Why has Labour given up on the mansion tax?

To retain it - in whatever form and by whatever name - would be a symbol of the party's desire to address inequality

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The Independent Online

On the day of the Conservative Party’s Queen’s Speech, it seems pointless to lament what might have been. No one will be dusting off the Labour manifesto to check which of its promises were to be enacted in the first year of an Ed Miliband Parliament – promises that now seem so, well, last month.

Still, the haste with which elements of that manifesto are being disowned in the current Labour leadership contest should give pause for thought. Take the mansion tax. Here the Tory victory has had an immediate effect, to judge by new figures showing that the number of houses for sale valued at £2m or more has doubled in the past fortnight, as buyers no longer have the dreaded tax to fear. Great news for the upper end of the housing market. But it hardly undermines the rationale of Labour’s plan, which was to raise money while restoring a little equity to property taxation.

Yet of the Labour leadership candidates, Andy Burnham – while insisting he is not “saying it was necessarily completely the wrong thing” – has called it “symbolism” which played “to the politics of envy”. Mary Creagh was “uncomfortable” with it. Yvette Cooper wants it “reviewed”. And while Liz Kendall has not yet pronounced on the mansion tax, she seems likely to follow suit, as she is easily the most forward in her critique of the Miliband way.

The impression left by all this is that the mansion tax has come to symbolise an outdated leftism on Miliband’s part which helped to lose Labour the election. Odd, since it was also a prominent part of David Miliband’s pitch in his leadership campaign in 2010. It’s hard to know what exactly has changed since then to turn it into a quasi-Marxist shibboleth. Certainly, it generated a few urban myths. Some months before polling day, I paid a social visit to an expensive street in Putney, south-west London, and was startled to find its educated, well-informed residents convinced that they would be forced to pay at least £20,000 a year extra or more, rather than the (roughly) £3,000 a year Ed Balls’ proposal would have entailed (while protecting low-income occupants). This was based on the incorrect idea that the tax would be imposed on the whole worth of the properties rather than on the amount above £2m (rising steeply, of course, for the fabulously expensive properties elsewhere in the capital).

This suggests a campaign failure. The name, first of all, was a problem. Though the word “mansion” had appeal in areas with few properties that fit the bill – namely outside London and the South-east – it was less popular among Londoners unlikely to consider their £2m plus houses mansions. In electoral terms, it may have been better if Labour had followed the Lib Dems by pursuing a higher council tax band instead – though that would have been harder for Balls to convert into Treasury revenue destined for the NHS.

The upper bands of council tax have taken no account of the soaring rise in high-end house prices since its introduction in 1993. Does it make sense for the owner of a £2m plus five-bedroom house in Putney to be paying half as much – at £1,355 per year –as the owner of a £160,000 two-bedroom semi in Nottinghamshire? Or for the owner of a £12m house in Westminster to be paying only £26 per week in council tax? And so on. Critics of the “crude and short-termist” mansion tax (copyright Lord Mandelson) say that a wholesale council tax revaluation would be better. That’s true. Except that such a revaluation is one of those highly desirable processes which governments never embark on because of the wide range of all-too-vociferous losers it will throw up.

Of course the mansion tax wasn’t that important in a fiscal sense, since it would only have raised around £1.3bn. But to retain it – in whatever form and by whatever name – would be a small but powerful symbol of Labour’s determination to address inequality.

And while the mansion tax passes rapidly into history, the Queen’s Speech will contain a very different housing proposal.  Cameron’s Government is to offer housing association tenants the right to buy their properties – a move which could cost the taxpayer upwards of £5bn, and one that even the Confederation of British Industry has criticised for exacerbating the country’s housing crisis.

It is of course modelled on Margaret Thatcher’s original Right to Buy. This may have been her great domestic political coup – but it also had an unintended consequence, in that some of the homes sold off under it ended up in the hands of buy-to-let landlords, charging rents now subsidised by housing benefit.

The ever larger numbers excluded from home ownership – especially the young – is serious for all parties. But it’s far from clear that the new Right to Buy will bridge the yawning divide between the winners and losers in housing, a key driver of inequality in British society. Neither will the continuous enhancement of state protections afforded to those lucky enough to own a home already, whether by increasing inheritance tax thresholds, as the Cameron Government intends – or letting top-end property owners pay minimal council tax.

It doesn’t say much for Labour if, with five years to do it, the party can’t persuade the public of why this simply isn’t fair.

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