Monday, 23 June 2014

Ed Balls, a slow learner (but stumbling vaguely in the right direction).

From Ed's guest article in yesterday's Evening Standard:

[The first ten or so paragraphs are the mix of obligatory meaningless politician's apple pie platitudes, O-level economics and hypocrisy, skip those, what's interesting is when he starts talking about the practicalities.]

... it is also why we have proposed a tax on properties worth more than £2 million. How can it be right that the foreign buyer last month of a £140 million flat in Westminster will pay just £26 a week in council tax — the same as the average-value property in that council area?

We would put the revenues from a tax on ultra-high-value properties to cutting income tax for 24 million working people on middle and lower incomes — including more than six million across London and the South-East — with a lower 10p starting rate of tax. This is part of our wider plan to tackle the cost-of-living crisis and balance the books more fairly in the next Parliament.

The couple of billion the tax would raise is not going to allow much tax cutting, and ten per cent band is more gimmicks, far better is a zero per cent band, i.e. a higher personal allowance, or getting rid of regressive taxes...

But I am clear that the mansion tax must be done in a fair way and follow three principles.

First, the tax must only apply on properties worth over £2 million and that limit must be raised each year. Instead of simply raising it in line with the overall rate of inflation it should be raised in line with average rises in house prices to ensure that more modest properties are not brought into the scope of the tax.

Why should it be raised at all? Nobody's forced to bid up house prices above £2 million, if people are prepared to pay £2 million or more for something 'modest' then good luck to them.

Second, there must be protections in place for people who do not have a high income but happen to live in an expensive property — for example because they are long-standing residents in areas that have seen dramatic rises in property values. We will look at a relief scheme or allowing those on modest incomes to defer payment until the property is sold. Labour will only support a mansion tax that is fair to those who are asset rich but cash poor.

Exactly, thereby defusing the 'Poor Widows In Mansions' bomb. Well done. It's not like we Land Value Taxers haven't been saying this for decades, but hey...

Third, the tax must be progressive so that those with properties worth tens of millions of pounds make a significantly bigger contribution than those in houses just above the limit.


But it must also be administratively simple. The original proposal by the Liberal Democrats for a one per cent annual charge on the value of the house above £2 million would require detailed valuations each year and fails that test.

I believe a better way would be to use a banded system, which avoids the need for detailed annual valuations. A banded system — £2-£5 million, £5-10 million, £10-20 million and over £20 million — already applies to the Government’s new tax on properties bought through companies.

Yup, the banding is a bit rough and ready, but it's in place and it works; it's administratively simple and everybody knows what they are letting themselves in for.

In fact, we know the Government has done detailed work on how a mansion tax would work. Ministers should publish it now so that we can have a proper debate on how to do this in a fair and proportionate way.

Exactly. The current government has actually introduced the a banded Mansion Tax for £2 million-plus homes not owned by named individuals as an experiment, which has worked a treat. Properly rich people just pay it out of petty cash without a murmur, it turns out that not many legit Poor Widows live in mansion owned by offshore trusts etc.

What poor old Ed overlooks it that they are going to add two new lower bands for £500,000 - £1 million and £1 million - £2 million. We could just call them Council Tax bands I, J, K, L, M and N, of course and have done with it, which would defuse the debate a bit.

He lets himself again at the end though:

Getting more houses built, cutting income tax for working people through a new 10p starting rate and making sure foreign buyers make a proper tax contribution to this country. This is how we tackle the housing crisis, back millions of Londoners and get the deficit down in a fairer way.

Building more houses achieves, in isolation, absolutely nothing.

A higher personal allowance, i.e. a bigger zero per cent band must always be better than a smaller zero-rate band and a ten per cent band.

Hooray to making 'foreign buyers' make a contribution, most other countries do this, for example Switzerland gives wealthy foreigner the option of paying Land Value Tax instead of income tax (which ironically, the Swiss lefties hate) and the UK gets away with charging wealthy residents who claim non-domicile status a flat charge of £30,000 or £50,000 per person per year; I'm sure they'd rather pay the Mansion Tax, however much it is, and be left in peace.

And there isn't a housing crisis as such, there's a concentration of land ownership crisis, and we know how to reverse that, we managed it between 1945 and the 1980s, but hey.