Mansion Taxes and Public Transport: A New Proposal to Fill Britain's £50bn Black Hole

Strategic Insights -

A report by think tank Labour Together has suggested that wealthy areas in Britain, particularly London, should be targeted with new taxes to fund public transport projects. The proposal, backed by Sir Keir Starmer's chief of staff, Morgan McSweeney, would see mayors like Sadiq Khan given new powers to tax valuable properties. The think tank also recommends a French-style law that allows city halls to impose an employment tax surcharge to finance new infrastructure. This comes as Chancellor Rachel Reeves considers a mansion tax on homes worth over £2m and an annual levy on properties valued at over £500,000.

Key Takeaways:

  • Labour Together, a think tank founded by Morgan McSweeney, recommends giving mayors like Sadiq Khan new powers to tax valuable properties and introduce a proportional tax on the excess value of homes above a certain threshold.
  • The think tank suggests that city halls should be able to levy small payroll taxes and have more flexibility to raise council tax to fund public transport projects.
  • The proposal aims to free up central government funding for infrastructure projects in poorer communities, allowing them to use general taxation for this purpose.
  • The report highlights the example of French cities, which use tax levies to fund public transport improvements, with the city of Paris applying a three per cent tax on employee salaries, generating around £6bn per year.
  • English mayors are lobbying Chancellor Rachel Reeves to allow them to introduce similar levies, such as a tourist tax and significant control over parking charges.
  • The think tank also recommends a windfall tax on developers and allowing big cities to set up development corporations to raise their own money on the markets for infrastructure improvements.

Statistics:

  • The proposed mansion tax would target homes worth over £2m.
  • An annual levy on properties valued at over £500,000 is another option being considered.
  • The think tank estimates that this would free up central government funding for infrastructure projects in poorer communities.
  • The city of Paris generates around £6bn per year from a three per cent tax on employee salaries.
  • The number of mayors lobbying Chancellor Reeves to allow them to introduce similar levies includes those from Liverpool, Manchester, London, Birmingham, and Leeds.

Sources:

  • Labour Together report, "More tax-raising powers that are hypothecated to paying for infrastructure"
  • Channel 4 News, "Rachel Reeves eyeing up mansion tax to plug £50bn black hole"
  • The Daily Telegraph, "Chancellor considers property taxes to fill £50bn shortfall in autumn Budget"
  • Financial Times, "UK mayors push for new powers to tax households and businesses"
  • The Guardian, "Paris' three per cent tax on employee salaries generates £6bn per year"