Jeremy Browne hits out at “arbitrary” mansion tax

Jeremy Browne - Minister for Crime PreventionIn today’s Times (£), Jeremy Browne slams the Lib Dem plans for a mansion tax:

Plans to introduce an “arbitrary” mansion tax on expensive homes will “undermine the fundamental principles of private ownership”, a former Lib Dem minister has warned.

In a scathing attack on the proposal, which is supported by Labour and the Lib Dems, Jeremy Browne said that imposing an annual charge on homes worth more than £2 million would permanently alter “the relationship between the state and the individual who owns a private possession”.

Jeremy goes on:

A person with a freehold property who has fully paid off the mortgage would still be liable for payments. That would apply even if their asset decreased in value but remained above the threshold. The £2 million threshold is arbitrary. The relationship between the state and the individual who owns a private possession would be altered in principle for everyone, with unknown consequences for future tax policies.

You can read the full article here.

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72 Comments

  • And this is different from the arbitrary ceiling on council tax bands how?

    Jeremy’s dive site great work for the party, but this is just making me think ‘don’t let the door hit you on the way out…’

  • Bill Le Breton 19th Nov '14 - 9:48am

    Further confirmation that politics is part of tHe entertainment business.

  • Goodbye Jeremy

  • Is Jeremy also arguing that it’s wrong to tax dividends or rental income or other income from assets on the grounds that assets are possessions?

    And is it similarly wrong to tax capital gains? Or should we eg be taxing increases in the value of companies but not short-term dividends?

    In short, is Jeremy saying we should not tax the gains that flow from wealth at all?

    The mansion tax may appear to be based not on a flow but on a stock (and I think that is Jeremy’s fundamental objection) but really it’s the same as taxing imputed rent. That is, if you spend £3m on a home and rent it out, we tax the income you get. If you spend £3m on shares in British companies, we tax the dividends you get. If you spend £3m on a home and live in it, you save tens of thousands in rent each year, and this should be taxed too unless you want to favour investment in a fairly fixed stock of real estate over investment in in productive assets.

  • Neil Sandison 19th Nov '14 - 10:21am

    What Jeremy seems to be forgetting is that the current council tax bands were introduced following the failure of the tories poll tax system. it was always been a sticking plaster solution and in no way reflects current property values.or the revenue requirements of local government .We need new bands that reflect more accurately current values.Call it a mansion tax to add additional bands but someone will have to pay for increased and growing costs for care for the elderly and climate change impacts to name but 2 challenges for local government.

  • If you spend £3m on a home and live in it, you save tens of thousands in rent each year, and this should be taxed too unless you want to favour investment in a fairly fixed stock of real estate over investment in in productive assets

    But a lot of people try to buy a house in order to not have to pay rent. Indeed, for many it’s a fundamental aspiration: to have their own bricks and mortar, rather than handing their money over to someone else.

    This sound a lot like you want to punish people for being successful in achieving that ambition.

    Taxes are necessary in order to raise revenue, but it seems rather unfair to use them to actively punish those who have been successful in life by demanding they pay tax on what they would be paying if they had not been so successful.

    And even if it’s not actively immoral to blatantly punish success, then it seems hard to see how it could be popular.

  • I don’t have much time for folk that speak up about the Mansion Tax but voted for the Bedroom Tax. I don’t think many people will/do.

  • Malcolm Todd 19th Nov '14 - 11:10am

    Dav — you seem to be saying that rich people want to use their richness to avoid having to pay for things and it’s not fair to tax them when they manage it. Exactly what is it fair to tax, then?

    You might answer with ‘income tax’. Well, back when income tax was introduced there were howls from the rich and much foaming about liberty and fundamental changes in the relationship between individuals and the state. All seems rather quaint now, doesn’t it?

  • Helen Tedcastle 19th Nov '14 - 11:12am

    I’m sure plenty of wealthy people in London agree with Browne. Not sure about the less well off though. I wonder why Browne feels the need to stand up for the wealthy – they are hardly in need of more champions in British politics.

  • you seem to be saying that rich people want to use their richness to avoid having to pay for things and it’s not fair to tax them when they manage it

    Actually what I was getting at was that your argument, ‘it’s okay to tax owned housing because otherwise income tax would be being paid on the rent so the state can recoup that’, applies equally to all houses, not just those owned by ‘the rich’.

    So logically, if your justification for the ‘mansion tax’ is the recoup the tax that is being avoided in avoiding rent, then you should be levying it on all owned houses, at a rate which is commensurate with the avoided rent.

    If you don’t do that, then you aren’t acting in a way logically consistent with your justification so we can assume that your justification is not your real justification.

    But it you do do it, then you are punishing anyone who managed to achieve the (common) ambition of owning their own home in order to not have to pay rent.

  • Gwynfor Tyley 19th Nov '14 - 11:48am

    Isn’t it time we just cut the charades about mansion tax and £2m.

    We need a wholesale restructure of council tax including revaluations of all homes with a progressive increase in the rate payable as property values rise.

