Page last updated at 16:42 GMT, Monday, 21 September 2009 17:42 UK

Lib Dem plan for 1m-property tax

Vince Cable on new tax plans

Lib Dem Treasury spokesman Vince Cable has set out plans to tax owners of £1m-plus homes - but he has been unable to confirm whether it would be permanent.

Mr Cable wants a 0.5% annual levy on the most expensive homes to raise £1bn to help low-paid workers.

Local authorities would collect the new property tax which would cost 250,000 people an average of £4,000 a year.

But Mr Cable said it may be phased out if the party succeeded in swapping council tax for a local income tax.

Asked on the BBC News Channel whether the £1m "mansion tax" would be temporary or permanent, Mr Cable said: "It depends on where, eventually, local tax goes."

The new charge of 0.5% would apply to the value of a property above £1m. So if a home was worth £1.5m the 0.5% tax would apply to £500,000 of it, meaning the owner will have to pay £2,500 a year. The extra tax on a £4m property would be £15,000 a year.

The Lib Dems say most of the 250,000 property-owners likely to be affected would be in the South-East of England.

But the party is facing questions about how it will work in practice after officials admitted they did not know whether the new tax would be based on Land Registry figures, based on house sales, or whether local authorities would have to carry out new valuations.

There is also a question mark over whether it would apply to the whole of the UK, as the party wants, because it would need to be approved by the Scottish Parliament and the Welsh Assembly could opt-out.

1M HOME TAX PROPOSAL
0.5% annual levy on homes worth more than £1m
About 250,000 people affected
Mostly in South-East of England
Property-owners would pay £4,000 a year on average
Exemption for those on low incomes
£1bn would be raised

Speaking on BBC Breakfast, Mr Cable said: "We're talking about this proposal to raise money, to cut taxes on people who are at the bottom end of the income scale or on average income.

"Our overall tax proposal is about lifting four million people - workers and pensioners - out of taxation and cutting taxes for people at the bottom end in a fair way."

Party leader Nick Clegg told the BBC he felt the mood had shifted over the past ten years: "I think people, even at the top end, now accept we need to try and rebalance things a bit so that everyone moves together - the whole of society moves together."

He said the reason for the new tax was "fairness" and rebalancing "one of the most unfair tax systems around".

"This is a small correction which I think will make a big difference for people who are really struggling to make ends meet," he said.

Party officials have stressed the new tax would be a "temporary" measure until it was able to implement its plans for a local income tax.

People on low incomes, who are currently receiving council tax benefit, would be exempt, although the party has stressed it does not believe there are many low income people living in million pound homes.

Revenue neutral

Lib Dem leaders have turned their fire on the Tories at their annual gathering in Bournemouth, arguing they cannot be trusted to tell the truth on spending and are posturing about planned cuts without being prepared to give details.

While saying he cannot rule out that the overall burden of tax will rise in the future, Mr Cable will say his latest measures are revenue neutral.

Lib Dem plan for ?1m-property tax

He has drawn up detailed proposals of their own for potential cuts, including scrapping Trident and other defence contracts, removing tax credits from higher earners, cutting NHS bureaucracy, freezing public sector pay and reforming public sector pensions.

In his keynote conference speech, Mr Cable told party members that efforts to reduce record peacetime levels of debt will not be "easy or popular" and that tax increases as well as spending cuts may be needed.

"It would be dishonest and unbelievable for me to say that taxes overall should never rise," he said. "But the Liberal Democrats' starting position is to aim for fairer not higher taxes."

The party says its pledge to raise basic income tax thresholds to £10,000, which it argues will lift four million people out of tax, will cost £16bn.

"Quite apart from the economics it just wrong that people on the minimum wage should be dragged into paying income tax," he told delegates, adding: "My priority would be to cut income tax for those on low and middle incomes."

The new charges on properties valued above £1m will help pay for the measure alongside existing taxes on higher earners and a raft of green taxes.

'Arrogance'

Mr Cable sought to contrast the Lib Dems' "upfront" approach with that of the Conservatives and shadow chancellor George Osborne who he will say is hiding his true intentions from the electorate.

While the Conservatives have called for public spending to be reduced now, Mr Cable said they are also committed to policies - ranging from abolishing inheritance tax to building a high-speed rail network - that will cost more than £50bn in total.

"The public doesn't need George Osborne's imaginary secret documents or conspiracy theories to work out that the public finances are in a bad shape."

"No-one does political cynicism better than the Tories. They pose as tough guys cutting spending sooner and deeper than anyone else.

"But we have just exposed them as committed to a massive £53bn of extra spending - more than the total defence budget.

"If we did that we would be accused of being fantasists or dishonest. But these people are so arrogant they think they can cruise into Downing Street without anyone noticing."



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