Mansion tax

FOR the Liberal Democrats, it has become imperative that they show voters they are fighting their corner within government. And one of the policies they are shouting loudest about, in the increasingly desperate hope that it might feature in George Osborne’s Budget, is the so-called mansion tax.

With the Conservatives keen to avoid the extensive property re-evaluation necessary to determine exactly which houses would fit into the category of “mansions” – not to mention dealing with the inevitable legal disputes that would follow – the idea was already looking unappealing to the Chancellor. Yet new research, by the Centre for Policy Studies, shows that this revenue-raising idea would actually be counter-productive.

Apart from the sheer injustice of the assumption that all those who live in valuable property must have a large amount of ready cash, this type of tax would also be complex and costly to initiate, while the amount raised might not be nearly enough as the Lib Dems fondly imagine.

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According to the CPS, a tax set at one per cent of the value of £2m-plus homes would bring in £1bn. Of course, this is not an insignificant amount, but at only 0.2 per cent of the total tax take, it is hardly the answer to Britain’s problems that its proponents claim. And it would undermine London, and other affluent areas, as leading business locations while penalising that sense of aspiration that is needed if the country is to return to sustainable growth.

The Lib Dems are not short of ideas. Indeed, their proposal to take low earners out of income tax is arguably a more coherent tax-cutting policy than any that Mr Osborne has suggested. If they want to be seen to be doing something, then, let them concentrate on those ideas that will encourage wealth creation rather than penalise it.