[email protected] … Vince Cable: I stirred up a hornets’ nest, but my Mansion Tax is fair

The debate has raged now for a week, ever since Lib Dem shadow chancellor Vince Cable announced his wish that the Lib Dems adopt the so-called ‘mansion tax’, a levy of 0.5% on households living in homes worth more than £1m. (You can vote on the issue over at LDV’s current poll). Was he right, or was he wrong?

Well, Vince has heard both sides of the argument now – including from his Lib Dem shadow cabinet colleagues – and has come out fighting in favour of his ‘mansion tax’, using his regular column in the Daily Mail to make his points. First of all, he points out, no tax is ever popular, but it’s going to be necessary:

Political parties will be under pressure to explain how they will cover the enormous hole in Labour’s budget.

Even though the Government has had to borrow a lot during the recession – otherwise the recession would be worse and unemployment higher – it can’t keep borrowing at the present very high levels.

Something will have to give. I have been trying to spell out what spending cuts might mean. Not easy. Not nice. I have lost some friends. But I believe that being honest and opening up debate is what we politicians have a duty to do.

Vince then runs through the list of possible other taxes which could be increased, dismissing each in turn:

Business taxes – “they are passed on as higher prices and reduced dividends that affect our pensions and lead to job losses. Also, these days, many companies can move abroad easily, costing more jobs.”

Employers’ National Insurance – “it has the potential to add thousands to the dole queue.”

VAT – “a big, sudden jump in VAT would stall any early recovery and hit shops hard. Also, some companies have learnt how to dodge VAT.”

Income tax / NI – “What we pay should reflect our ability to pay. That means progressive taxes with high earners not just paying more tax but a higher rate. This can’t, however, sensibly be pushed further.”

Which leaves us where Vince started – with the ‘mansion tax’. And what would the money raised through this and other wealth taxes enable us to do?

The proposal I highlighted last week was that people earning less than £10,000 would no longer pay income tax – four million low-paid workers and pensioners would be lifted out of tax altogether. Those over the threshold would see their tax bill cut by £700.

In the current environment of big budget deficits, no Government can afford to make such an offer unless the money can be raised somewhere else.

Cutting back on some of the tax loopholes and reliefs, which are enjoyed by the wealthy, makes such a tax cut possible.

But does the ‘mansion tax’ mean the Lib Dems are resiling from our pledge to ‘Axe The Tax’, abolishing Council Tax? No way, says Vince:

Council tax was introduced in the early Nineties as an alternative to Mrs Thatcher’s hated poll tax. It has always been unpopular with pensioners who have modest incomes and who are often reluctant or unable to claim benefit.

It has become even more unfair as the valuations are now almost 20 years old and bear no relation to present house prices – so people even in the same borough can be paying the same council tax as someone with a house worth twice as much.

We have a system that is unpopular, unfair and out of date. It deserves to be axed and replaced with a system that better reflects ability to pay.

Having run through asll the possible alternatives, Vince once again takes the chance to re-state his belief in a ‘mansion tax’:

Property is also one of the few sources of tax revenue that cannot be hidden or avoided. And it is one of the few ways of getting untaxed foreign owners to pay their share.

The super-rich have been pouring their money not into businesses, which create wealth and jobs, but into property. How is it fair that the richest people in the country pay the same council tax, or less, on their £30million palaces as a family in a three-bedroom house in the suburbs?

Britain’s richest man apparently has a mansion in Kensington costing him £40 a week in council tax – not much more than nurses or pensioners pay on a small house or flat in my South-West London borough.

Last week, Nick Clegg and I put forward the idea of a levy on homes valued at more than £1million to try to reduce the unfairness and to produce more revenue to cut taxes on low earners and pensioners. The owner of a £1million house would pay no tax but the owner of a £2million property would pay 0.5 per cent of the extra million – £5,000.

His conclusion:

The looming crisis in the budget should be an opportunity to sort out our tax system and create one that is fairer for all. We must take it.

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  • Herbert Brown 28th Sep '09 - 3:01pm

    “Political parties will be under pressure to explain how they will cover the enormous hole in Labour’s budget.

    Vince then runs through the list of possible other taxes which could be increased, dismissing each in turn:

    Which leaves us where Vince started – with the ‘mansion tax’.”

    Ridiculous. Even on Cable’s estimate this tax was only ever going to raise just over £1bn a year, and that only for a limited time.

    If he’s claiming this is the party’s answer – and the party’s only answer – to the “enormous” budget deficit, then that’s a worse piece of stupidity than anything he perpetrated last week.

  • Hells bells 28th Sep '09 - 4:11pm

    Mansion-tax? Sorry, but VC knows as well anyone in London/South does that people who’s houses are worth 1mill gdp do not live in *mansions*.

    If it raises hardly anything, hasn’t been voted in as party policy AND will lose of key votes in ultra-marginal held and non-held seats, what is he doing annoucing it to the press?

    We have a leader, not two, nor do we need two. When I voted for Nick I didn’t also vote for Vince, or some amazing siamese twin formed of a Cable-Clegg aliance.

    Let’s have the debate, have the vote and have one leader. Oh and please, make it after the next GE and leave this talk of a mansion-tax until a point where we can cope with the hits we will take because of it: We don’t need to be making declarations like this immediately before such a key election season.

  • Herbert Brown 28th Sep '09 - 4:28pm


    I didn’t ask a question. (The trick of spotting questions is that they have a curvy symbol at the end called a question mark.)

