Lib Dems vow to raise £17bn with tax on £1m-plus homes
Nick Clegg, the Lib Dem leader, says funds raised by the 0.5% levy would be used to increase the threshold on the basic rate of income tax to £10,000.
Nick Clegg during a question and answer session at the party's annual conference in Bournemouth. Photograph: Chris Ison/PA
Homeowners in properties worth more than £1m would face a new tax under Liberal Democrat plans to rebalance the tax system by targeting the rich.
In a rebuff to David Cameron, a day after he said there was not a "cigarette paper" between himself and Nick Clegg, the Lib Dems will today announce plans to raise £1.25bn a year with a new property tax.
The Lib Dem leader told BBC Radio 4's Today programme this morning: "It is a fairer tax that Labour should have done 10 years ago in the interest of a fair society.
"It affects 1% of property owners in this county and it is for a purpose," he said. "The purpose is fairness."
Asked how the value of homes would be established, Clegg said it would be "relatively easy" using land registry documents.
"I think people at the top end now accept we need to rebalance things a bit," he said.
The new tax would be payable on an estimated 250,000 properties and raise more £17bn a year, the party said.
Vince Cable, the party's Treasury spokesman, will set out details of the new policy in his speech to the Lib Dems' annual conference in Bournemouth later today.
He will cite the billionaire businessmen Lakshmi Mittal and Roman Abramovich to reinforce the need for a change.
"You may also recall that I proposed a small annual levy – half a penny in the pound on property values over £1m," Cable will say.
"Since then we have seen the super-rich pouring their money not into job creating businesses but into acquiring mansions. And remember too that under the unfair council tax Mssrs Mittal and Abramovich in their £30m palaces pay the same as a band H family home though their properties may be worth 40 or 50 times as much. That small levy alone could lift 300,000 low-paid workers and pensioners out of tax."
The tax would be paid at a rate of 0.5% on the value of properties over £1m. This would mean that a homeowner in a property worth £1 more than £1m would pay half a pence. A homeowner with a property worth £1.5m would pay the tax on £500,000 which works out at £2,500.
Lord Oakeshott of Seagrove Bay, a Lib Dem Treasury spokesman who helped Cable draw up the policy, last night said the party had the Tories in their sights.
"The Liberal Democrats are not going to shed too many tears if Notting Hill is hardest hit by this millionaires' mansions tax."
The tax would hit property owners hardest in safe Tory seats such as Kensington and Chelsea and Westminster. But some Lib Dem MPs will be nervous. Susan Kramer, who is fighting a tough battle in Richmond Park against the millionaire Tory Zac Goldsmith, may face a backlash in her affluent constituency.
The Lib Dems hope their policy will be as totemic for them as the Tories' plan to raise the inheritance tax threshold on properties worth up to £1m has been for Cameron.
Cable believes that the Tory plan, which benefits about 3,500 estates, symbolises that the Tories are still the party of the affluent. The Lib Dems believe their plans show that they are prepared to shape the tax system in a fairer way even in hard times. "It is only right that the wealthiest should pay a slightly higher amount," one source said.
Cable, who has been widely praised across the political spectrum for having forecast that Britain was heading to a debt-fuelled recession, will also use today's speech to deliver a tough message about the state of Britain's public finances.
He will say that Britain's public spending bill should be cut by £2.4bn a year by freezing the entire budget for millions of public-sector workers.
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