UK Politics

Labour's mansion tax plans 'crude' warns Mandelson

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Media captionLord Mandelson: 'Mansion tax is not the way to tax property'

Labour's proposed "mansion tax" on properties worth more than £2m is "crude" and "short-termist", ex-Cabinet minister Lord Mandelson has said.

He told BBC Two's Newsnight programme he did not like the idea of "clobbering people" and preferred a Lib Dem idea of adding new council tax bands.

"It will take longer to introduce, that's true, but it will be more effective and efficient," he said.

Labour said it was right to ask the rich to make a bigger contribution.

The mansion tax is one of Labour's main 2015 manifesto commitments, with the proceeds due to be used to fund the recruitment of 38,000 new GPs, nurses, midwives and other NHS professionals.

Several Labour candidates for Mayor of London in 2016 have expressed concerns that the steep rise in house prices in the English capital in recent years will see family homes become liable for the tax.

'Not efficient'

And Lord Mandelson, a leading Blairite who served as business secretary in the last Labour government, suggested it was not the best way to address problems of inequality and concentration of wealth among an increasingly small, international elite.

"We don't have an efficient way of taxing property in Britain," he said. "I don't happen to think the mansion tax is the right policy response to that, I think it's crude, I think it's short-termist.

"What we need is what I think the Liberal Democrats are proposing and that is the introduction of further bands that relate to different values of property within the council tax system. That's what I would like to see.

"It will take longer to introduce, that's true, but it will be more effective and efficient in the long term than just sort of clobbering people with a rather sort of crude, short-term mansion tax".

Under its plans, Labour has said most people who own homes worth between £2m and £3m will pay £250 a month in extra taxes while owners of homes worth "tens of millions" and second home owners would pay much higher rates.

'Wages falling'

It has said the tax would apply to fewer than 0.5% of homes in the UK, since the threshold for the tax will rise in line with average prices for high-value properties, not inflation.

Labour MP and London mayoral candidate Diane Abbott called for the proceeds of the mansion tax to be spent in the area where it is levied, in London's case on social housing.

The Lib Dems, who originally called for a mansion tax on £1m properties before the 2010 election, have since refined their plans and called for a review of council tax bands in place since the early 1990s, with new bands above £2m introduced.

The Conservatives have questioned Labour's estimate of how much a mansion tax would raise and pointed to its planned reform of stamp duty bands and previous increases in taxes on properties bought through corporate and off-shore vehicles.

Conservative chairman Grant Shapps said: "With Mandelson joining the chorus of Labour voices opposed to Labour's homes tax, it is clearer than ever that Ed Miliband is a weak leader peddling a bad policy."

A Labour Party spokeswoman said the mansion tax would help fund 20,000 more nurses, 8,000 more GPs, 5,000 more home care workers and 3,000 more midwives.

She added: "When working people have seen their wages fall by £1,600 a year since 2010 it is right to ask those who have the most to make a bigger contribution."

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