Owners of homes worth more than £2m should pay an annual "mansion tax" to help the poor, Labour leadership contender David Miliband said today.
The shadow foreign secretary said the levy would raise £1.7bn to restore housing benefit for the least well-off.
The proposal – outlined in an interview with the Evening Standard – appears designed to drive a wedge between the coalition partners, as well as appealing to Labour grassroots.
Business secretary, Vince Cable, put the idea in the Liberal Democrat general election manifesto – but it was lost during negotiations with the Tories. Under the plan, owners would have to pay a 1% levy on a property's value above £2m.
A home worth £3m would pay a minimum of £10,000 extra a year, while a home worth £4m would pay £20,000. Miliband said the money raised would allow Labour to reverse the coalition's proposals for slashing housing benefit costs by cutting the current rates paid on behalf of tenants.
"We've calculated that a mansion tax of 1% on homes of more than £2m would more than cover the money that they claim to be saving from housing benefit reforms," he said.
Fellow leadership contender Diane Abbott has also floated the idea of a mansion tax to restore the balance to cut the deficit from the 80:20 ratio of cuts to taxation introduced by the coalition government.
In an interview with the Guardian's Polly Toynbee recorded last week but published on today's website, Abbott said she would switch the ratio to 50:50 to affect so much of the axe falling on the public sector. Her measures would include reducing the threshold for the 50p rate of tax down from £150,000 to £100,000, introduce a financial transaction tax, double the banking tax, and introduce a "wealth tax" such as the Cable's mansion tax idea.
"I think there was something to be said for Vince Cable's mansion tax, even though people that live in nice houses in London might object to it", she said. "It would have the side effect of bearing down on the housing bubble – it would stop people buying and selling houses for gain. But I think you would be looking at assets more than income."
Abbott issued a broadside against Miliband, claiming he risked "buying" the leadership because of the level of funding raised for his campaign.
Donations published by the Electoral Commission on 8 July show the shadow foreign secretary had at that point raised £185,265 – six times more than the second largest set of donations, secured by Ed Balls.
In contrast, Abbott says she has raised just £1,700.
But the MP for Hackney North and Stoke Newington claimed Miliband has amassed £400,000 in "cold cash" to help his campaign.
"You do get very, very tired when you are facing those sorts of odds," said Abbott, who has previously attacked Miliband for having "old Blairite money".
Meanwhile, fellow leadership contender Ed Miliband revealed yesterday that he had recruited 1,300 potential campaign volunteers in 24 hours in an Obama-style two-way text message drive. His campaign team claimed the mobile marketing exercise was a first for British politics.
Miliband's team sent thousands of text messages to Labour party members through data supplied to all candidates by the party and instead of just sending a message, asked for a response. About half of the recipients replied, of whom 45% said they were supporting the former energy secretary.