Nigel Wilson says plan for levy on \u00a32m homes is ‘poor economics’ that will reduce supply of property<\/p>\n
Ed Miliband’s mansion tax is \u201cpoor economics\u201d and will \u201cpunish\u201d families who have saved hard for a property, the head of one of Britain\u2019s biggest insurers has warned.
\nIn a blistering assessment of Labour\u2019s flagship tax policy, Nigel Wilson, the chief executive of Legal & General, said the party was \u201cpandering to the politics of envy\u201d by promising to impose a levy on homes worth more than \u00a32 million.
\nIt could exacerbate a housing shortage and make it even harder for young people to buy their first home. The mere threat of a mansion tax has already slowed the top end of the property market, and will result in fewer properties getting built, he said.
\nThe policy is unlikely to raise even a tenth of the \u00a31.2 billion that Labour says it could generate as home-owners are likely to find legitimate ways of avoiding it.
\nIt will \u201ccertainly come nowhere near\u201d raising enough money to fund the 30,000 extra nurses and midwives Mr Miliband hopes to employ, Mr Wilson said.<\/p>\n
Under Labour’s plans, the starting rate will be \u00a33,000 a year, and could be as much as \u00a330,000 a year for homes worth over \u00a33 million. The Liberal Democrats are making similar plans.
\nNick Paget-Brown, the leader of Kensington and Chelsea council, the area of the country with the highest number of homes defined as mansions, has warned the policy would drive out long-standing residents \u201cmaking way, no doubt, for some real billionaires\u201d.
\nA string of potential Labour candidates for the London mayoralty have disowned the plan, with around 90 per cent of the affected properties in the capital.
\nMr Wilson said the tax is \u201canti-London\u201d. Despite Ed Balls\u2019 promise to increase the \u00a32 million threshold in line with inflation at the top end of the market, Mr Wilson warned it would be \u201cexpedient\u201d for a Chancellor to lower that to \u00a31 million.
\nIt is \u201cunjust\u201d to those whose property values have increased seven-fold in under 20 years, he added.
\n\u201cThe political attractions of a Mansion Tax on houses worth over \u00a32 million are obvious: It\u2019s anti-\u2018Fat Cat\u2019, it\u2019s anti-London; and sends a message to those who can\u2019t afford housing: \u2018We\u2019re on your side\u2019.\u201d
\n\u201cThe problem is that pandering to the politics of envy almost always makes for poor economics.
\n\u201cPeople who choose to prioritise buying a home have typically made sacrifices to do so: fewer foreign holidays, meals out or other luxuries. Through no fault of their own, their prudence would be punished by a Mansion Tax.\u201d
\nUltimately, he warned, the \u201csoak-the-rich\u201d approach could result in a slowdown of the entire property market that would punish those on the bottom rung of the ladder.
\n\u201cA well-functioning housing market needs people to move. We\u2019re already seeing the threat of a mansion tax slowing down sales at the upper end of the market \u2013 and this has repercussions down the chain.
\n\u201cWhat may well happen is that fewer top-end houses get built, more homeowners stay put, and ultimately fewer opportunities exist for first-time buyers. \u201c
\nInstead, policy makers could raise far more in a fairer way by reforming the higher bands of council tax or imposing a flat rate on pension tax reliefs, Mr Wilson said in a statement published by the company.
\nLegal & General is listed on the FTSE 100 and trades in pensions, insurance, mortgages and investments. A Labour Party spokesman said the measure is a “fair” way of raising revenue for the NHS, and protections will be put in place to protect those with large assets but low incomes.
\nIt comes amid Labour in-fighting over the Rochester and Strood by-election, after sources said the party had given up on the contest in the hope that a Ukip victory will fatally wound David Cameron\u2019s leadership.
\nOne senior figure told the Mirror a win for Nigel Farage\u2019s party would be \u201cChristmas come early\u201d and send the Tories into \u201ctotal meltdown\u201d.
\nBut a member of the shadow Cabinet denounced any plan to give up on Rochester, saying Labour must “take the fight” to Ukip before it takes their seats. \u201cWe need to pop their balloon and take the momentum away.”<\/p>\n
<\/p>\n