Fury at Reeves’s mansion tax raid on homes: Chancellor is accused of ‘incoherent’ class war 

Rachel Reeves’ class warfare plan to crush wealthy homeowners with a new mansion tax was defeated today by former Bank of England governor Mervyn King.

Baron King hit out after it was revealed Chancellor Rachel Reeves could impose a punitive tax on those with home values ​​of more than £2 million in next month’s Budget.

Under the proposal, revealed by the Mail on Sunday, owners of properties worth £2 million or more would face a fee of 1 per cent of the amount the property exceeds that value.

This means owners of a £3 million property will face a bill of £10,000 every year.

Speaking to Sky News on Sunday Morning, executive Trevor Phillips, who ran the bank between 2003 and 2013, said Britain needed more than plans ‘written on the back of the fag packet’.

‘This is not a coherent tax strategy and you can achieve a lot by thinking about this first,’ he said.

‘Property taxes are the interaction between stamp duty, council tax, capital gains tax, inheritance tax.

‘You can’t solve this problem by adding another wealth tax.’

Property experts condemned the policy as a ‘blunt and crude tool’ that would disrupt the housing market and disproportionately affect older households, while the Conservatives described it as class-based and counterproductive.

The plan is the latest sign that Ms Reeves is preparing a raft of measures to soak the rich in the Budget, possibly including a manifesto-busting increase in income tax and cuts to pensioners’ tax-free allowances, as she seeks to plug a £40bn hole in the public finances.

Rachel Reeves (pictured) could hit homeowners with a new mansion tax costing thousands of pounds a year as part of a class warfare plan being considered for next month’s Budget

It was previously reported that Ms Reeves could replace council tax with a property tax on homes of all values. An analysis of such a plan by the Institute for Fiscal Studies in 2020 showed that such a move would deeply impact wealthy southern homeowners

It was previously reported that Ms Reeves could replace council tax with a property tax on homes of all values.

Analysis of such a plan by the Institute for Fiscal Studies in 2020 showed that such a move would exploit wealthy homeowners in the south, increasing tax bills by up to 410 per cent, while cutting average bills in the north and Scotland.

Asked whether her major announcement next month would include higher taxes on the rich, Rachel Reeves said this month: ‘It will be part of the story.’ But he denied it would lead to an exodus of better-off Britons.

Budget preparations are being led by Treasurer Torsten Bell, who served as Ed Miliband’s policy director when, as party leader, he included a mansion tax in Labour’s 2015 general election manifesto.

Under the plan, people with homes worth between £2 million and £3 million would pay an extra £3,000 a year in tax, while homeowners and second home owners worth tens of millions would pay much higher rates.

The ‘1 per cent’ offer would be similar to the Liberal Democrats’ policy in the 2010 general election and could raise between £2bn and £3bn for the Exchequer.

Shadow Chancellor Mel Stride said: ‘Keir Starmer and Rachel Reeves promised not to raise taxes, now we know they plan to do just that. If Starmer and Reeves introduce a so-called mansion tax, they will punish greed and hit hard-working people. This is not justice, this is class war.

‘If Rachel Reeves had a backbone, she would rein in spending, including the welfare bill, instead of raising taxes again and chasing the wealth creators on whom our economy depends.

‘Nothing is safe under Labour; your job, your home, your savings or your retirement. ‘Rachel Reeves will tax your children’s future to pay for her own failure.’

The plans come as new private polls reveal a collapse in public confidence in the state of the economy.

The poll, conducted by former Conservative Party deputy leader Lord Ashcroft and shared with The Mail on Sunday, shows just 1 per cent of voters believe the economy will fare ‘very well’ next year. Almost three-quarters, or 73 percent, think they will perform poorly.

The exclusive survey (above), conducted by Lord Ashcroft and shared with The Mail on Sunday, reveals the collapse in public confidence in the state of the economy

Conservative leader Kemi Badenoch and Mr Stride are favored over Sir Keir Starmer and Ms Reeves to manage the economy by 28 per cent to 25 per cent.