    Much of the success of our civilisation rests on the states recognition of and support for property and ownership rights. On the whole, these rights come for free and it seems that is Browne’s view. Maybe it is about time that we said that there is a cost associated with the preservation of those rights.

  • Charles Rothwell 19th Nov '14 - 11:54am

    He is obviously on his way to being an “LD Carswell or Reckless” (although he will not be an MP and the Tories (and certainly not UKIP) (as long as any realistic distinction can still be made in that regard) likely to be his destination. Shame, as I enjoyed reading his small booklet on “Why vote Lib Dem” (even though it certainly had a whiff of libertarianism about it despite the emphasis in places on “social liberalism”) and also his book on globalisation, where his neolib credentials were even more on show (as they were in a recent “Daily Politics” show where he made it clear he was totally against Party policy on expanding Gatwick and was still a “Boris Island” advocate). In terms of the actual issue, it seems the mansion tax is the only way left to impose taxation on the mega-rich in these days when billions can be transferred within seconds.

  • Disastrous poll ratings, a disastrous byelection result due tomorrow. Ebola and bird flu.
    We thought things could not get much worse and then Murdoch’s media empire gives us a little something to remind us of Jeremy Browne.

  • Malcolm Todd 19th Nov '14 - 11:56am

    Dav

    First, explain to me how this is different in principle from Council Tax.
    Second, in what world does a “mansion tax” payable on houses worth over £2m equate to ” punishing anyone who managed to achieve the (common) ambition of owning their own home”?

    Incidentally, the rates (are you old enough to remember them?) were explicitly based on notional rental income. And it used to be the case that there was an income tax schedule for the notional rent received by home owners, which was the old justification for mortgage interest tax relief (which offset the notional income). So this isn’t some new, shocking, anti-aspirational imposition. It’s a (version of a) once perfectly normal idea.

  • David Faggiani 19th Nov '14 - 12:16pm
  • David Faggiani 19th Nov '14 - 12:18pm

    But it’s quite a contrast, with Clegg defending progressive property taxation in today’s news, whilst also not insulting Ms Klass. A good one for Clegg, I thought.

  • The income tax take is falling even as borrowing increases. At some point someone as to pay for it and it might as well be the asset wealthy. All this stuff about the mansion tax killing aspiration is a smokes created by people who think low pay, asset poverty and hard work are fine for everybody else. As Malcolm Todd points out what’s called the Mansion Tax is pretty much the same thing as the pre council tax rates system.

  • in what world does a “mansion tax” payable on houses worth over £2m equate to ” punishing anyone who managed to achieve the (common) ambition of owning their own home

    It’s not the policy, it’s the justification of it as ‘If you spend £3m on a home and live in it, you save tens of thousands in rent each year, and this should be taxed too ‘ which equates to punishing people who have achieved ownership of their own home.

    Because logically, it also applies to ‘if you spend £300,000 on a home and live in it, you save tens of thousands in rent each year, and this should be taxed too’.

    And therefore it is (spitefully) aimed at dragging down those who have managed to get themselves out of the rental market by denying them one of the major benefits of not being in the rental market.

    Attacking one particular justification for a policy is not the same as attacking the policy.

    I could propose scrapping Trident, and if questioned why, I could say that the space aliens who visited me told me that they would make sure that no nuclear weapons would ever fall on Britain, so we don’t need it.

    Demolishing that argument does not mean that Trident shouldn’t be scrapped (nor, conversely, that it should).

    I was pointing out that ‘we should have a mansion tax because people who have managed to afford to buy their own homes are avoiding paying rent and so we should reclaim from them the money they have had the temerity to avoid paying’ is a bad reason to have a mansion tax.

    That doesn’t mean there don’t exist good reasons to have a mansion tax.

    It just means that that reason is a bad one.

  • This has to be the oddest criticism of the “mansion tax” I have heard. I oppose the tax (as it will not just have bad outcomes but undermine the case for a proper Land Value Tax) but this seems to lack the legitimate criticisms, focusing on how “arbitrary” the threshold is or taxing property. Neither of which are unique to this bad policy.

    I used to think it was just the supporters of this policy who didn’t see the true weaknesses but it appears some of the opponents don’t either.

    It appears that neither side recognises that housing is a market consisting of people who respond to signals like the Mansion tax meaning the prices will move when it is implemented raising nothing like as much as it’s supports claim. However if a LVT was implemented correctly there would be fewer of the perverse incentives and would mean the price adjustment would gradually adjust to counter some of the worst fears about the tax.

  • Paul In Wokingham 19th Nov '14 - 12:42pm

    Mike Smithson reports that we are 1/33 at Ladbrokes to lose our deposit in tomorrow’s by-election. The only surprise is that they are offering any odds at all. Does Mr. Browne accept any personal responsibility for the disaster that he and his erstwhile colleagues have created by their failed efforts to reinvent the party?

