This election will see me up all night until the last results are in. It will have me knocking on doors, handing out leaflets and driving old ladies to the polling stations. All this is a first for me — and for the many others I find myself doing it with. Why does this election galvanise like no other? One issue has made it up close and personal — Labour’s mansion tax. As one neighbour canvassing with me yesterday remarked, ‘It is landing us in the shit.’
We are all of a certain age. We range from the comfortably off to the quite poor. We have lived in our houses a long time and now we find our homes under threat.
A new Labour government will hold a budget in June and send out mansion tax demands shortly after. Houses valued between £2 million and £3 million will pay £3,000 a year. Over that is anyone’s guess. Shout, a campaign to stop the mansion tax, estimates the average at £12,000 a year. Last week a report for the Centre for Policy Studies put the likely tax rate at 1 per cent of value. In many roads in my area that is £50,000 a year and counting.
If you have to stay in London, selling up is not the obvious answer. Increased competition for houses under the mansion tax threshold is already pushing up prices. Shout estimates 100,000 homes could tip over that £2 million edge within the year. You go through all the trouble of downsizing only to find your modest flat has also has become a ‘mansion’. But I do not want to downsize. I do not want millions in the bank. I just want to stay in my home.
Then there is the whole question of value. This is a tax on pie in the sky. The only value a house has is how much someone will pay for it. If values go down, will owners get a rebate? If values increase, who is going to judge how and when new houses move into the tax? I and my fellow canvassers would fall on our knees in gratitude if our houses were suddenly valued at little more than we paid for them. Increased value has not translated into happiness or wealth. On the contrary, it has brought nothing but trouble.
It is also going to store up trouble for our children. One third of ‘mansions’ belong to pensioners and have been in the same hands for ten years or longer. Miliband promises that those on an income of £42,000 or less can roll over the tax until they sell or die. Some comfort. This leaves our children to pay 40 per cent inheritance tax on the house together with 20-odd years of mansion tax. Maybe we should just hand over the deeds to our homes here and now to the Treasury and be done with it.
And what kind of crazy incentive does this £42,000 cut-off create? If you earn £42,001, you are suddenly expected to find £30,000, £40,000, £50,000 in mansion tax? Out of taxed income? In fact it is not worthwhile earning unless your income jumps from £42,000 to a stratospheric £150,000. That, after paying income tax and a Mansion Tax of £50,000, leaves you with an income of roughly £40,000 a year again. We literally would not be able to afford to make money. And we certainly would not be able to spend it. That will add up, says Adam Memon, head of economic research at the Centre For Policy Studies, to less income tax, less VAT and less inheritance tax for the Treasury.
At a stroke the mansion tax makes us tenants of the state. The government, my new landlord, can jerk me around at will. He can raise the ‘rent’ and I will have no redress. Miliband declared last week that he will force private landlords to cap rents. Will mansion tax payers receive the same assurances and protection from the government?
I rail at the unfairness. For example, one woman friend will be liable for the mansion tax but her ex-husband, a landlord with ten flats, escapes because not one of them is valued at over £2 million.
And please do not press my emotional buttons about the NHS. I spent a year investigating the NHS for a think-tank report. I know what it needs to improve — a sum of money that will keep it going for just four days is not one of them.
But the thing that makes me most angry is that this does not address the scandal of the London property market and the lack of homes for my children’s generation. London has turned into an investment playground for the world’s super-rich. Why have we let this happen? Why, like other countries, are we not rationing how much property foreigners can own or charging them dearly for the privilege of doing so? When I am forced out, I will not be freeing up a much-needed home for a struggling young family. The last English people to buy a house in my road were my ex-husband and me in 1987. Only someone who does not pay UK income tax can afford London property now. The new owner of my home will be foreign and largely absent, the favourite concubine, perhaps, of an Azerbaijani warlord looking to invest for her old age. Lucky woman. I wish I could do the same.
Harriet Sergeant is a research fellow at the Centre for Policy Studies and author of Among the Hoods: My Year with a Teenage Gang.