Wednesday, 20 February 2013

Mansion Tax

Living in what is undoubtedly a 'mansion' I am naturally a little nervous now that Ed Milliband has adopted 'Baby Face' Clegg's idea of a Mansion Tax.  For a politician the attractions of such a tax are easy to see.  There are , apparently, some 70,000 houses in the UK worth over two million pounds (out of a total housing stock of some 15.0 million)  of these 70,000 houses some 70% of them are in London and - though no one has mentioned it- some 70% of those in London are owned by fat Arabs, greasy Frenchmen, or criminal Russian oligarchs  and -those Brits who do own houses in London worth over two million pounds - are almost exclusively bankers - and we all hate them anyway.  So actually - for a politician - it is a no brainer - very few votes -if any will be lost - while - at a tax rate of 1% on values it is estimated that £1.6 billion will be raised.

Unfortunately though - for politicians - things are not that simple. If you bung on a tax of 1% on the capital values of any home worth over £2.0 million then something is going to happen and that something is that homes worth £2.0 million or more are going to drop in value probably by around 20%. Why?  Because that's how economics works. Add on an annual cost to owning a property and the value will shrink -that is why -incidentally - house prices in  the USA look cheap to us in the UK  - the reason they are cheap is that property taxes are very high in the States and that is reflected in the price.

So the mansion tax will not raise anything like what Baby face and Ed Milliband think as something like 50% of the properties they hope to tax will immediately fall in value below the £2.0 million threshold.  Then - of course- in rural Britain someone will have to decide what is a mansion. That might sound silly until you think that most houses worth more than £2.0 million in the country come with land attached - take away the land and the house suddenly becomes worth much, much less. So a monster mansion like mine would be worth very little if I tried to sell it with two acres of garden.  Add in the fact that a lot of such properties are Grade 1 listed buildings and you immediately fire up the Heritage Lobby which - after the fluffy animal lobby- is probably the most feared by politicians.

So actually 'the Mansion Tax' is yet another example of 'sound bite' politics to which -sadly - all three party leaders are addicted.  Have a brain wave - try it on a 'focus group' - then make a speech and get acres of newsprint and TV coverage- later -of course -in the cold light of day - harsh realities come to the fore - but by then you are trapped by your sound bite.  that - of course -is how Cameron became entangled with Gay marriage - Overseas Aid - the Royal Succession - to name but three of his more asinine policies.


  1. The phrase 'instant gratification' comes to mind - isn't that what we are all addicted to? (especially the politicians, bankers, the public....the list goes on.

  2. Nice article, see I never would have thought of this. I'd like to hear your insights on the passing of Margaret Thatcher, being a 90s kid, I'm confused as to whether I should love her or hate her.

    Could you please help me consolidate my views into one definitive emotion?

  3. The Mansion Tax seems to be not a little like the long-abandoned Window Tax in the 18th and 19th c. Is there no new way for government to come up with revenues?