    Oh and – obviously – I absolutely disagree with his assessment of this issue. We need more taxes on wealth (a mansion tax being a simple, practical and visible first step) as the growing divide between the ultra-rich and the rest is a real and growing threat to the health of our entire political system.

  • matt (Bristol) 19th Nov '14 - 1:04pm

    Hmm. I suggest Jeremy as a student of history take a long hard look at his idol Gladstone’s many proposals for complulsory tenant land purchase arrangements in Ireland in the 1880s, the very many differing past property taxes, and ask himself whether and how much the “fundamental principles of private ownership” were altered then, and how much we have all suffered by it, or whether it was so much water of the nation’s duck’s back in the fulness of time, and whether in raising this question at this time he is (by intent of design) on the side of the super-rich, big business (and the Tory party) or not?

  • John Critchley 19th Nov '14 - 1:07pm

    I’m not keen on the ‘mansion’ tax (which is really a London issue). We are a party which should try to be fair to everyone, in favour of success, and unfortunately the name smacks of envy.
    Are there are better ways to deal with it: updating council tax bands, and preferably on a local basis that reflects property prices variations? Capital gains tax to replace stamp duty – on all properties? It seems to me preferable to tax gains than purchase. Deal with empty properties?
    And all taxes need to be reviewed to ensure they are fair, progressive and meet the needs of the country.

    Are we trying to just bring in revenue from the wealthy or actually do something about the appalling housing costs in much of the UK which affect so many people? If the latter, will a ‘mansion tax’ actually help?

  • I agree with Dav regarding the principle of the matter and would slightly rephrase Adam’s original comment thus: “If you spend £1, or more, on a home and live in it, you save tens of thousands in rent each year, and this should be taxed too unless you want to favour investment in a fairly fixed stock of real estate over investment in in productive assets”. Hence if we are agreed to the principle on which liability is based then we revert the whole system of local taxation back to largely how it was pre-1990, because in part the Council Tax system has created the anomaly that enables such things as the Mansion Tax to even be contemplated.

    What is clear, from all the informed reports, without a significant lowering of the Mansion tax threshold (potentially sub £1m) the government won’t be collecting anything like the levels of monies the supporters of the Mansion Tax claim. I do ask whether all this effort and aggravation is really necessary when by simply doing what should of been done in 2010 and axing HS2, significantly more tax revenues become available to spend on projects that will have a greater impact before my children’s children start work.

  • Martin Land 19th Nov '14 - 2:16pm

    Is it part of the selection criteria for PPC’s that if elected they should go out of their way to find some manner in which they can embarrass the party?

    Understand Jeremy Browne is standing down next May; with comments like these I’m sure some Tory grandee will offer him a job.

  • I’m not sure it’s quite right to regard a home as an ‘asset’ anyway. After all, one needs to live somewhere. And one has to pay for its upkeep and, if it was purchased with a mortgage, one has to pay interest on the loan.

    In a lot of ways, a home is more like a balance-sheet liability than an asset.

  • Martin Land 19th Nov '14 - 2:22pm

    @ John Critchley

    A London problem? Really? A search on Rightmove will show you that 750 properties are currently on sale for more than £2,000,000 in Surrey alone!

  • David Evans 19th Nov '14 - 2:27pm

    Sorry Dav, but speaking as an accountant that is just rubbish. If you have a liability you will be prepared to pay to have it legally taken from you. Let me know if you have any friends or relations who are home owners who will be willing to pay me to do so. 🙂

  • Sorry Dav, but speaking as an accountant that is just rubbish. If you have a liability you will be prepared to pay to have it legally taken from you

    But if you have an asset you can dispose of it by selling it to someone to realise its value.

    You can’t do that with your home (without buying another one), because you have to live somewhere.

    I didn’t say it was exactly like a liability, but it’s not exactly like an asset either.

    A bit like if you owned a very valuable painting, which you weren’t allowed to ever sell, but which you still had to pay to have kept securely. That would be a de facto liability, wouldn’t it, not an asset (even though de jure it would show up as an asset when determining your net worth)?

  • Martin Land
    It is not just Tory Grandees that offer jobs. I am sure that there will be a well paid corner of the Murdoch Empire that will always have space for a former Liberal Democrat MP who is willing to rubbish the party at every conceivable opportunity.

  • (Note: I deliberately wrote ‘a home’, not ‘a house’. A house which is not your home is clearly and uncomplicatedly an asset, as you can sell it to realise its value, let it to gain income, etc etc. It’s specifically a home that is not a straightforward asset, not any house / building / piece of land which is owned).

  • Simon McGrath 19th Nov '14 - 2:44pm

    @John – you rubbish the Party at every opportunity though. You do nothing but whinge and carp. Is this really a plan to get a job as a Sun columinst ?

