Ed Balls, the shadow chancellor, has tried to reassure London homeowners that his plans for a new mansion tax will not hit most of them by saying the threshold could be higher than £2m if house prices continued rising.
The proposal, giving greater detail than announced by Balls at the party conference in September, will mean the number of properties liable for the tax will not increase.
Balls also pledged that those in the lowest band of the mansion tax, aimed at houses worth £2m to £5m, would only pay an extra £250 per month, or £3,000 a year, the same as the average top band of council tax.
In addition, people with incomes not large enough to pay the higher or top rates of tax (those earning less than £42,000 a year) will be guaranteed a right to defer the charge until the property changes hands.
Balls added that he would try to get overseas owners of second homes in the UK to make a larger contribution.
The shadow chancellor has acted after a backlash against the mansion tax among some wealthy Labour donors as well as prominent Labour MPs in London, such as Tessa Jowell.
The mansion tax proceeds will contribute to a “time to care” NHS fund worth £2.5bn a year, capable of funding an additional 20,000 nurses and 8,000 GPs by 2020.
Writing in the London Evening Standard, Balls said: “It cannot be fair that the average person pays 390 times more in council tax, as a percentage of the value of their property, than the billionaire buyer of a £140m penthouse in Hyde Park – who has seen its value rise by around £6m in the past few months alone.”
The mansion tax remains popular in polls but it has been the subject of a vocal attack by donors and some newspapers, notably the Times.
The Tories claimed Balls was in a panic. “These sudden changes follow growing anxiety in the Labour party that the tax won’t just hit the rich,” said a spokesperson.
Senior Labour figures had said that the new tax would mean some would have to move out of their family homes, and that it would be disastrous for pensioners.
“Serious questions have now been raised about how much revenue Labour would be able to raise from the tax,” the Tory spokesperson said.
“This is a further unravelling of the policy, which faced fierce criticism after it was revealed that no money would be raised until halfway through the next parliament, and the proposals for mass valuations of family homes was widely slammed as unworkable.”
Balls’s commitment means that those owning properties worth between £2m and £3m will pay only an extra £250 a month, or £3,000 a year though the new tax will mean that those with houses worth £3m or more may have to pay substantial sums if he is to meet his commitment that the mansion tax will raise £1.2bn. Some tax experts reckoned the tax might have to reach £10,000 a year for homes worth more than £3m.