    As Stephen didn’t provide a link to the original article, and I’m unable to find it on the Daily Mail website, I can only judge by his summary and its conclusion – “Having run through asll the possible alternatives, Vince once again takes the chance to re-state his belief in a ‘mansion tax’”.

    It’s ridiculous to give this prominence to the proposal, as a means of tackling the “enormous” deficit, considering how little it would raise.

  • Matthew Huntbach 28th Sep '09 - 4:51pm

    Well, I do live in London, in a house, and it’s not worth (in the sense of what it would raise if it were sold) anything near £1 million. A quarter of that, maybe. Even in the more expensive parts of London, a million pound home is a biggish one, it’s not what your average person lives in.

    So, far fewer people will be hit by this than will be hit by dropping our commitment to remove university tuition fees. So why is it that Nick Clegg’s suggestion that dropping the tuition fees commitment hasn’t raised nearly as much “Ooh, you can’t say that, it will lose us votes” comments as has Vince Cable’s “mansion tax” suggestion? Indeed, the commentariat seems to have welcomed Nick’s suggestion as brave and sensible and the sort of thing we should be saying to win votes, while condemning Vince’s suggestion as silly and a vote loser. This, more than anything else in recent politics, has driven home to me just how biased the commentariat is, just how rotten political discourse is in this country because it’s so dominated by people who will twist it to make out the interests of the very rich are everyone’s interests. Perhaps worse, they may say this sort of thing because they actually don’t reaiise how they and the sort of people they mix with are a wealthy and privileged elite way above ordinary people. Or they may be “useful idiots”, to use Lenin’s term, people who have been brainwashed by the political elite to sing the tune of that elite even though they are not of that elite.

    This is not just a rich v. poor thing, as there are good philosophical and practical arguments for shifting tax from income to property, and good philosophical and practical arguments for not charging tuition fees for higher education. I agree with those who have noted the “mansion tax” is very far from a full Land Value Tax, yet what Vince is saying here is a little of the argument which taken further to argue for something which is closer to LVT. It is worth flying, and if it is shot down, well next time some young person says to me “I never vote, it isn’t worth it”, I shall say “As a consequence of your attitude, policies which would benefit you have been dropped as impossible to get acceptance, congratulations on damaging yourself”.

  • Just an observation, but owners of £1 million houses would pay … er … nothing.

    Owners of properties valued at £1.2 million would pay £1,000 per annum.

    And so on ……

    In a world of governmental debt on a massive scale doesn’t seem a terrible idea to me.

  • Vince misses the point. Many people in the party were against this because it was launched on us without any debate and (AFAICS) any significant work having been done as to how it would operate in practice. Launching a property tax when you haven’t really worked out how you will value the properties is pretty dumb really.

  • Richard Church 28th Sep '09 - 11:13pm

    The only thing wrong with the mansion tax is the way it was announced. Three years ago, in the good times, Vince persuaded conference to abandon our proposed top rate of income tax, then Labour did it anyway. Now the reccession has demanded that we find a new way to protect services without hurting people on low incomes, and frankly, the number of people on low incomes living in £1 million houses is tiny. However much it raises, the proposal is redistributive and difficult to evade.

    Let Vince be brave and propose a motion for his mansion tax at Easter conference and I’d vote for it. After the election, let’s then have a proper debate on property taxation, including land value taxation, with a view to replacing the grossly unfair council tax.

  • Herbert Brown 28th Sep '09 - 11:18pm

    “We should bear in mind also that our “Green Switch” taxes will also raise income for the exechequer, so this policy should not be seen in isolation.”

    Indeed. The “mansion” tax was presented as £1bn out of a £17bn package – or about 6% of the total. As far as I can tell, this package is the replacement for what was originally billed as the “green switch” – which in fact consists mainly of adjustments to capital gains tax and taxes on businesses.

    Undoubtedly the reasons it’s being given a prominence out of all proportion to the revenue it will raise are (1) it was designed to placate delegates at the party conference who were angry about proposals for public spending cuts and (2) opinion polls have since shown it to be popular with the public – despite the fact that Vince Cable promulgated it on the spur of the moment, without having consulted the front bench or having thought through the details.

  • Herbert Brown 29th Sep '09 - 8:52am


    “within hours of the policy being announced, Lib Dem aides admitted they did not know whether the new tax would be based on house sales or Land Registry figures, or a complete revaluation of properties across the country.”

    In his interview with Paxman when he was asked how properties would be valued he said first that the market value of property was reflected in the Land Registry. Then when Paxman pointed out that this wouldn’t help with properties that didn’t change hands Cable said the Valuation Agency would make a valuation. Then when Paxman asked how often this would happen Cable said “_presumably_ there would be an annual change” – apparently not an annual revaluation but some kind of “reflection” of data from the Land Registry.

    If he had really thought out the details I don’t understand why “presumably” would come into it. And I _really_ don’t understand why the party officials who were trying to answer these very basic questions couldn’t have been briefed properly.

  • Trouble with Vince is that he doesn’t listen. He brought this idea to the Tax Commission 2 years ago, and it was comprehensively rejected for some of the reasons mentioned above any many more. It remains a really dumb idea from which we gain peanuts (revenues lost in the roundings of Treasury forecasts) and lose plenty (already going down horribly in the London key seat where I was canvassing last night).

    Let’s reiterate, though, that this isn’t policy. Just because Vince floats an idea in a pamphlet and then a newspaper article doesn’t make it such. The FPC and Parliamentary party have already considered this idea – and rejected it. They were wise to do so.

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