  • Malcolm Todd 19th Nov '14 - 2:50pm

    This is getting surreal, Dav. Of course you can sell your house if you own it. Even if it’s your home. The property market rather depends on this being true.
    As for the rather peculiar invention of “a very valuable painting, which you weren’t allowed to ever sell, but which you still had to pay to have kept securely” – well, if such a thing existed you could probably realise its value by renting it out to galleries or charging people to come and see it; and if you couldn’t do that, then I’m pretty sure it wouldn’t be counted an asset. Perhaps an accountant could comment on that. (Though it would have to be an accountant who could imagine themselves into a situation where there could be such a thing as a painting “which you weren’t allowed to ever sell”. I have to say that I think the invention of such a thing would involve a far greater transformation of our concepts of property rights than a mere property tax does.)

  • This is getting surreal, Dav. Of course you can sell your house if you own it. Even if it’s your home. The property market rather depends on this being true

    You can sell a particular house but you can’t sell your home.

    If you imagine you have a line on your balance sheet which says ‘Home’, then if you move house, that line stays. The address and the value may change, but you still own ‘a home’. You can’t sell ‘your home’.

    (Well, you could, I suppose, move into the rental sector; but then the line ‘a home’ gets transformed into ‘rent’ — which is explicitly a liability).

    Though it would have to be an accountant who could imagine themselves into a situation where there could be such a thing as a painting “which you weren’t allowed to ever sell”. I have to say that I think the invention of such a thing would involve a far greater transformation of our concepts of property rights than a mere property tax does

    Her Majesty the Queen owns quite a lot of paintings that she can never sell, but what surprises me more is that you appear not to have heard of the concept of a trustee.

  • Helen Tedcastle 19th Nov '14 - 3:00pm

    @ John Critchley
    ‘ I’m not keen on the ‘mansion’ tax (which is really a London issue). We are a party which should try to be fair to everyone, in favour of success, and unfortunately the name smacks of envy.’

    The mansion tax is not just a London issue – look around the south east. Second, you are right – we are a party which should be fair to everyone so trying to suggest that those who are rich are ‘successful’ only measures ‘success’ by the value of assets. No doubt some people are sitting in mansions because their forebears did rather well and mixed with the right people. Let’s now be fair to everyone and tax those with the most a bit more.

    For me, success means creating a fairer society from what is a grossly unequal one – that means redistribution of wealth from the rich to the poor. It’s not envy but common sense and fairness.

  • As Helen Tedcastle rightly says —
    “.. …success means creating a fairer society from what is a grossly unequal one – that means redistribution of wealth from the rich to the poor. It’s not envy but common sense and fairness.”

  • Malcolm Todd 19th Nov '14 - 3:25pm

    “The address and the value may change, but you still own ‘a home’. You can’t sell ‘your home’. ”
    Really?
    “The design and the value may change, but you still own ‘a shirt’. You can’t sell ‘your shirt’.
    Demonstrate that the first sentence makes one jot more sense than the second if you can.

    If you’re making “home” mean something mystical and permanent, something other than the bricks and mortar and land that constitute your actual, current home, then your objection melts away anyway, because nobody, in that case, is proposing to tax your “home”. Just your house.

    I’ll leave it at that, because I really don’t think this fencing with words is going to reach a conclusion.

  • “The design and the value may change, but you still own ‘a shirt’. You can’t sell ‘your shirt’.
    Demonstrate that the first sentence makes one jot more sense than the second if you can.

    You can sell all your shirts. You can’t sell your home because you need somewhere to live.

    This (that one’s home is not the same as other assets) is in fact already recognised in the tax system: it’s why you don’t pay capital gains tax on your home. Because it’s not the same as other assets. Did you forget capital gains tax like you forgot trust law?

    Other assets you choose to own in the hope they will go up in value, so it makes sense to tax you on any gains you thereby make; this is not true of your home.

    If you’re making “home” mean something mystical and permanent, something other than the bricks and mortar and land that constitute your actual, current home, then your objection melts away anyway, because nobody, in that case, is proposing to tax your “home”. Just your house.

    In fact the mansion tax is intended to target homes, not houses. If it were intended to target houses, it would operate the same way as Capital Gains Tax, ie, it would not apply to the primary residence.

  • Malcolm Todd 19th Nov '14 - 3:43pm

    I just can’t help myself, it seems.

    No, I didn’t forget capital gains tax. Capital gains tax should, of course, be levied on all houses, regardless of whether they are someone’s principal home. This would help to slow the massive house price inflation that continually bedevils this country. The fact that one tax is subject to an irrational exemption is not an argument for extending that irrationality to elsewhere in the system.

    “You can sell all your shirts. You can’t sell your home because you need somewhere to live.”
    Where I live, you need clothes to wear as well. And we pay tax on that, too.

  • No, I didn’t forget capital gains tax. Capital gains tax should, of course, be levied on all houses, regardless of whether they are someone’s principal home.

    That is own position, but the opposite (that homes should be treated differently) is neither illogical or irrational. Both position have arguments in their favour and arguments against.

    Where I live, you need clothes to wear as well. And we pay tax on that, too.

