Mansion tax "could trigger huge crash in property prices": Owners" lobby group claim that "economically illiterate" levy is just politics of envy

By

Glen Owen

and Mark Hollingsworth

|

Warning: Property agent Trevor Abrahmsohn predicts £50,000 bills to the Treasury just to stay in your home

A powerful new lobbying group containing dozens of the country’s super-rich – and backed by a Tory MP – has been set up to thwart moves to introduce a mansion tax.

The secretive outfit hopes to overturn public support for the proposed levy on multi-million-pound homes by arguing that it is ‘economically illiterate’ and would trigger a devastating crash in property prices.

Chancellor George Osborne has repeatedly blocked efforts by the Lib Dems to impose the annual tax of 1 per cent on homes worth more than £2 million – but Labour leader Ed Miliband has vowed to introduce it if he comes to power in next year’s General Election.

London Mayor Boris Johnson has launched an outspoken attack on the proposed tax, describing it as ‘brutally unfair’ and saying it is ‘time that people woke up to the horror of what is being planned’.

In an article for today’s Mail on Sunday, Mr Johnson says: ‘Labour and the Lib Dems would have you believe that the people they want to hit are oligarchs and international bankers.

‘But the overwhelming majority of victims would be Britons who find themselves living in a house that has nudged over the threshold.

‘That includes people who currently have no idea of the risk they face.

‘It is hard to think of a tax that is more viciously unfair. It hits families who have worked hard and traded up the property ladder only to find themselves walloped for their success.’

Mr Johnson’s robust intervention is bound to lead to further speculation about his political ambitions at Westminster.

The new lobbying group, organised by a property mogul who operates in some of the capital’s most exclusive areas, was discreetly launched last November at a meeting in a West End restaurant attended by 65 of the richest people in the UK – including Russian oligarchs and multi-millionaires from the Middle East.

They were addressed by Tory MP Richard Harrington, who urged them to ‘donate to the Conservatives’ if they wanted to stop the levy.

Chancellor George Osborne has made repeated blocks to the Lib Dem motion but now Ed Miliband has pledged to carry it through

Despite Tory opposition, Lib Dem leader Nick Clegg has warned that the tax, which would affect about 60,000 homes, would be a ‘die-in-the-trench policy’ in any future coalition negotiations.

It would mean that the owner of a £2.5 million house having to pay £25,000 a year to the Treasury just to stay in their home.

Mr Miliband’s support means that only a Conservative majority at the Election is now likely to prevent it being introduced.

Last night, Mr Harrington, the Tory MP for Watford and a shareholder in a property development company, said: ‘I am all for everyone paying their fair share to help the economy, but this is not the right way to go about it.’

Mr Harrington’s £3.5 million house in Hampstead, North London, would result in him having to pay £35,000 annually.

Trevor Abrahmsohn, the luxury property agent who has set up the group, predicted that the tax would cause owners to sell their homes en masse.

Nick Clegg has told Cameron the tax will be his ‘die-in-the-trench policy’ in any future negotiations

‘Three out of four enquiries we get about homes above a certain value now concern the tax,’ he told The Mail on Sunday.

He claimed a typical salary for someone in a £5 million house is about £150,000 a year, leaving them less than £100,000 in take-home income – around half of which would have to be paid to the Treasury in tax.

‘There would be no alternative but for them to sell, which would cause a crash in property prices all the way down the scale. And not just in the capital, the ripple effects would be felt far and wide.’

He declined to identify the guests at the meeting or even the restaurant where they met.

Mr Abrahmsohn has sold more than £3 billion of property for clients including Britain’s richest man, Lakshmi Mittal.

He added: ‘We need to get the message across – this is not about rich people furthering their own interests.

‘It will raise a tiny amount of money in the scheme of things, perhaps £1 billion, but cause mayhem in the process. It is economically illiterate and class warfare. The politics of envy are back.’

Opponents of the tax also say the tax would require a new bureaucracy to value every home, and an expensive appeals procedure.

The construction trade would be hard hit, and foreign investors deterred from settling in the country.

Mr Abrahmsohn, 60, added: ‘The Lib Dems and Labour feel this primitive tax has been very well received amongst their core voters. As might be the erection of 20 crucifixes along the Mall with bankers firmly pinned to them, but that does not make it good policy’.

Comments (228)

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The comments below have been moderated in advance.

Zeit Geist,

Venus Project, Ukraine,

1 hour ago

Bubble must not burst. Must not burst. Must not. Keep repeating.

andy,

derby, UK,

1 hour ago

House prices are too high, these prices are unsustainable, and are damaging the economy! Does he really think the way forward is to put just about every working person in Britain into debt that they will never ever pay off?

When he talks about economically illiterate people he must be looking in the mirror!

cwjones,

london,

1 hour ago

Don’t forget Cable wanted to levy it on homes worth only £1m. Due to the property boom fuelled by bankers’ pay, those homes are now almost worth £2 million and will be caught yet again by the tax. Even a QC colleague says he will have to sell his home and he’s furious about it.

Weeklies22,

England, United Kingdom,

1 hour ago

Dear stokie, I pressed the red arrow not because of envy. Of course is great to do well in life. But when the Head or bosses pay peanuts, care less and treat the workforce as commodity – as objects or androids – I detest them.

cwjones,

london,

1 hour ago

It’s fine to levy higher Council Tax on homes that really are owned by fabulously wealthy people eg £5 million homes in London owned by overseas investors etc But the big mistake in this proposal is that it sucks in all the hundreds of thousands or even millions of people in London who live in very modest two up two down Victorian homes that have risen over the 30 years of their ownership to be around £2 million. You may say they are rich, but there are so very many of them on very modest incomes of £25,000 or less. Many live in my road. To force them to sell the place they’ve lived in for 30 years is cruel.. By all means levy it on a new property if they choose to sell, but this current proposal is crazy. It would have to be an idea of Clegg’s.

Montywarne,

UK,

1 hour ago

My nanna wants to know if she can pay with bricks because she only has a small pension and can’t pay with cash. She’s hoping she will be able to use the upstairs part of her house because she doesn’t go up there any more anyway. She doesn’t want to leave the home she’s lived in all her life to live in a high rise flat for the few years she has left.

caroltours,

london,

1 hour ago

So pay tax on what we earn, pay VAT when we do the house up and tax when we sell and buy somewhere else. Perhaps we should not have tried to improve our lives and stayed in social housing and denied someone who needed it the opportunity to have a home. We could have kept the money and had nice holidays in Brazil like Bob Crow and not be facing more taxes as our property, which is a family home and not a foreign investment, has risen in price due to our already taxed improvements and the area changing because of a new train service.

jtb,

home, United Kingdom,

1 hour ago

Thats a good thing no?

Gideons Underpants,

Warwick, United Kingdom,

1 hour ago

More ‘boogeyman’ scare stories from the upper classes. Just like the ‘bankers will leave if we don’t give them more money’ they have tried to play on the populous’ biggest fears with baseless scare stories. Just pay your fair share like we all have to.

titan,

faversham, United Kingdom,

2 hours ago

its only the rich that are bothered how do you think they made there money off the backs of those on minmum pay are we not all equal they have to remember some people were not given the same oppertunitys as them or come from stable back grounds I for one would love too see this introduced

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Mansion tax "could trigger huge crash in property prices": Owners" lobby group claim that "economically illiterate" levy is just politics of envy