Rachel Reeves is facing a last-minute revolt on plans for a ‘mansion tax’ as MPs panic over a backlash from ‘aspirational’ voters.
The Chancellor effectively confirmed at a reception this week that a policy targeting high-value homes will be unveiled in the Budget.
However, the shape of the proposals is unclear – with claims that last-minute haggling is ongoing with Labour backbenchers.
London MPs are adamant the annual percentage levy should only apply to property valued at more than £2million.
That would hit fewer than 150,000 homes, while a £1.5million threshold could affect 275,000.
One Labour MP told the Financial Times: ‘There are a lot of talks taking place on this and we’ve been told that the levy will not kick in for homes costing £1.5million.
‘It will be higher than that.’
Another asked: ‘Do they literally want to lose every seat in London?’
Imposing a percentage levy on homes over a certain price would require new valuations to be done, seen as a major obstacle.
Meanwhile, government sources have been playing down fears that residents of the South East could face 10 per cent-plus council tax hikes.
There has been speculation that Ms Reeves will announce the axing of rules forcing local authorities to hold referendums before imposing big increases.
However, government sources insisted there are no changes to the current 4.99 per cent rule imminent.
A new ‘fairer’ funding settlement, expected to divert huge sums from London and the South East to ‘deprived’ parts of the Midlands and North, is being unveiled today.
Ministers are understood to be considering relaxing the council tax cap for a ‘very small’ number of central London authorities such as Westminster, which has some of the lowest council tax levels in the country.
Government sources suggested such councils are benefiting from outsized revenue streams, but stressed no final decisions have been taken and there is no announcement scheduled.
A swathe of councils have been warning they face bankruptcy amid spending pressures in areas like social care and SEND provision.
Earlier this year the Government gave six local authorities in England permission to raise council tax by up to 10 per cent.
Ms Reeves is gearing up for another brutal round of tax hikes as she scrambles to fill a hole in the public finances estimated at up to £40billion.
She is believed to be looking at a ‘Smorgasbord’ of smaller increases after performing a shambolic U-turn on plans to increase income tax last week.
Other so-called ‘mansion tax’ option thought have been on the table include doubling the top rates of council tax.
That would affect more than a million families. It would mean an eye-watering rise from £3,800 to £7,600 for residents of a band G household in England – and from £4,560 a year to £9,120 for those in band H.
Further possibilities floated before include adding extra council tax bands.
Any such measures would hammer London and the South East, where property prices are higher.
Critics have warned it would spark a crisis for pensioners on fixed incomes and families who have stretched themselves to afford a dream home.
