Ed Balls, (Shadow Chancellor) in his speech, (explaining the monetary policy of a future Labour government) said that additional substantial finance would be found and allocated to the National Health Service. One of the measures proposed is the introduction of a, “Mansion Tax” on homes worth more than £2million. Reaction has been mixed but on balance there is doubt the tax would result in the release of any measurable amount of new money.
There are many that would applaud the introduction of a mansion tax, but it would need to be modified in a number of areas so that cash poor, property rich owners, e.g. pensioners would not be punished for a house purchase made many years before in a now affluent area. Proposals are to defer tax collection in such cases until after death which would adversely impact upon inheritance benefits to be passed on to surviving family members.
Introduction would be made difficult since many owners, (assisted by estate agents and solicitors) would endeavor to find ways of reducing the sales value of their houses. Tax revenues would therefore, be difficult to identify and collect, possibly in the first 2 years of introduction and any measure of success might only be achieved through the establishment of a new government body payment of which would adversely impact on any net revenue. The roll back in property values under £2million would also add to the consequent depression in house values.
Net revenue from the tax, (95% of which would be gathered from homeowners in London and the South East of England) would be well below Labour Party projections, (most likely to be under £700Million). Transfer of finance to the National Health Service, would be put in place at the start of a new governments term of office. The Scottish National Health Service would benefit since £70Million would be given over to Scotland. A small re-distribution of wealth which, for the turmoil it is likely to bring with it is an exercise in futility.
I expect the Mansion tax will be, “kicked into touch” in favor of a UK wide property revaluation, since the last one was done over 25 years ago, well before the various property bubbles, crashes and subsequent increases occurred. The revaluation would increase the levels of, “Council Tax” substantially, but income generated, (which might be in excess of £15Billion would be spread evenly across the UK.