The tax, originally proposed by Nick Clegg in 2009, was defeated by 63 votes last night as Lib Dems joined forces with Conservatives.
Shadow financial secretary Chris Leslie accused Lib Dems of performing a U-turn. "The Lib Dems have not only failed to support a straightforward motion calling for their flagship policy of a mansion tax, they actually voted against it," he said. But the Lib Dems accused Labour of “infantile” politics.
Treasury minister David Gauke said that Labour’s plans were “pathetic”, “insincere” and lacked “any sense of credibility”.
Last month, Labour leader Ed Milliband said a Labour government would re-introduce the 10p tax rate, funded by the “mansion tax".
Miliband made a speech promoting a “fairer tax system” under Labour to help “millions of working people”.
"We would tax houses worth over £2m and we would use the money to cut taxes for working people," he said. "We would put right the mistake made by Gordon Brown and the last Labour government.
"We would use the money raised by a mansion tax to reintroduce a lower 10p starting rate of tax, with the size of the band depending on the amount raised. This would benefit 25m basic rate taxpayers,” he added.