    I’m fairly sure you are only charged tax once on clothes when you buy them (through VAT or sales tax, depending on where you live), not just on possession of them. So equivalent to stamp duty, not a mansion tax.

    But I may be wrong. Where do you live, that levies a yearly tax on the clothes in your wardrobe that would be analogous to the mansion tax?

  • John Critchley 19th Nov '14 - 4:27pm

    I shouldn’t have referred to London specifically, rather as mainly a south east issue (London commuting distance), though I recognise that is may crop up elsewhere in the country. I’m obviously a bit out of touch with prices and am sometimes shocked so I could be totally wrong here. Housing is a necessity that has become an investment and Governments have not taken action to prevent that so we are where we are, and it’s wrong. Actually I would have thought that there is probably a correlation between expensive property and being considered successful in modern society. That’s unfortunate, I agree.

    As for wanting to increase taxation on the more wealthy: of course, but I don’t like this particular idea, and not only because it sounds like envy, which is bad. There are many ways to deal with revenue, a subject about which we would all no doubt have our own ideas. In my view inequality won’t be solved unless we take a broader view like getting business to pay proper wages, bring housing costs and wages more in line, and have a more progressive tax system which also deals with loopholes and exceptions and, as I said, a better council tax.

  • Above I described one rationale for the mansion tax – that of taxing imputed rent as with the the old rates system. That would probably actually require even higher rates, e.g. 45% (preferably plus NI) of perhaps 5% of the property’s value per year (=>2% and without the £2m band). It’s not about taxing ambition, Dav, but about not favouring investment in domestic property over every other investment.

    It could also be justified as a form of VAT, relating to Dav’s post above. That could mean a 20% tax on new homes (or at least the non-land value); but it’s better to capture the annual flow of value from properties given how long homes last and that stamp duty is quite damaging to geographic mobility.

    It could be recompense for not levying CGT on principal homes.

    Or it could be largely a land tax, extracting a fraction of rents of the UK’s most valuable areas for the benefit of all rather than just the landowners, and raising public revenue in as economically efficient a manner as possible.

    There’s a really interesting question about whether LVT alters the idea of private ownership of land, but really, which of the above fundamentally alters “the relationship between the state and the individual who owns a private possession”? Very disappointing from Jeremy Browne.

  • There’s a really interesting question about whether LVT alters the idea of private ownership of land, but really, which of the above fundamentally alters “the relationship between the state and the individual who owns a private possession”?

    The idea of a land value tax as a form of ‘use it or lose it’, ie, if you don’t put your land to the most economically productive use we will tax you to force you to hand it over to someone who will, implies that the owner does not in fact ‘own’ the land outright but is merely allowed title to it by the state, on condition that they do something useful with it.

    That is quite a big statement about ‘the relationship between the state and the individual who owns a private possession’.

    One might assume, generally, that if an individual owns a private possession then the state has no right at all over what they do with it (provided they don’t use it to do anything illegal).

    Specifically, the state has no right to force an individual who owns a private possession to make ‘best use’ of it. If an individual owns a private possession which could be valuable if put to economic use, but instead leaves it to go to rack and ruin, that is up to them and no business of the state’s. If they choose to forego possible income through laziness or spite then that is their prerogative as the owner of the property.

    To say that in fact the state can force an individual to make ‘best use’ of a possession, by, for instance, taxing it so that the individual must put it to economic use (or sell it to someone who will put it to economic use) or incur an ongoing yearly loss, is quite a profound statement about ownership rights; it is saying, in effect, that ownership rights are no absolute but are granted b the state on condition that the state likes the way they are used and that the state can interfere if it doesn’t think the possession is being used correctly.

    For instance, imagine if the government decided to tax artworks worth over £1 million, unless they were exhibited to the public. Would that not constitute a profound shift in notions of the relationship between state and invididual with regards private property?

  • It’s not about taxing ambition, Dav, but about not favouring investment in domestic property over every other investment

    But (for reasons I detailed above) domestic property for one’s own use is not an ‘investment’. It’s a place to live. One is not buying it in order to gain its appreciation in value, as one might buy gold or stock; one is buying it to have somewhere to spend one’s time and leave one’s stuff.

    It therefore makes sense to treat it different from things which are bought as investments (including domestic property which is bought to let out).

  • Malcolm Todd – “Capital gains tax should, of course, be levied on all houses, regardless of whether they are someone’s principal home. This would help to slow the massive house price inflation that continually bedevils this country.”

    CGT will have about the same effect on the prices of new build houses as VAT has on new car prices. But its effects on housing sales is likely to be dramatic, but then I could sell my house a bedroom at a time …

  • Dav

    Now I am about to say something that will sound like a defence of the MT which it is not as that is a terrible policy, but it does apply to the LVT too which is a much better policy.

    “To say that in fact the state can force an individual to make ‘best use’ of a possession, by, for instance, taxing it so that the individual must put it to economic use (or sell it to someone who will put it to economic use) or incur an ongoing yearly loss,”

    This is not about making best use. An LVT would not be a tax equivalent to the full annual available rent of a piece of land. It would be a small fraction of this the owner could continue to put the asset to a less than “best” use obtain a smaller return and still make use of the land but potentially generate more than enough to cover the tax.