The poll also finds that almost half of voters, 45 per cent, think Ms Reeves should not break Labor’s manifesto promises on tax.

As current council tax ranges are based on property values ​​in April 1991, the introduction of a mansion tax would require a complex and bureaucratic revaluation of properties.

Last week The Mail on Sunday revealed Ms Reeves was also considering introducing new council tax brackets for high-value properties.

Until last year Mr Bell was chief executive of the Resolution Foundation think tank, which is proposing a fundamental reform of property tax in the UK. The idea has been put forward to scrap council tax and replace it with a flat fee of 0.5 per cent of the property value each year.

The trust has also proposed dismantling the current inheritance tax system and replacing it with a new system that imposes tax on individual heirs, not estates, with a lifetime tax-free allowance of £125,000, a basic tax rate of 20 per cent on inheritance income up to £500,000 and a 30 per cent tax on income over £500,000.

Lucian Cook, head of housing research at estate agent Savills, said the mansion tax, which targets homes worth more than £2 million, was a ‘very blunt and crude tool’ that was unlikely to target the truly wealthy.

He said: ‘There’s a big difference between someone living in a £2 million mortgage-free house and someone with a large mortgage. So it doesn’t necessarily include net wealth.’

Torsten Bell (pictured) leads preparations for the new Budget; He was working alongside Ed Miliband when Labour’s 2015 general election manifesto included a mansion tax.

Under Bell’s 2015 plans, people whose homes are worth between £2 million and £3 million would pay an extra £3,000 a year in tax (Stock Image)

He added that it was ‘very difficult to get an accurate valuation’ of properties worth over £2 million because such homes ‘tend to be quite specific properties, so this tax would be expensive to impose as any valuation is likely to be controversial’.

Mr Cook also said ‘older retirement households’ who have seen their property rise in value over a long period of time may be hit with mansion tax but ‘may not have the means to pay for it’.

Neal Hudson, founder of housing market data company Residential Analysts, said the fact that a mansion tax was being considered meant the Treasury was probably ‘looking at it as a way of raising revenue’ and was ‘not particularly concerned about the efficiency or fairness of the property market’.

He said: ‘There is a danger that this could have quite negative effects. The higher end of the market has already stagnated over the last decade as it has been hit by high stamp duty rates.

‘Therefore, this will further negatively impact transactions. [The Treasury] ‘You might make more money from an ongoing levy, but suddenly you may find that a lot of properties are popping up priced at just under £2 million.’

He also predicted there would be ‘a lot of legal challenges to go through’ as ​​homeowners object to the valuation of their properties if they are within the tax threshold.

‘If this happens there will be a lot of unhappy estate agents in central London,’ added Hudson.

A Treasury spokesman said: ‘The Chancellor makes tax policy decisions at fiscal events. ‘We do not comment on speculation about future changes to tax policy.’

The man behind the plan

Torsten Bell, who effectively wrote Rachel Reeves’ Budget, only entered the House of Commons last year but is already being tipped as a future Chancellor.

The child of a Swedish mother who worked as a writer and policy analyst and a Scottish charity manager father, the 43-year-old was educated at The Judd School, a highly selective grammar school in Kent.

After studying philosophy, politics and economics at Oxford, Bell quickly progressed through the Labor Party’s advisory ranks to become Ed Miliband’s head of policy ahead of the 2015 election, writing a manifesto that included the original mansion tax.

He was part of the team behind the infamous ‘EdStone’, a tombstone-like inscription of election promises indelibly associated with Miliband’s election loss to David Cameron.

But as patron of the influential Left-wing think tank the Resolution Foundation, he advanced his radical economic ideas, including a wealth tax and changes to capital gains and inheritance tax.

Bell (pictured) effectively writes Reeves’ Budget and is rumored to be a future Chancellor