Business secretary Vince Cable has confirmed that negotiations to replace the 50p income tax rate with some form of wealth tax, or “mansion tax”, are ongoing within the coalition ahead of the Budget.
Cable added that the Liberal Democrats were not "ideologically wedded to the 50p tax rate" as the Chancellor comes under increasing pressure to abolish it later this month.
He told BBC Radio 4’s Today programme that, while the exact nature of the tax was currently being negotiated, a mansion tax on expensive homes was an "economically sensible way” of replacing the 50p rate.
"If that were to go, it should be replaced by taxation of wealth, because the wealthy people in the country have got to pay their share, particularly at a time of economic difficulty," Cable said. "How exactly that is configured is a detailed matter for negotiation. But that principle must be upheld, and a mansion tax actually is a very economically sensible way of doing it.”
Chancellor George Osborne has asked HM Revenue & Customs to see how much the 50p rate is raising and to find out whether avoidance measures mean it is not bringing in extra money.
Conservative MP Malcolm Rifkind has come out in opposition to a mansion tax trade off, arguing that it would hit middle-class Londoners, with an overwhelming proportion of the affected properties – estimated to be 81% of the national total – in London.
He said: “Such a levy would be arbitrary, unfair and unaffordable for many of those required to pay.”
The Liberal Democrats have warned against axing the 50p rate too soon, and Cable has also said that the Lib Dems’ tax priority remained increasing the level at which people started paying tax on their earnings to £10,000.