    Your argument does apply that the owner could put it to no use and have to find the tax amount to retain full ownership. For example buying a field that your house over looks but doing nothing as you don’t want to look at land that is farmed and to stop development on it. The owner would still have to pay to maintain fences (or someone else could exercise vacant possession, stripping the owner of their property rights). This is a cost, as would the tax be.

    “is quite a profound statement about ownership rights;”

    Well it is but I would say no more so than income tax is over the rights of an individual to own their own labour.

    “it is saying, in effect, that ownership rights are no absolute but are granted b the state on condition that the state likes the way they are used and that the state can interfere if it doesn’t think the possession is being used correctly.”

    It does not it says the owner ship is dependent on payment of a tax, you can do whatever you want (within the law) you just have to pay taxes, how you raise the money to do that is not relevant.

    Your argument has more application to a MT because It imposes a significant cost if a house is worth £2.5m but if you break your house in to two separate properties one large house for the family and the garage with annex attached for granny/eldest child (costing £1.9m and £600k respectively) as the cliff edge nature creates perverse incentives (like Stamp Duty does in the transactional market).

    The point is that under a slowly introduced LVT the market for land would adjust the prices to reflect the tax costs. This is ignored by the supporters who estimate the revenue as being much higher than it will be and opponents claiming it is so much more unfair than it will be.

  • Tsar Nicolas 19th Nov '14 - 6:07pm

    I think that it is high time some restrictions on the number of houses that a person can own is restricted, and time to abolish buy-to-let mortgages.

    Unless some sort of action along these lines is considered, more people will be forced into rented homes while house price inflation accelerates and otherwise talented celebrities end up attacking political party leaders for attempting to reverse the slide to inequality in housing ownership.

  • I think that it is high time some restrictions on the number of houses that a person can own is restricted

    Now that really would change the relationship of the individual to the state vis-a-vis private property!

  • Surely the term “mansion tax” was dreamt up by our policy wonks because they knew it would generate headlines which would not have been the case if we’d advocated another couple of higher council tax bands, which is basically the same thing. Just what would Jeremy Browne’s problem with that be?

  • David Hollingsworth 19th Nov '14 - 6:36pm

    Jeremy Browne sounds just like a Tory perhaps that’s why he not standing as a Lib Dem anymore. Roll on the Mansion Tax .It has my total support. He a few people living in Central London Bourghs can’t afford to pay it I suggest they move to cheaper parts of London.

  • [If] a few people living in Central London Bourghs can’t afford to pay it I suggest they move to cheaper parts of London

    Wasn’t the fact that it might mean those living in expensive bits of London having to move cited as a horrible, terrible consequence of the bedroom tax?

    So which is it: is using the tax system to force people to move bad, or good?

  • Philip Rolle 19th Nov '14 - 7:50pm

    It is often forgotten that we already have a mansion tax. The annual tax on enveloped dwellings, applicable to property held within limited companies valued over £2m. On 1 April 2015 the threshold will come down to £1m and then again to £0.5m on 1 April 2016.

    This tax

  • Philip Rolle 19th Nov '14 - 8:01pm

    (continued )

    is misunderstood. The Times property editor wrote that it was to catch foreign buyers using companies to avoid tax. It doesn’t just do that. It catches UK resident owners who have limited companies that have property in for historic reasons. For example, advice years ago was often to have a limited company with property used for a trade inside it. Some people still have those companies, but having retired, have ceased to trade through them. They may live in the property themselves, and may have done so for decades – often, the house used to be the farmhouse.

    Those properties will usually be caught by the ATED charge. An exemption does not exist for them and the occupants ( often very elderly ) may well have to move out and let the property to avoid the charge.

    Not very impressive.

  • Thanks Phillip for the information on ATED, just had a look at HMRC’s website and spoke to an accounting friend who deals with the local farmers, we agree not only is this not widely known but the changes that will come in to effect on 1-April-2016 will have substantial impacts, particularly as many (farmers) will be living in farmhouses that haven’t been sold on the open market in generations.

    Interestingly, ATED is applied on a single dwelling basis not on the total value of dwellings held by a company and so won’t apply to many buy-to-let landlords who operate through an Ltd.

    Also HMRC are not clear whether ATED applies to foreign companies regardless of whether the ‘participators’ [HMRC term] are foreign nationals or not. So it is looking like those with family members oversea’s who are not UK nationals may suddenly find themselves the directors of a company holding property in the UK.

  • Phillip, thinking further, if the Mansion Tax is to be based on ATED, we can see that the revenues and responsibility for collection will go to HMRC, Local authorities won’t be involved (although they will still collect Council Tax) and hence won’t directly benefit from this tax. Also the existence of ATED will mean that revenue forecasts for a Mansion Tax will need to be downgraded (unless people are suggesting owners will be paying both taxes).

