Rachel Reeves is doing her best to paralyse the housing market

We are still four weeks away from the Budget and already we have had virtually every tax rise floated before us by Treasury leaks. This is presumably in the hope of managing our expectations so that if we think the Budget is going to be really, really dreadful, we will be pathetically grateful to Reeves when it turns out merely to be fairly dreadful. Is the Chancellor really intending to impose an annual mansion tax of 0.1 per cent of the value of every home above £2 million? It plays to the Labour gallery alright; maybe the idea has even come from the undead at the heart of the cabinet: Ed Miliband, who came up with a similar idea in his previous life as Labour leader in 2015.   

This mansion tax is a pretty poor idea. There is a case for putting extra bands of council tax at the upper end, which would require a one-off valuation of all Band H properties. But if you are going to levy a wholly new and extra tax in the way it has been suggested, it would require all pricey homes to be valued every single year. I can imagine that would suit valuers but it is a pretty poor use of working time. And who would pay for the valuation? Are mansion owners going to have to bear the cost or is the HMRC going to do it for them?

Then there is the fairness aspect. The chief victims would not be the fabled billionaires with broad shoulders; it would be asset-rich, cash-poor pensioners who moved to what were pretty ordinary streets 40 or 50 years ago but who have seen the value of their homes soar thanks to the gentrification of the areas in which they live. Do these people really deserve to be hounded out of their homes by the taxman? They might have moderate incomes but would be treated by this tax as if they were the super-rich. The annual bill on homes worth in excess of £3 million would be over £10,000.

There would be another class of victims who are far from wealthy: families who have stretched themselves to the limit to afford a decent home large enough to bring up children. In their case they might have little in the way of assets, with a large mortgage to cancel out the value of their home, but they now face being landed in negative equity if prime house prices fall as a result of Reeves’ raid.

The prime London property market is already reported to be stagnant. That is the self-defeating problem of all Reeves’ Budget leaks. If homes are not selling because she has frightened homebuyers, she faces a crash in stamp duty and capital gains tax receipts. That, no doubt, will generate another black hole which Reeves will try to fill by jacking up taxes even more.

This year’s Budget is already lining up to be one of the most damaging in history before anything has been announced, for the simple reason that the constant floating of ideas has paralysed businesses and the housing market. Reeves may think she is preparing the ground so markets take Budget day in their stride, but really what she is doing is harming the economy before she has even got going. There is a lot to be said for the ‘purdah’ into which Chancellors used to go for weeks before the Budget. If Reeves could order her aides to keep their traps shut, we would be in a better place.