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Councillors in central London have begun polling residents on an optional “mansion tax” for the owners of properties worth more than £10m.
The City of Westminster charges the lowest rates council tax in the country. But councillors on the Conservative-controlled Westminster City Council are now encouraging the borough’s richest property owners to double the £1,376 a year they pay and generate as much as £2.75m for the local authority.
Nickie Aiken, the council’s leader, said the initiative is intended to “allow the well-off to voluntarily help those just about managing”.
The council insists it has been struck by the “apparent willingness” of its wealthier residents to pay more tax. But sceptics have suggested that people will be more willing to give money to charity, rather than local government.
Charles McDowell, an independent agent specialising in prime London properties, said his clients could be wary, particularly after recent rises in stamp duty. “Most of my clients would be happy to make a contribution but they would be worried it would be the thin end of the wedge,” he said.
But Ms Aiken defended the plan, saying: “This scheme might have its cynics, but I have spoken to very wealthy people who want to help the borough more. The voluntary scheme we are proposing is a vehicle for them to do just that.”
Tony Travers, a professor at the London School of Economics, described the move as a “sensible piece of politics”. “The spirit of the time is to see the significant wealth gained by property owners as a challenge,” he said.
Mr Travers added that he would be “amazed” if other councils, such as Islington, Kensington & Chelsea and Camden, did not follow suit, particularly as local authorities, rather than central government, are entitled to keep voluntary contributions.
Westminster will keep £51.8m of its council tax income this year, with £35.6m going to the Greater London Authority.
Westminster has targeted the owners of about 2,000 houses worth at least £10m, which represent the top 2 per cent of most-expensive properties in the area, for the voluntary extra tax. But the council has also tested support for its proposal by writing to a larger group of about 15,000 residents who currently pay the top rate of council tax.
The council said a favourable response would prompt it to petition the government for a new council tax band on “super prime” properties — the most valuable 2 to 5 per cent of properties in the borough — that would raise sufficient revenues to freeze council tax for everyone else.
Adam Corlett, senior economic analyst at the Resolution Foundation think-tank, said it was “good to hear that Westminster council hopes to raise some money in this way”.
But he added that the move was “yet another sign that central government needs to step up and comprehensively reform the outdated and unfair system of council tax for everyone in England”.
“The current system is hugely regressive, with the highest effective tax rates for those in the least valuable homes,” he said.
Fearing any move would be unpopular with voters, successive governments have ruled out any recalculation of English council tax bands, despite the widening gap between the cheapest and most expensive dwellings in the 25 years since the tax was introduced.