated in the 2010 manifesto.

      The rotten Evening Standard newspaper has recently used the £1m figure in an article aimed at misinforming its readers and will carry on using it if we show any doubt whatsoever about where the threshold lies.

      In my area (West Hampstead in North West London), comparatively cramped three/four bedroom terraced houses go for very nearly £1m and this is pure poison electorally in what should be a very promising area for us as a party.

    • Richard Swales 14th Feb '12 - 9:35am

      Not clear on why someone with a 1.8 million home should pay but not someone with two 900K homes – only a week ago we were talking about how it was great that the second home council tax discount was being abolished. I would rather start it from a house value of zero and adjust other benefits, minimum wage, etc. to compensate. The idea about letting people pay after they sell the house is interesting, so if you have 5 years unpaid tax then the government should get 5 percent of the value of the house when it is sold – this is possible if you have a system starting from zero.
      LVT would be better but I think we have to remember that we don’t start with a blank slate and don’t have a majority in parliament. More council tax bands (or replacing them with a straight valuation) should be achievable. In the absence of another system, we should also set in place a regular process to keep council tax valuations up to date.

    • Matthew Huntbach 14th Feb '12 - 11:35am

      The trouble with Jock’s argument is that “LVT or nothing” will always end up with nothing. If it’s a hard fight to suggest a tiny tax on very high value properties, how on earth are we going o get any acceptance of a more radical tax not “based on ability to pay”?

      I am saddened by the great many London Liberal Democrats who go on about this being “electoral poison”? Is that what our party has come to, defending the privileged and not giving a toss for the rest? Can’t these people see that if fairly ordinary houses in London are selling for a million pounds that’s a huge problem for millions of Londoners? Can’t they see the misery caused by high housing costs? Don’t they care about the families living in poverty and misery in London because they can’t afford decent housing?

      And can’t they see that the biggest wrecking factor in our economy, why we are now in a mess, why we are having to cut services and welfare, is because of puffed-up houses prices resulting from owning a house being seen as the natural way of making money instead of anything involving real work and enterprise? People buying houses at inflated prices because they think the prices will be even more inflated in the future, and the money pouring out at the top end of the housing ladder paid for by misery and family breakdown at the bottom end as people are forced to borrow more than is sensible to get a roof over their heads is almost pure Ponzi.

      Putting a break on house price rises by making housing a less attractive investment will be of huge BENEFIT to millions of Londoners. But if we don’t care about them, we only care about those making a profit from their misery, what sort of a party are we?

      Clearly we need to set up a guarantee system whereby any such tax can be paid by equity withdrawal and no-one will actually lose their homes through it. Is the argument is about the poor heirs, what are they to do for housing? Well, they are in a lot better position having to pay a bit of tax to keep hold of the housing than those who have to find a million or two pounds in the first place to buy it.

    • Matthew Huntbach 14th Feb '12 - 11:41am


      In my area (West Hampstead in North West London), comparatively cramped three/four bedroom terraced houses go for very nearly £1m.

      Prices are about a third of that where I live in south-east London. Which still means that if mortgages are given at three times salary you need a salary of £100,000 to get one to buy a family house, and how many Londoners earn that much?

    • It’s important that there be no silly cliff-edge threshold. Fortunately, the planned conference tax motion says “Introducing a 1% annual levy on the value of the property that exceeds £2m for residential properties (uprated periodically for house price increases) with a deferral mechanism for those who may be asset-rich but income-poor”.

      That distinction might change where people think the threshold should be set, as well as how much money this will raise.

    • Richard Swales 14th Feb '12 - 1:17pm

      @Adam
      So the proposal is that the tax would be zero on a 2 million property, 10K per year on a 3 million property, 20K on a 4 million property and so on.
      While I don’t oppose it, it strikes me that this is a fairly weak proposal if we are serious about moving a significant share of taxation from income onto wealth.

