New Labour think-tanks are considering how to tax further people’s housing wealth, says the centre for economics and business research (Cebr). But, the centre says, the Chancellor’s sums for taxing and spending may not add up because housing wealth is not spread evenly over the UK.

In London, one household in twenty is worth a million or more according to the centre's detailed research into the housing market, which shows how much housing wealth is being accumulated particularly as a result of the house price inflation since the mid-1990s.

The latest proposal, from the IPPR, is for an estate duty rate of 50% on estates above £763,000. In practice, because valuation is normally on the cautious side for estate duty purposes and because people tend to give away some of their wealth towards the end of their lives, this is unlikely to affect many who do not currently have net worth of over a million. So looking at the distribution of millionaires gives some idea of who might be affected by such a tax.

The Cebr's estimates suggest that there are now 425,000 millionaires in the UK. The latest official estimate from the Inland Revenue is 230,000 for 2001. The 64% jump in the price of the average house since 2001 will have pushed the number up substantially.

Of these, Cebr estimate that because of high house prices, 175,000 or 41% of these millionaires live in London, where they make up an astonishing 5.5% of all households. A further 90,000 live in the rest of the South East.

Other regions with significant numbers of millionaires include 32,000 in the South West and 29,000 in the East of England. There is a middle group comprised of the West Midlands (23,000); the North West (20,000); the East Midlands (15,000); and Yorkshire and Humberside (14,000). The parts of the UK with fewest millionaires are Scotland (12,000); Wales (9,000); the North East of England (7,000); and Northern Ireland (4,000).

What this means is that a 50% estate duty rate on estates over £763,000 will mainly affect London and the South of England. Whether this is ‘fair’ depends on one’s point of view, but it is worth noting that now, with mortgage interest relief abolished and high rates of stamp duty for housing transactions, the tax position for home owners is already very much less advantageous than it was a decade ago.