Towards the end of Wednesday’s mayor’s question time Boris Johnson teased Labour over its stance on the mansion tax. The party’s leader in Scotland, Jim Murphy, has famously wooed nationalist sentiment by depicting Ed Miliband’s promised monthly levy on homes worth more than £2m to help fund the health service as Scotland’s way to get more medics at filthy rich London’s expense. But here in the capital, Labour mayoral hopefuls Diane Abbott, Tessa Jowell, David Lammy, Christian Wolmar and Margaret Hodge have all expressed concerns. At City Hall, Johnson quoted from this catalogue of misgivings gleefully.
Meanwhile, in a safer part of the property tax jungle, Jowell, the bookies’ favourite to win the next mayoral election in 2016, has declared war on the “global super-rich” who “buy London homes like they are gold bars” and don’t live in them. “That’s a scandal and it’s time to get tough,” she wrote. “Absentee owners should live in the house they own or sell up - or face uncapped charges until they do.” This fighting talk was part of a wider diatribe against “unfairness” in London. “The only response is ‘one London, not two,’” concluded Jowell, adapting the “two cities” theme that carried Mayor DeBlasio to victory in New York.
The common thread running through all of the above is more to do with election strategy than with housing, inequality or tax. Let’s start with those mansion tax doubts. There are three overlapping elements. One might be called the Londonist objection. It holds that Miliband will be seen to be picking on the capital, where the vast majority of £2m mansions are, without London enjoying the bulk of the benefit. The second element is that the mansion tax will unfairly hit Londoners described as being asset-rich but cash-poor, such as people who bought a London home in a poor area decades ago for, by today’s standards, next to nothing and have seen its value soar, yet have never been high earners. The third is that many Londoners whose homes are worth far less than £2m may hope that their value will hit that mark someday - to them, the mansion tax could look like a heavy cloud on the horizon.
It may be tempting to suspect that Abbott, Jowell, Lammy and Hodge have made their worries known with the May 2016 mayoral election in mind rather than the coming May’s national poll - three are in safe seats while Jowell is stepping down - and winning City Hall requires reaching across party lines. It may seem no coincidence that the Evening Standard has been as strident in its opposition to the “tax on London” as Mayor Johnson has. However, the quartet are not alone among the capital’s Labour politicians in fretting about the policy, even if such anxieties are only about its name - can a three-bedroom terraced house in Camden “with potential” really be described as a “mansion”?
That said, high profile London Labourites are rallying round their leader. Miliband’s shadow London minister, Tooting MP Sadiq Khan, is leading the chorus, making him the sole mayoral runner - albeit a closet one so far - speaking in favour. “One of the biggest problems Londoners face is the vast gap between the rich and the poor in our city,” he says, “and the mansion tax will ensure that those with the broadest shoulders bear the biggest burden. London’s NHS is in meltdown and the mansion tax will pay for the extra doctors and nurses we desperately need.”
Khan is joined by Islington Council leader Richard Watts, whose manor may have more than 40% social housing but also contains more Mili-mansions than most. “The mansion tax is about fairness and I’m surprised at the level of opposition within the party to this progressive measure,” he observes. A fellow called Ken Livingstone has weighed in too. Writing at Labour List, he has denounced the “tax on London” accusation as “nonsense”, arguing that the same could be said of any redistributive measure. “When you see the Tories blustering that the mansion tax is anti-London, you know that what they don’t want you to hear is that it is pro-the majority, including the majority of Londoners.”
This last point seems confirmed by a YouGov poll conducted last August which, compellingly, found that 49% of Londoners support the mansion tax compared with only 18% who oppose it. Labour voters backed it overwhelmingly and even Conservatives were slightly more in favour than against. And shadow chancellor Ed Balls - with, I’m told, the assistance of Khan - has made refinements: the starting threshold would rise in line with prices, the “asset-rich, cash-poor” would be able to defer payment and those with homes worth more than £3m would pay progressively more than the £250 a month charged to those in the £2m-£3m bracket.
None of this, though, has either ended all Labour jitters or dissuaded Conservative candidates in tightly-contested London seats where property prices are high from seeking to stir up mansion tax fears. An extraordinary campaign leaflet resembling a council tax demand headed “mansion tax and council tax revaluation information” and claiming Miliband will take £15,000 a year from 5,000 local homes has been distributed on behalf of Tory candidate Simon Marcus in knife edge Hampstead and Kilburn. A Labour councillor in Barnet says Tories are pulling the same stroke in semi-marginal Finchley and Golders Green.
Jowell’s “fairness” initiative, by contrast, is unlikely to put her own side on edge or hand opponents an opportunity. Her article for the Independent, whilst urging Londoners to vote Labour in May, doesn’t mention the mansion tax, a flagship policy, at all. What it does do is align her mayoral bid with a populist narrative against global property investors who “buy to leave”.
In a Twitter conversation Jowell praised Camden Council’s policy of slapping an extra 50% council tax on “ghost homes”. She’d like to see it copied across the capital. She’s right that it’s a good policy. Camden says that since the introduction of this premium two years ago the number of properties in the borough eligible for the higher rate has fallen from 248 to 186, meaning they are now occupied, while those owners paying up have contributed about £110,000 to council funds.
However, not every empty home is empty because an international investor has left it so and not everyone thinks “buy to leave” or, indeed, international investment in London property as a whole are as significant an influence on London’s housing problems as some politicians and campaigners claim. Research by Savills published last year found that only 7% of transactions in Greater London during 2013-14 were made from other countries, pointing out that in a city where 37% of people were born in another land a lot of investing foreigners are also Londoners. Moreover, Savills found that the “vast majority” of these homes were let rather than left.
Empty homes in general rightly make people cross and also generate good news desk copy, which is why politicians and newspapers who denounce them cannot lose. But there are fewer overall than there were: 59,000 in 2013 compared with 85,000 in 2009 according to government figures (table 165). The mayor’s office says 5,000 of these have been brought back into use as a result of his policies and he has recently launched a further initiative in partnership with Big Issue Invest.
All this helps explain why Mayor Johnson has no problem agreeing that “empties” are bad and has himself publicly backed punitive council taxing of them. But even if every empty home were filled tomorrow it would only meet a small part of London’s mounting housing need. And even if we hoisted the premium higher the yield for local authorities would be relatively small.
Whatever their virtues, the mansion tax and measures against “buy to leave” excite emotions that are greater than their weight as policies. The sternest Labour criticism of the mansion tax I’ve heard is that it’s a short-term gimmick designed to build on Labour’s credibility on the NHS where there ought instead to be comprehensive programmes for both property tax reform and putting London’s health service right.
Christian Wolmar has succinctly described a council tax regime that would have a real impact: “a revaluation, more bands and a promise that the money will be retained locally to make up for the shortfall caused by the austerity programme.” As for housing supply, the affordability problem in London cannot be fully addressed without more public investment and more freedom for councils to borrow to build. Every Labour mayoral hopeful knows London needs these things. Their party leader surely knows it too. The sad reflection on our political and economic times is that he dare not offer them.