    • The mansion tax may be popular but it is bad politics because we know it wouldn’t work (remember tuition fees?).

      I would be up for a levy on ALL property (if used to redistribute wealth to the most disadvantaged for example through citizens income) or some extra council tax bands. But there are real problems with the use of such a high cliff-edge threshold which will make the levy a real lottery and create a massive avoidance industry so that it will almost certainly raise less revenue than it costs to implement:

      a) an annual 1% levy is disproportionate in the context of current rental yields of just 2-3%, and if effective could significantly reduce property values and at the same time significantly increase the cost of renting in London. The current Council Tax level for the top Band H in most London boroughs, which roughly corresponds to £2m in today’s money, is less than 0.1%. So a proportionate levy would be 0.1% not 1%.

      b) because it is disproportionate and involves an arbitrary cliff-edge threshold of £2m without any obvious economic justification other than alienating a small proportion of the population, the levy is fairly easily avoided. For example, a wealthy couple in a so-called ‘mansion’ worth £4m can avoid the levy by separating and splitting the property into two and taking half each. (The 50% discount for living alone would mean they don’t even pay any more council tax.)

      c) the levy doesn’t work for multiple properties. A wealthy individual with a luxury flat in London (worth £2m), a small castle in Scotland (worth £2m), a cottage in the Lake District (worth £2m), a farmhouse in Devon (worth £2m) and a beach house in Sussex (worth £2m), as well as a yacht worth £10m, still pays ABSOLUTELY NOTHING.

      d) the levy takes no account of actual wealth or status. For example, a ‘hard-working family’ (to use the Tory spin) living in a terraced house in London, either renting (and therefore liable for any property taxes) or mortgaged to the eyeballs, perhaps in negative equity, cannot be described as wealthy, but would be treated in exactly the same way as an individual freeholder with no debts.

      e) the use of an arbitrary threshold without any underlying economic justification for a very high levy is intrusive and illiberal as it treats people differently depending on whether they live together or separately as individuals (see example (b) above and for example 10 friends who decide to club together and use their pension savings to buy a retirement home).

      f) politically the proposal is unfortunate, coming as it does before mayoral and assembly elections in London, which is the area most affected by the proposals; in addition, the use of a totemic threshold of £2m will be misunderstood, so that the Conservatives will be able to scare residents of ordinary terraced houses into thinking that they will have to pay £20,000 pa under the proposals when they actually pay very little. The proposal will also alienate some of our most longstanding supporters, for no good purpose since we know it is unworkable and will never be introduced.

    • Richard Swales 14th Feb '12 - 4:23pm

      @Paul K
      There isn’t a cliff edge threshold as I think most people define the term. That would be the case if we were proposing that you pay nothing on a 1.99 million property but 20K on a 2..00 million property. Most of the rest of the post I agree with (I would tax the full value, maybe phasing it in reaching 1 percent in a decade – as we have to remember that currently people have mortgages secured on the current values).

      If we are going to do a proper wealth tax (rather than just joining in with bashing millionaires, another public hate group) then we have to offer something in return. If we are going to increase wealth taxes then we can offer the public something in return, such as lower income taxes, lower VAT or more spending. Most politicians get the credit for offering the tax cut or the spending without taking the heat for saying how they are going to get the money. We are taking the heat for saying how we are going to get the money without getting any credit for saying how we are going to use it.

      If this is meant to be a wealth tax then can you offset the outstanding balance on your mortgage?

      Tuition fees didn’t exist until 1999. The total tax take in every year up to 1999 was lower than it is now. Abolishing fees would “work” if it were prioritised over other spending. The political problem with tuition fees (which by the way isn’t going to go away unless local parties are willing to deselect MPs and Cable is willing to move to the back benches) comes from the fact that about half the party pretended to voters that they were willing to prioritise it when they weren’t, thereby totally discrediting the honest half of the party.

    • “LDV asked: The ‘mansion tax’ would levy a 1% annual charge on properties above a certain value.”

