Johnson vetoes mansion tax after backlash
BORIS JOHNSON has shelved plans to impose a “mansion tax” on owners of expensive homes, following a major backlash among Conservative MPs and grassroots.
The Prime Minister is understood to have “cooled” on the idea of including a new “high-value property tax” in next month’s budget, having previously discussed the proposals with Sajid Javid, who quit as Chancellor last week.
The Sunday Telegraph can disclose that the Treasury had also wanted to announce a nationwide revaluation of homes, which would have left millions of families with higher council tax bills.
Both policies are now “highly unlikely” to feature in the budget due to be delivered by Rishi Sunak, Mr Javid’s successor, a Government source told this newspaper. Mr Johnson and Mr Javid are both understood to have backed away from the proposal for a “recurring” wealth tax after The Telegraph’s disclosure of the plan last week sparked fury among senior Tories.
In a sign of the strength of opposition to the proposals, we can reveal that Sir Graham Brady, the chairman of the influential 1922 committee of backbench Conservatives, warned Mr Javid about the “push-back” in the parliamentary party in a face-to-face meeting ahead of Thursday’s reshuffle.
The plans were put forward by the Treasury in a list of possible “revenue raisers” to help the Government stick to Mr Javid’s fiscal rules which could now be loosened, in a move likely to
lead to claims of the Conservatives breaching their manifesto. Options under discussion also included expanding the scope of inheritance tax to cover business assets and shares that are currently exempt from the levy.
It also emerged that Mr Javid was considering severe cuts to pension tax relief. Mr Javid quit his post after being told his entire team of advisers would be sacked and replaced with No10 appointees in a joint economic unit. He claimed “no self-respecting minister” could have accepted the terms he was offered. He was replaced by his deputy, Rishi Sunak. Some of Mr Javid’s allies have claimed that the mansion tax proposal was backed by Dominic Cummings, Mr Johnson’s chief adviser.
Mr Javid clashed with No10 over pressure to relax his fiscal rules, which were set out in the Conservatives’ election manifesto to restrict spending and borrowing levels. He is also believed to have resisted Mr Johnson’s plans to increase the speed at which the Government rolls out new restrictions on immigration, warning that the move could create a shortage of construction workers.
Sources involved in discussions with Mr Johnson and Mr Javid said that both men effectively ruled out the idea of a mansion tax following a backlash from MPs who warned of a tide of fury in their constituencies.
Writing in The Sunday Telegraph, Lord Lamont, the former chancellor, states: “Conservative supporters were horrified by the kite-flying of swingeing tax increases including a ‘ mansion tax’. The UK’s tax burden is already near a historically high level.”
He adds: “Let us hope that the new partnership [between Mr Johnson and Mr Sunak] works and that the new chancellor will find ways to make economies, ensure infrastructure projects are properly managed and keep spending under sufficiently tight control so that at least we avoid penal tax increases.”
John Redwood, the former trade secretary, had warned that a mansion tax could “destroy” optimism and growth. John O’Connell, chief executive of the TaxPayers’ Alliance, had said the proposal appeared to amount to a “misunderstanding of what the Tories’ new voters were looking for.”
Mr Sunak reminded ministers at Friday’s cabinet meeting that their departments needed to find 5 per cent savings so money could be spent elsewhere.
The proposals for a mansion tax and revaluation of homes were both being taken seriously by No10 and No11 until early last week. The revaluation would have involved a nationwide review of which properties fall into each council tax band.
David Cameron abandoned a similar exercise in 2010 after estimates that it would have left more than 7 million families in England paying an extra £320 year or more.
Last week, George Osborne, Mr Cameron’s chancellor, revealed that he had wanted to introduce “two new council tax bands for homes worth over £5million and £10million” – a move which was likely to have required such a revaluation.
Mr Javid is said to have indicated in multiple meetings early last week, including with Sir Graham, that he too had gone cold on the idea of the high value tax.
‘Let us hope that the new partnership will ensure projects are managed so we avoid penal tax increases’
Amid criticism by friends of Mr Javid about the treatment of the former chancellor on Thursday, one source close to the conversations said: “There is nothing unusual in tensions between No10 and No11 or the need for improvement in how teams work together in government. What is unusual is the Chancellor of the Exchequer being put in a room like that, with that kind of binary choice, and no option to find another path.”
The budget was due to be delivered on March 11 but it could now be delayed to give the new chancellor more time.