    I suppose the one thing in favour of the Mansion Tax (and ATED) is that it begins to bring property into line with earned income, namely making it subject to double taxation in this case: Council Tax and Mansion Tax rather than NI and Income tax…

  • I would agree that it is reasonable to reform Council Tax bands to raise some additional revenue from higher value properties. May I suggest a Royal Commission to look at ideas to ‘capture’ further tax revenue in a fair and sustainable way.

  • Philip Rolle 19th Nov '14 - 11:55pm

    Roland I guess it is still off the radar because the threshold is still £2m at the moment.

    There is an exemption for certain farmhouses as part of working farms and accommodation for ex farm workers. But that’s no use to those who no longer farm but continue to live in the farmhouse.

  • Gary, You want to put it off how long? 🙁

  • Philip, I agree the problems with farms really arise when the farmhouse has been legally separated from the working farm. Where a farm is still operated within a family a case can be made for the retired farmer (and/or their surviving spouse) still being active on the farm, if only as an advisor.

    A concern is that HMRC themselves may recommend a Mansion Tax, as a way to avoid ATED currently is to divest the dwelling from company ownership to named individual ownership/trusteeship. Hence HMRC may recommend the rapid (or backdated) implementation of a Mansion Tax as a way to close an ATED avoidance option.

  • Matthew Huntbach 20th Nov '14 - 10:45am

    The principle of property tax is that land comes with responsibility. Anyone with wealth to own a large amount of it has the responsibility to make productive use of that wealth to benefit society. That was the basis on which land ownership was established in this country and why land has been taxed for centuries. Under the rating system, abolished when the “poll tax” was brought in, taxation on property that would be liable to this “mansion tax” would have been much more. Hilaire Belloc (Liberal MP for Salford South 1906-1910, and author of “The Servile State”, a book Jeremy Browne might be expected from what he has said previously to have some sympathy with) put it as “It is the business of the wealthy man To give employment to the artisan”.

    Jeremy Brown claims to be an “authentic liberal” and to have politics which are the true descendants of 19th century Liberals, but here he shows how very untrue this is. The idea of Land Value Taxation was central to our political ancestors, we still sing that old song about it, support for it was written into the Liberal Party constitution. What Jeremy Browne has written here shows no sign of any sort of familiarity with what our political ancestors stood for on this issue. He reveals himself to be what we who have been criticising him over his “authentic liberal” claims have been saying all along – he is just stealing those words to give a false credence to the thoroughly new and thoroughly nasty ideology he stands for: defence of the super-rich against the rest.

    The “mansion tax” is just a very, very, timid proposal to bring back a little bit of property taxation to even the imbalance in wealth and hence imbalance in opportunity which comes from the way property ownership enables the wealthy to get wealthier to the cost of the poor and those squeezed out by high property taxes, no longer just the “poor” but in places like London most of us. Full Land Value Taxation would take it much further. I quite accept that LVT should have some sort of allowance so that it hits only after one has taken into account what are reasonable actual needs. So, needs here before it kicks in should be on the same basis as they are assessed for the “bedroom tax”, fair yes?

    Stuck-up celebs and the sort of posh types Jeremy Browne mixes with may suppose two million pounds is not much, but I live in a three bedroom house in London, and at the price it would currently sell for, two million pounds will buy it six times over. To suggest, as they do, that these stuck-up types have no choice but to live in their two million properties because that’s the norm is just to show how out of touch these people are, and is a deep insult to all the rest of us.

  • Edward Reach 20th Nov '14 - 2:17pm

    Matthew Huntbach – interestingly, Jeremy Browne mentioned the value of his property in an exchange on twitter a couple of days ago, it’s not that different to yours….

  • Tony Rowan-Wicks 20th Nov '14 - 3:29pm

    I think someone is ready to defect to another party – I don’t recognise this post as having LibDem principles.

  • Tony Rowan-Wicks 20th Nov '14 - 5:20pm

    Council tax has registered most of us into a single band [in London] and there should be a better device for tax – either adding more bands or taxing higher value properties more than at present. This is where the Mansion Tax has validity as governments are wary of re-assessing council tax bands – and anyway government doesn’t want local authorities to gain finance which central government wants for itself to balance its budget.

    There have been huge increases in property values in UK [especially in London] over the last few decades, all since the Council tax bands were drawn up. The idea was, at implementation, that more expensive properties would pay more Council tax – but in London the majority of properties are attaining the highest band. If I remember correctly, my house was in band D at the last implementation of bands but now is in H. I understand that H is the highest band of Council Tax and H includes all properties in London from £320,001 up to Buckingham Palace. I checked just now and far fewer properties are valued at less than £320,001 in London. So, Mr Browne should understand the full range of taxes of all kinds to see that more expensive properties need to pay more – otherwise we will see another means whereby lower income people [in smaller houses] will be paying the same as higher paid members of society.

