Balls confirms mansion tax plans

Owners of properties worth between £2-3 million would pay an extra £3,000 a year under Labour's mansion tax plans, Ed Balls has confirmed.

But "asset-rich cash-poor" home owners will be able to defer their bills until they sell or pass on their property, the shadow chancellor said.

Senior Labour figures have raised fears about the tax plans in recent weeks with Margaret Hodge, chairman of the powerful public accounts committee, warning it was "too crude to work properly" and former Labour cabinet minister Dame Tessa Jowell admitting she was "concerned" about the impact it could have on families whose homes have increased in value but their incomes are low.

Mr Balls insisted that "modest properties" would not be caught up in the tax and underlined how the threshold for paying the charge would rise in line with house prices, rather than inflation, so the number of homes affected did not increase.

In an article for the Evening Standard, he said the tax would be progressive, with owners of properties worth more than £10 million expected to pay substantially more than those at the lower end of the scale.

Home owners with incomes on basic rate tax, under £42,000 a year, would be allowed to defer the charge.

Mr Balls also reiterated that Labour is looking at targeting overseas owners of second homes in Britain in its plans to raise extra cash to plough into the National Health Service.

He wrote: "First, we will guarantee that more modest properties are not brought into the scope of the tax.

"The Tories have been spreading desperate smears that properties worth far less today - even £1 million - will end up paying. This is simply untrue."

He added: "Second, the tax will be administratively simple. A banded system means valuations will not be needed for most properties as it will be clear which band - for example £2 million-£3 million - the property falls into. As with the Government's new tax on properties bought through companies, owners will be able to submit a self-valuation to HMRC.

"Third, as we have always said, the tax will be progressive. We will ensure those owning properties worth £2-3 million will only pay an extra £250 a month through this new tax - the same as the average top band of council tax.

"Owners and investors in properties worth tens of millions of pounds should make a much bigger contribution. And we will look at asking overseas owners of second homes in the UK to make a larger contribution than people living in their only home."

He added: "We will protect the small minority of people who are asset-rich but cash-poor.

"Long-standing residents who now find themselves living in high-value homes but do not have an income high enough to pay the higher or top rate of income tax - in other words earn less than
£42,000 a year - will be guaranteed the right to defer the charge until the property changes hands."

Exchequer Secretary to the Treasury Priti Patel MP said: "It's barely a month old, yet Labour's NHS promise has completely unravelled. This panicked change in policy shows Ed Miliband's and Ed Balls's homes tax won't raise the money they say it will.

"You can't protect the NHS if you can't make the sums add up, forget about the deficit, and bankrupt the economy like Labour did last time.

"The only way to secure the future of our NHS is to stick to our long-term economic plan."

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