Wealthy homeowners face mansion tax to pay for 50p rate scrap

Business secretary Vince Cable said that there is a ‘broad understanding’ in the Coalition that the 50p rate can only be scrapped if it is replaced by a mansion tax on wealthy homeowners.

Mr Cable claimed the coalition agreed that taxing the rich must be a priority and said “the wealthy people of the UK have to pay their share.”

Speaking on BBC Radio 4’s Today programme, he criticised the unfairness of the current system and hinted that the money could be raised via council tax, with new higher bands for expensive homes.

In particular, the Liberal Democrat condemned people who own large properties in Britain but pay little or no pay tax on these shores because they are based abroad.

He also highlighted the example of millionaire homeowners paying the same in council tax as families living in modest houses.

Mr Cable said: “There is a broad understanding that if the 50p rate were to go – and I and my colleagues are not ideologically wedded to it – it should be replaced by taxation of wealth.  The wealthy people of the UK have got to pay their share, particularly in times of economic difficulty.  There are vast numbers of extraordinarily valuable properties around the country netting very large gains for their owners, many of whom come from abroad incidentally, and are not taxed at all.  You get people with multi-million pound properties paying exactly the same in council tax as somebody living in a three-bedroom semi-detached.  The system doesn’t work at all.”

Mr Cable has previously been a vocal supporter of a mansion tax on properties worth more than £2 million.  It is believed the policy could raise as much as £1.7 billion a year for public finances, based on the 40 -50,000 properties of that value in Britain, most situated in London and the South East.

He confirmed that the Liberal Democrats were negotiating with Conservative colleagues over new ways to tax the wealthy.

He said: “How exactly that is configured is a detailed matter for negotiation but that principle must be upheld.....The mansion tax is actually a very economically sensible way of doing it."

When asked about the possibility of new council tax bands, he said: “There are different ways of approaching it.  It can be done through local government as well as central government.  Providing the principle is accepted, that tax should be related to the value of property.”

Referring to dropping the 50p rate and adopting a tax on expensive properties, he said: "That is one part of the complex set of negotiations which my colleagues are conducting.

"The Liberal Democrats are emphasising the importance of lifting low earners out of tax and we are making serious progress."

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