    The Barnet Council tax bands:
    Property Total Going to Going to
    Band Values 2014 Barnet GLA [Boris]
    A up to 40,000 944.13 742.13 202.00
    B 40,001-52,000 1,101.49 865.82 235.67
    C 52,001-68,000 1,258.84 98951 269.33
    D 68,001-88,000 1,416.20 1,113.20 303.00
    E 88,001-120,000 1,730.91 1,360.58 370.33
    F 120,001-160,000 2,045.63 1,607.96 437.67
    G 160,001-320,000 2,360.33 1,855.33 505.00
    H over 320,001 2,832.40 2,226.40 606.00

  • Tony Rowan-Wicks 20th Nov '14 - 6:00pm

    Apologies, just found this site doesn’t do layout

  • R Uduwerage-Perera 21st Nov '14 - 6:58am

    Poor Jeremy pleads for the privileged and wealthy, yet forgets about the vulnerable!

  • Can’t believe Jeremy worked in government and has only just worked out that tax thresholds are arbitrary. It sounds terrible (and unlikely) having bought a house for £2.5m and then it being worth only £2m later; how will the rich manage?

  • AC Trussell 21st Nov '14 - 4:27pm

    It might bring the silly house prices down a bit. Sorry Jeremy, I think you are turning tory!

  • ChrisB – “It sounds terrible (and unlikely) having bought a house for £2.5m and then it being worth only £2m later”

    From the occasional look at the property pages, it isn’t so unlikely. The £2M+ bracket contains many ’boutique’ properties who’s appeal maybe limited and who’s value is, to a much larger extent than your ‘standard dwelling’ determined by the buyer. So it isn’t uncommon for properties to be sold for say £7M and then a few years later be sold again for £3M.

    This does raise questions about the Mansion Tax that may be due on a property, namely is it determined by purchase price or some fudged valuation… Whilst you may not be concerned about those who can afford a mortgage on a £2+M property, I would be concerned as the ATED scheme (which I suggest any Mansion Tax is likely to replicate) will from April 2016 cover properties worth £500,000+ and from recent government financial reports, income tax receipts are down (largely because tax thresholds have risen and more low paid jobs have been created) which means the next administration will be more cash strapped than previously forecast…

  • Andrew Colman 22nd Nov '14 - 10:55am

    Jeremy Browne displays a form of ignorance which is at the heart of Britain’s political problems. If you want to raise money and re invigourate the economy you have to tax those with money , fair or unfair.

    I personally favour (a) scrapping the council tax and replacing it with a local income tax
    (b) Introducing a national Land value tax which would be a % of the value of a property. There would be an allowance of about £250 (average house price) on fully occupied properties (ie not including 2nd homes unless they are permanently let) . I suggest the rate was about 1% between 250000 and 1 million, 2% between 1 and 5 Million, 3% 5-10 million 5% above £10 million. So someone in a £750000 house would pay 0.01 x 500000 = £5000 PA.

    Yes, the SE will be hit hardest, but I do not have a problem with that. The higher rates will encourage peole and business to move away from overheated London and the SE , a good thing in my view

    This would increase circulation of money and give poorer people a much greater chance to improve themselves. Good entrepreneurs will benefit too by tapping in to extra demand.

  • Stevan Rose 22nd Nov '14 - 3:24pm

    The cost of implementing a mansion tax, given the relatively small number of such properties, will inevitably cost more than it raises.

    Numerous border line disputes will cut into revenue even more.

    Cases will arise of this causing genuine hardship – the widow of a war hero living in a home she has occupied for 70 years and can’t afford to heat or repair, denied a discretionary pass. That kind of thing. It will end up discredited and unpopular. It only takes one case of unjust treatment.

    You know, from the bedroom tax, that all the safeguards that should be put in place won’t be.

    I can already think of ways to avoid paying it and if I can you can bet the people impacted will have thought of a few more.

    Property prices are highly volatile. Who decides the value. At some point you are going to have people in houses worth less than the band paying the tax, and people with houses worth more not paying.

    I’ve seen 2 up 2 down terrace houses in once unfashionable parts of London now selling for 7 digit numbers. People that bought when it was an unfashionable area will not have anticipated a retrospective tax on their modest home. That’s not fair. Neither is it fair to make them move.

    So, it raises little or even makes a loss, would be a nightmare to set up and administer, will create injustices, will tie up resources settling disputes, and will be relatively easy to circumvent. It’s an absolute nonsense with marginal envy gesture value. It would be easier and cost nothing to wallop up the stamp duty on houses worth £2m or more with transitional bands leading up to the maximum. The buyer pays not the incumbent resident. It’s difficult to avoid and isn’t a tax on retrospective decisions. Pitch it to raise the same money as you would like a mansion tax to make.

  • Philip Rolle 22nd Nov '14 - 3:30pm

    I have got on to my MP about ATED and asked her to get a response from a Treasury Minister. I’m also going to get the point in front of various other MPs in case one or two of them decide it is worth pursuing.

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