Last week the Labour Party confirmed their plans for a new tax to hit hundreds of thousands of home owners, if Labour wins the election, or forms a coalition with the Liberal Democrats.
Local MP Greg Hands has condemned the measure and warned that the tax would hit more and more ordinary house and flat owners.
Speaking at the Labour Party Conference in Manchester, both Shadow Chancellor Ed Balls and Labour Leader Ed Miliband, announced plans to introduce a new tax on homes. Ed Balls told the conference that the measure would only hit houses worth more than £2million. However, Balls also said a Labour Government would be required to raise £2 billion each year from the new tax, which independent experts believe would lead to homes worth more than £1.25 million being included in the tax.
However, to achieve Labour’s goal of funding the annual NHS budget of £108 billion from the Homes Tax, Labour might seek to raise more than £2 billion from the tax. Therefore, the £2 million threshold would be likely to creep down in order to meet Labour’s revenue targets. It is unclear how low Labour would be willing to drop the threshold, but one of their London Mayor candidates, David Lammy MP, has talked about homes worth less than £1 million.
What is clear is that London would be disproportionally hit by the tax, as it has not only the highest property prices, but also the fastest rising. According to estate agents Knight Frank, there are approximately 110,000 £2million properties in the UK, 86.4per cent of which are located in London and the south east of England. Homes in London have risen in value by more than 300 per cent in the last twenty years, meaning a house bought for £500,000 in 1994 could be worth more than £2million. Previous research by Knight Frank suggested that the Homes Tax, as currently proposed, will raise approximately £1.3bn annually, before exemptions, considerably less than the £2 billion Labour say they require.
MP for Chelsea and Fulham, Greg Hands said: “This is not a Mansion Tax, it is a Homes Tax, and in particular it is a tax on London. Many of the properties that would be hit by this tax are ordinary family homes and flats. Many were bought years ago for modest prices, and due to house price inflation would now fall into this bracket. As prices continue to rise, more and more homes would be hit. Elderly people would find it impossible to pay amounts of up to £30,000 per annum to live in their family home where they might have lived 30 years or longer."
Greg added: “The real worry that came out of the Labour conference however is just how much money they are seeking to raise with their homes tax. They want two billion pounds a year, but some independent estimates say it will only raise just over half of that. We know that Labour Governments always overspend, and so they would have to raise more taxes accordingly. I can envisage this tax starting at £2million threshold but that would soon come down to hit even more people. That is why I am fighting these proposals and why people should be concerned about what a Labour Government could mean for their families."