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Raising £1.2 billion for the NHS

The Labour Party’s website states that funds raised by the mansion tax will be put towards funding the

NHS. Specifically, Labour alleges that “the mansion tax will contribute £1.2 billion towards [the National

Health Service], helping to pay for thousands more doctors, nurses, midwives and homecare workers,

and to guarantee that patients in England will wait no longer than one week for cancer tests and results

by 2020.”

In a report published in November 2014, Cebr concluded that it is improbable that the mansion tax

would succeed in raising its target revenue of £1.2 billion. This finding was based on the estimate that in

order to raise the stated amount, homeowners whose properties are valued above £3 million will pay an

average of £24,000 in tax annually. It is unlikely that a tax of such magnitude would be enforceable.

Furthermore, if the mansion tax in its current form was implemented it would target a very limited

sector of home owners (approximately 0.3% of all UK homes are valued above £2 million), bringing into

question the fairness of the measure. Also, taxing only one bracket of property values is likely to create

market distortions such as price clustering.

Thus, the question arises of how else property taxation in the UK could be revised to raise the £1.2 billion

needed for the NHS. Section 3 of this report outlines the reasons that the existing system of council tax is

in need of reform. It also discusses a comprehensive set of reforms which in 2015-16 would add £4.7

billion to council tax receipts. However, even a far less extensive set of reforms would raise an added

£1.2 billion needed for the NHS. Implementing bands outlined i

n Table 5,

which entirely eliminate

payments for occupiers of lowest valued properties, would redistribute the council tax burden in a way

that would add the £1.2 billion necessary to council tax revenue.

© Centre for Economics and Business Research - Report Commissioned by Howard Cox for the FairHomeTax.UK Campaign