The Mansion Tax is back, albeit in slightly more expensive clothes. The original proposal levied a 0.5% charge on properties valued at over £1million, which was a determined effort at suicide. Following criticism from senior MPs, staring nervously at their irate constituents, Clegg and Cable have raised the threshold to £2million and the levy to 1% - a humiliating retreat, revealing the dangers of making policy on the hoof.
Raising the tax income threshold to £10,000 is an attractive and fair policy; theoretically, a limited super tax is a reasonable way to fund the threshold hike. But, Clegg and Cable’s proposal remains laden with problems. First, what was proposed initially as a one-off levy has become a permanent measure, which is pernicious, not fair. It remains unclear how houses will be valued and it does not follow that because you own a £2million house you can afford a charge that will cost at least £5,500 per year according to Clegg. Crucially, the tax is unlikely to raise the required £11bn lost by raising the tax threshold. The Lib Dems’ position is fragile enough without having their key tax plan unravel under scrutiny.