UK Property Tax to Fund Tax Cuts for Rich

Taxes will be increased on expensive houses, allowing the government to fulfill its longer-term promise to scrap the 50p income tax rate, Nick Clegg has said.

Sharon Lorimer

The deputy prime minister said the top rate would be eliminated once people on lower middle incomes were “breathing more easily” but only if it was accompanied by a new tax regime for high-end properties.

The Liberal Democrat leader told the Financial Times: “A liberal tax system rewards work and enterprise and captures pollution and unearned wealth.”

Mr Clegg said the impending tax squeeze on the owners of big properties had gone almost unnoticed in George Osborne’s Budget last week, a financial package that he said could have been written by the Liberal Democrats.

Mr Osborne said: “As well as reviewing revenues from the 50p tax rate, we will also be redoubling our efforts to find ways of ensuring that owners of high value property cannot avoid paying their fair share.”

Mr Clegg said the coalition would not be reviving the old Lib Dem policy of a 1 percent “mansion tax” on properties worth more than £2 million but added: “It could be a range of things: the way the council tax system is structured; the way stamp duty is structured.”

Asked whether the Budget would have been any different if he had written it, Mr Clegg said: “Not much. This Budget was pretty close to what would have been delivered if I was prime minister and we had a Liberal Democrat chancellor.”

Mr Clegg has been frustrated by suggestions that Mr Osborne sidelined the Lib Dems and that the deputy prime minister had been the “loser” from last week’s package. “It’s completely bizarre,” he said.

When he was caught on a microphone during a post-Budget roadshow saying he could not find much to “bloody disagree” about with David Cameron, Mr Clegg said it was a sign of how closely the Budget reflected his party’s core beliefs.

Among the measures endorsed by the Lib Dems were raising the income tax threshold by £600 and a crackdown on tax avoidance, designed to raise £1 billion, targeting the owners of expensive homes.

The chancellor has said tax evasion and avoidance is widespread in the area of very high-value property: one dodge is for properties to be bought by a company, thus avoiding normal rates of stamp duty.

Mr Clegg also signaled that the Lib Dems would push hard for the implementation of radical banking reform, if it is recommended by Sir John Vickers’ independent review.

Although the deputy prime minister said the coalition would be “daft” to commit itself to following his proposals to the letter, he said it would be hard to ignore Sir John if he made a “powerful case” for making the banking system safer and more competitive.

The Vickers team will publish its interim report next month, with much focus on whether it will propose some kind of internal split of retail and investment banking operations – a move strongly resisted in the City.

“I would fully expect that we would look at it very carefully and seek to implement the recommendations,” Mr Clegg said.