LibLink: Vince Cable: Smell the coffee, Boris. The Mansion Tax has slipped in already

Mansion Only - Some rights reserved by Gerg1967This story appears under the byline of a “Daily Mail Reporter” which is a bit odd, because I don’t think they’ve let any of them into the Cabinet yet, and certainly not any who oppose the Tories. The reference to “my Cabinet colleagues’ kind of gives the game away that it’s our Vince who has taken on Boris over the Mansion Tax. Now, there’s another debate I’d like to see alongside Nick vs Nigel. Vince vs Boris. One day, maybe..

Anyway,  Vince started by pointing out that action was taken in the Budget to tax corporate property buying:

One less publicised move was a crackdown on people using high-value property to make easy capital gains from property inflation and then dodge tax, hiding behind a corporate façade.

At a time when families are desperate for housing, thousands of luxury flats sit empty in tower blocks along the Thames. The Government is stopping this abuse by charging a penal rate of stamp duty and a charge on the property value – a mansion tax.

It’s not quite Vince’s Mansion Tax, but it’s something. Vince says he’s perplexed by Boris’ opposition and goes on to outline the unfairness of the current system:

The key issue is unfairness. We have a system of property tax – council tax – which was cobbled together in a hurry two decades ago to replace the hated poll tax.

It is based on property values that are now hopelessly out of date; and politicians of all parties have baulked at a revaluation, which would create a lot of losers as well as winners.

Also council tax does not distinguish between modest family houses and mansions which, these days, in London includes homes worth hundreds of millions of pounds. In my constituency of Twickenham in South West London, Band H properties, which include many traditional 1930s semis worth perhaps £750,000, pay around £3,170; but the owner of a £100 million mansion in Westminster pays about £1,350.

That is not the only unfairness. Property inflation is generating big gainers and big losers, not on the basis of hard work or enterprise but simply by virtue of where people live.

He acknowledges that building more houses is needed but says that “fairer taxation would ease the pressures.” He goes on to outline the help that could be available for those comparatively few people who would find the Tax difficult to pay.

There are a few genuine cases. But this is not a new problem. It is encountered in the council tax system and under the Government’s spare room subsidy. It can be dealt with in the same way, through discretionary treatment of genuine hardship and, if necessary, by rolling up tax obligations against a future sale, as already happens with individuals and families which have large care bills.

Of course there will be some who need help but most wealthy people can help themselves: Freeing up cash by downsizing as many already do; renting out part of a large house; or using equity release.

He then responded to Boris’ attack on the full Mansion Tax  in pugnacious style:

I see that the Mayor has resorted to making up the facts. He claims the threshold is £1 million; it is £2 million and future governments could, and would, adjust for inflation. He claims that the tax on a £1 million house would be £10,000 a year. Actually it would be zero. (It would also be zero on a £2 million house). He then claims that the tax on a £2.5 million house – and how many Mail on Sunday readers live in a property of this value? – would be £25,000.

Actually one per cent of 500,000 is £5,000. I have long suspected that beneath the Mayor’s witty use of words was someone who can’t add up. He is a prime candidate for Mr Gove’s numeracy classes.

This Coalition Government has so far brought in only a limited mansion tax. Since I know many Conservatives agree with me, I have not given up hope of persuading my Cabinet colleagues to go further. We may yet get agreement to widen the mansion tax. That would demonstrate clearly that this Government is fair as well as competent.

You can read the whole article here.

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8 Comments

  • Vince is on a roll!

  • Tony Rowan-Wicks 25th Mar '14 - 9:22am

    It’s great to be hearing so much from Vince again. His wit is a joy to hear or read. And his reply to the recent budget was amazing. Watch the opposition try to appear against him but hide behind their order papers, laughing. When Vince is on form there is no-one better to listen to or laugh with.

  • charlie robertson 25th Mar '14 - 12:22pm

    Amazed at how anyone can still believe the simplistic/political analogy used by Mr Cable over the Mansion Tax. In fulham there are many people in three/four bedroom houses worth over £2m. A significant proportion have high mortgage – and have pretty moderate salaries – Is Vince really telling them to sell with the costs of doing so being so large. We also have a number of old age pensioners who have lost their partners and live off a pretty small pension (like most of us) – the houses are their homes and full of memories – I assume Vince is telling them to get out or find some bank willing to pay them the money to allow them to live in their house. Why not simply increase the Council charges for those in higher bands. This seems a remarkably stupid and unfair policy which will cause anger amongst many pensioners.

  • @Charlie Robertson
    “In fulham there are many people in three/four bedroom houses worth over £2m”

    According to Zoopla, apart from a few overpriced newbuilds, even the most expensive four bedroom house in Fulham comes in at £2.85m. That is the asking price. So the maximum they would pay is £8,500 a year. Probably more like £5,000 to £6,000 given the actual sale price. For someone who’s borrowed half the money to buy it, they’ll have to be on a minimum of around £360,000 a year. Are you really saying they can’t afford to pay the tax?

    Or just they don’t want to?

  • This is just typical of Boris.

    Even a friend of mine thought the threshold was £1m, probably because Boris and his friends at the Evening Standard keep on disseminating this false information.

  • charlie robertson
    Could you define what you describe as ” pretty moderate salaries ” ?
    It would help people to understand what you have said about Fulham residents who can afford a £2 million house on what you describe as “pretty moderate salaries”.

    The national average is less than £30k per year. Would you say that was pretty moderate?
    Or would you say twice the national average let’s say £60k per year? Is that pretty moderate in your terms?
    Or would the pretty moderate salary have to be £100k per year to get one of these £2 million houses?

  • charlie robertson 25th Mar '14 - 4:24pm

    Not sure how you use Zoopla but your statistics are utterly wrong . If you are in any doubt why don’t you ring up an estate agent and get a view of how many houses are priced over £2m. Who said they could borrow half in a mortgage – I don’t know anyone who can borrow that amount. My neighbour is a pensioner and received roughly £50k in a pension – her house (which she has owned for ever) is now worth £3m – she now has to find an extra 10k to pay the mansion tax – or as Vince says get equity release or sell. For those with families the situation is even worse given nursery and school fees – if you think that everyone with a house over £2m can afford this then you simply are deluded given these past years of recession. It is only those who really live in Mansions that can – but strangely I don’t call 3/4 bedroom houses in Fulham Mansions. Seems to me that it is just a tax to screw the hard working middle classes in London – especially those families on 60k a year. I used to be a Lib Dem fan but now I have the distinct impression they would be more comfortable with a socialist agenda – which seems remarkably like the hit the middle class and spend more on government – which is why we ended up in so much trouble in the first place.

  • BJ also claimed in The Telegraph, that people would start demolishing their home in order to avoid the MT.

    A quick calculation shows this would be utter madness.

    If I’m in a £2.1m property and want to avoid paying my £1000 per year MT liabilities, I would have to reduce the value of my home by £100,000.
    Given the bricks and mortar value of my £2m house is <£600,000, I'd be reducing the value of that by one sixth.
    That would involve a fair bit of demolition/neglect. No one in their right mind would ever contemplate such a thing to avoid £1000 per year. Not going to happen.

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