      I wonder what the answers would have been if you’d explained it would only be 1% of the amount by which the value exceeded the threshold. It looks as though quite a large proportion of those who have commented above didn’t understand that.

    • Thanks to Richard and Geoffrey, for what it’s worth I am against the benefits cap and against tuition fees, but we need to get the benefits right in the first place, which means basing them on need not means. A proportionate LVT would pay for this unlike the mansions tax. I agree that phasing a 1% levy in would work better although I guess that means we upset more people immediately without raising the extra revenue!

    • Matthew Huntbach 15th Feb '12 - 9:58am

      Andrew Tennant

      For every seat the mansion tax proposals would lose us in London we’d more than make comparable gains in the counties outside it.

      But here you go – Londoners are being hugely damaged by the high cost housing, and yet you write as if this measure, which would be a small step to halting the semi-Ponzi growth of house prices, would be unpopular in London. I am not fool enough to suppose it would be instantly popular, because we know the right-wing press would write it up as they do anything financial which hits the top-end: make out it is an attack on the middle. But can’t we find a way of talking to young Londoners, Londoners who don’t live in big houses, Londoners who rent, Londoners who have to pay a big chunk of their income in income tax and yet can’t get on the money-machine home-ownership system which delivers tax-free dollops of cash to those who don’t need it? Isn’t it a measure of the failure of British politics that discussion on things like this is so skewed towards the interests of a small number if people at the top end of the wealth scale, while the much greater number of people who would benefit are ignored?

      Please note also (though actually I do agree with the idea of a much wider property tax – and I do take the point that making it just on land values is better) that houses selling at one million pound plus are not as common in London as might be supposed from the comments of some who are vocal on this. The “London” of the commentariat tends to be just the few places they go to – they are hardly aware of the less glamorous parts of London where the majority of London’s population live. The whole of south-east London where I live, for example, just does not feature at all on their mental maps, and across the whole of south-east London a million pound house IS a mansion, that’s not the price tag on an ordinary family house.

    • 1. Who is wealthier?
      A. Person with £5m house with a £4m mortgage = £1m net wealth
      Or
      B. Person with £2m house with no mortgage = £2m net wealth
      A pays the tax, not B…

      2. Who is wealthier?
      A. Person owns London house £2m and Country House £2m
      Or
      B. Person owns London house £4m
      B pays tax not A.

      3. Who is wealthier?
      A. House worth £5m, paid £2m,10 years ago
      B. House worth £5m, paid £6m last year

      4. What is wealth?
      £5m cash
      £5m shares
      £5m house

      5. What happens if a £4m house is in 2 names (partners) as opposed to 1 name? Neither partner is ‘wealthy’ iro of £2m ‘benchmark but ‘together’ they are? Contrast this with one individual who owns his/her £2m property in a sole name. They are identical but in the joint ownership version, the mansion tax is paid.
      6. What happens if the house is also a place of business eg B&B?
      7. What if the house is worth £0.5m – hardly a mansion – but the land is worth £4m?

      Finally, no sane homeowner with a property value of £2m would spend anything which might improve its value and thereby create a future tax for themselves at the next valuation. And anyone with a house valued >£2m will engineer a deterioration in their current house to reduce the value. People will turn lofts into attics, basements into storage rooms etc.

    • It is impractible and unfair as there are plenty of houses in London worth more than £2m with many on medium incomes………it is a disincetize to improve your house and create a huge amount of bureaucracy. I live in Twickemham and will definitely noy be voting for Lib Dems any more. I have a house worth just over £2m and am not a Russian Oligarch or banker …. In fact I am currently unemployed so what do I do ?

    • Some very interesting reading. My Father bought a plot of land in north London 50 years ago and built a house. It is now worth about 2.5m. This means absoutly nothing to him as he will live there the rest of his days. I am sure that he could not afford 20k a year extra tax. I hope that people in his position will be protected.

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