The remarks from Kate Barker – a former member of the monetary policy committee – ramp up the pressure to spell out details of how the proposed mansion tax will work.
She said: “The thing with introducing a mansion tax, particularly if it’s introduced at a reasonably high level, is that it is unexpected tax, and it would be capitalised into house prices today and therefore have quite a disruptive effect on the housing market.”
“It would mean that houses over £2m would decline in value according to the discounted view people have of the tax paid on them.”
Speaking to the Huffington Post she said: “It may be a bit difficult to feel terribly sorry about the effects of house prices as they have risen so rapidly. However, you should be reasonably careful about introducing a tax that would be very disruptive. I wouldn’t do the mansion tax myself.”
Labour sources suggested they were considering introducing three broad bands for the mansion tax, and will expect wealthy home owners to make their own assessment on their home to submit to the Inland Revenue. The bands are likely to be set at homes valued above £2m, £5m and £10m.
Labour sources said it would not be compulsory for homeowners to seek an external valuation of the home with a firm such as Countrywide. Typically property valuation for homes in the £2m plus region can cost around £1,400, according to leading property valuers.
Homeowners that incorrectly self- value their own home could be subject to penalties in the same way as an individual that incorrectly self assesses their income tax. The arrangement could lead to disputes between homeowners and the government about the valuation of individual properties.
Labour insisted it was confident that the tax will raise over £1.2bn. A party spokesman said the levy might be deferred if someone died and the house needed to be sold. It has also promised to raise the level of the Mansion Tax regularly so as to prevent house price inflation dragging more and more people into the net. Special measures for cash-poor inhabitants of expensive properties would also be envisaged.
It has been estimated that the levy will need to raise an average of £11,000 per home to hit the party’s £1.2bn target. The cash is being set aside for Labour’s Time to care fund, which is designed to produce another 40,000 health workers.
At one point Labour was looking to raise £5bn for its NHS package, and was going to include a sugar tax. But this was over-ruled by the shadow chancellor Ed Balls on the grounds that it would hit living standards of the poor.
Some of Labour’s pre-conference planning was hit by the distraction of fighting to save the union with Scotland leading to key figures distracted and important decisions deferred.
In 2010 the Liberal Democrats estimated that 70,000 properties would be affected and the total yield from the mansion tax would be £1.7bn a year, implying that the average charge would be over £24,000 per year.
The further detail came out as Labour tried to shore up the credibility of its policy announcements in the face of an attack by the Tories and Liberal Democrats.
The health secretary, Jeremy Hunt, and the deputy prime minister, Nick Clegg, said Labour’s plans to raise an extra £2.5bn for a time to care fund would be trivial, Hunt claimed he had raised health spending by more this year.
Clegg said Miliband had chosen to forget the deficit in his speech and claimed he had failed to apologise for wrecking the economy, adding that his solutions were trivial. Speaking on LBC he said
He said: “The answers provided by Labour were a ministerial pay cut the government had already implemented, an extension of the child benefit cut that they had previously said they would reverse and a very small additional dollop of money that no one in the NHS seriously thinks will solve the problems in the NHS.”
Cabinet Office minister Jon Ashworth insisted that Labour’s mansion tax was not a tax on family homes, as Grant Shapps had said.
He said: “It’s certainly not a tax on family homes as Grant would say. In Brookmans Park in Hertfordshire – Grant knows it well, he lives there – I’ve looked at the figures and in the last five years of the 133 houses sold, only three went for over £2m. So when Grant says it’s about family homes, the vast majority of family homes in the village he lives in don’t even go for £2m.”
He added Labour would have to “look at the details” of how many houses would be affected by its mansion tax and how the charge would be calculated.
“We think we can raise £1.2bn or so from it, that’s what we’ve scored in our figures ... We’re going to have to look at the details and we’ll probably have some sort of consultation on it if we get into government.
“This is what we’re going to have to work on when we get into government. He again urged the Office of Budget Responsibility to be allowed to check Labour’s spending plans something the chancellor has refused.”
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