Under Labour’s plans, the starting rate will be £3,000 a year, and could be
as much as £30,000 a year for homes worth over £3 million. The Liberal
Democrats are making similar plans.

Nick Paget-Brown, the leader of Kensington and Chelsea council, the area of
the country with the highest number of homes defined as mansions, has warned
the policy would drive out long-standing residents “making way, no doubt,
for some real billionaires”.

A string of potential Labour candidates for the London mayoralty have disowned
the plan, with around 90 per cent of the affected properties in the capital.

Mr Wilson said the tax is “anti-London”. Despite Ed Balls’ promise to increase
the £2 million threshold in line with inflation at the top end of the
market, Mr Wilson warned it would be “expedient” for a Chancellor to lower
that to £1 million.

It is “unjust” to those whose property values have increased seven-fold in
under 20 years, he added.

“The political attractions of a Mansion Tax on houses worth over £2 million
are obvious: It’s anti-‘Fat Cat’, it’s anti-London; and sends a message to
those who can’t afford housing: ‘We’re on your side’.”

“The problem is that pandering to the politics of envy almost always makes for
poor economics.

“People who choose to prioritise buying a home have typically made sacrifices
to do so: fewer foreign holidays, meals out or other luxuries. Through no
fault of their own, their prudence would be punished by a Mansion Tax.”

Ultimately, he warned, the “soak-the-rich” approach could result in a slowdown
of the entire property market that would punish those on the bottom rung of
the ladder.

“A well-functioning housing market needs people to move. We’re already seeing
the threat of a mansion tax slowing down sales at the upper end of the
market – and this has repercussions down the chain.

“What may well happen is that fewer top-end houses get built, more homeowners
stay put, and ultimately fewer opportunities exist for first-time buyers. “

Instead, policy makers could raise far more in a fairer way by reforming the
higher bands of council tax or imposing a flat rate on pension tax reliefs,
Mr Wilson said in a statement published by the company.

Legal General is listed on the FTSE 100 and trades in pensions, insurance,
mortgages and investments. A Labour Party spokesman said the measure is a
“fair” way of raising revenue for the NHS, and protections will be put in
place to protect those with large assets but low incomes.

It comes amid Labour in-fighting over the Rochester and Strood by-election,
after sources said the party had given up on the contest in the hope that a
Ukip victory will fatally wound David Cameron’s leadership.

One senior figure told the Mirror a win for Nigel Farage’s party would be
“Christmas come early” and send the Tories into “total meltdown”.

But a member of the shadow Cabinet denounced any plan to give up on Rochester,
saying Labour must “take the fight” to Ukip before it takes their seats. “We
need to pop their balloon and take the momentum away.”