Friday, 13 September 2013

Labour's proposal for a Mansion Tax

The Shadow Frontbench have proposed introducing a mansion tax on houses worth over £2 million and to use the money raised to reintroduce a 10p starting rate of tax.[1]

There was an Opposition Day debate on this issue on 12th March 2013, in which the Labour's Frontbench’s motion (‘that this House believes that a mansion tax on properties worth over £2 million, to fund a tax cut for millions of people on middle and low incomes, should be part of a fair tax system; and calls on the Government to bring forward proposals for such a tax at the earliest opportunity’)[2] was defeated by 304 votes to 241.[3]

A Government motion, stating that ‘the part of the Coalition led by the Deputy Prime Minister also advocates a mansion tax on properties worth more than £2 million, as set out in his Party’s manifesto, and the part of the Coalition led by the Prime Minister does not advocate a mansion tax’ was approved by 301 votes to 246.[4]

The Labour's Frontbench then sought to introduce a mansion tax through the Finance Act 2013 which has now received Royal Assent. At Committee Stage of the Finance Act 2013 in April the Shadow Frontbench tabled an amendment that called for the Government to ‘review the possibility of bringing forward a mansion tax on properties worth over £2 million and publish a report, within six months of the passing of this Act, on how the revenue could be used to fund a tax cut for millions of people on middle and low incomes as part of a fair tax system’.[5]

The Labour's Frontbench stated that ‘when the economy is flatlining and tax rates are rising in so many other ways, particularly VAT, we must do more to help those 25 million basic rate taxpayers’.[6] The amendment was defeated by 304 votes to 234.[7]

At Report Stage of the Finance Act 2013 in July the Labour's Frontbench tabled an amendment that called for the Government to lay before Parliament ‘proposals for an income tax rate of 10% on a band of income above the personal allowance’ and stated that ‘the range of income to be covered by that 10% rate should be determined by the Exchequer yield from a mansion tax’. The Labour's Frontbench believe that ‘the full benefit of that 10% or 10p rate of income tax...should be targeted and focused on basic rate taxpayers’. The Shadow Frontbench believe this would ‘be welcomed across the country’ because ‘living standards are being squeezed, and for most people, life is getting a lot harder’ as ‘wages have fallen in real terms’.[8] This amendment was rejected by 226 votes to 281.[9]

On 4th September 2013 the Labour's Frontbench tabled an Opposition motion on living standards which called on the Government to ensure that the recovery is ‘strengthened, sustainable and its benefits fairly shared’ by ‘backing fair taxes by reintroducing a 10p rate of income tax, paid for by a mansion tax on houses worth over £2 million’.[10] The motion was rejected by 225 votes to 289.[11]

The Labour's Frontbench have stated that the size of the 10p rate band would depend on the amount raised from the mansion tax. The Labour's Frontbench feel a mansion tax is a clear signal about the priority they ‘attach to a fairer tax system and the living standards of working people’.[12] The 10p starting rate of tax was abolished by the previous Government in 2007.[13]

The Labour's Frontbench have cited estimates that tens of thousands of properties would be affected by the proposed mansion tax and are consulting on the best way to implement it. The Labour's Frontbench would seek to introduce a 10p tax rate and a mansion tax in Government, but will only set out tax and spending commitments at the next election.

The Labour's Frontbench have stated that estimates show that a mansion tax could raise around £2 billion, which could fund a 10p rate band of up to £1,000 and benefit all 25 million basic rate taxpayers by up to £100. The Labour's Frontbench will ‘ensure that the details of a mansion tax are right so people are not thrown out of their homes’, such as through deferring the charge for some people.

Chancellor George Osborne has ruled out introducing a ‘mansion tax’ in this Parliament, stating that ‘it's very costly to implement. It means you have to send inspectors round the country valuing all the homes, not just the homes worth over £2 million but those worth less’ and that ‘there aren't that many mansions in the country that can be taxed to pay for some tax cut for millions of people’.[14]

The Government also feel that a mansion tax ‘could hit asset-rich but potentially income-poor households’ and that it ‘would be administratively burdensome for HMRC to operate, not to mention intrusive for the person having their home inspected’.[15]

[1] http://www.labour.org.uk/rebuilding-britain-with-a-one-nation-economy-ed-miliband,2013-02-14
[2] HC deb 12/03/2013 c162
[3] Division 179, HC deb 12/03/2013 c215-217
[4] Division 180, HC deb 12/03/2013 c291-223
[5] HC debate, New Clause 5, 17/4/13, c332
[6] Chris Leslie MP, HC debate, 17/4/13, c342 and c343
[7] Division 2011, HC debate, 17/4/13, c364
[8] Chris Leslie MP, HC debate, 1/7/13, c646
[9] Division 38, HC debate, 1/7/13, c674
[10] Rachel Reeves MP, HC debate, 4/9/13, c334
[11] Division 74, HC debate, 4/9/13, c388
[12] http://www.labour.org.uk/rebuilding-britain-with-a-one-nation-economy-ed-miliband,2013-02-14
[13] http://news.bbc.co.uk/1/hi/uk_politics/6472999.stm
[14] See quote by George Osborne MP, The Daily Telegraph, 19/2/13
[15] Sajid Javid MP, HC debate, 17/4/13, c362