How mansion taxes will make us all poorer

There are few things most of us enjoy more than watching the value of our houses rocket. Every homeowner will have felt the pulse of excitement that comes from a mental calculation of how much has been added to their net worth by the latest bulletin from Rightmove or the Halifax. Yet fast forward two or three years and the same news could make our hearts sink — because by then a mansion tax could well have been introduced, and rising prices will take many middle-class owners over the threshold.

The mansion tax bandwagon has been rolling for several years, pushed enthusiastically by business secretary Vince Cable and his Lib Dem colleagues. The idea is that any home worth more than £2 million would be taxed at an annual rate of 1 per cent of its value above the threshold. In February, Labour leader Ed Miliband embraced the concept — and there’s a growing sense of inevitability about it. If Labour wins power in 2015, either on its own or in coalition with the Lib Dems, the tax looks certain to be imposed. If David Cameron needs to renew his existing coalition, it may be the price of a deal. Indeed, probably the only way it can be avoided is if the Tories win an outright majority. But stuck on 32-34 per cent in the polls, with Ukip splitting the right-wing vote, how likely is that?

In fact, expensive homes are one of the last things left to tax. Most British families have the bulk of the wealth tied up in their ‘primary residence’, which is exempt from capital gains tax. But for a state chronically short of cash — even in a recovery, our government is still running one of the world’s largest deficits — wealth is the only thing left to tax.