The Deputy Prime Minister has intimated that plans to axe the 50p rate of income tax will be funded by a modified version of the Liberal Democrats’ controversial ‘mansion tax’.
Chancellor George Osborne had already made it clear that he intends to scrap the 50p top rate of income tax, which is currently paid by people earning more than £150,000, during the lifetime of this Parliament, but has so far failed to clarify how he would finance such a move.
But Nick Clegg, the Liberal Democrat leader, told the Financial Times yesterday that any cuts in high income taxes would be accompanied by action to increase taxes on wealth, specifically on "very, very high value property".
The measures would not be introduced until the economy recovered more and those on lower middle incomes were "breathing more easily", he said.
But Clegg denied that the changes would amount to a rebirth of the ‘mansion tax’ that was promised before the general election. The Lib Dems dropped their election pledge to place a levy of 1% on homes worth more than £1 million during negotiations with the Conservatives about forming the coalition government after having been accused of failing to think it through properly.
The proposed new property tax "could be a range of things: the way the council tax system is structured; the way stamp duty is structured," Clegg said, adding that tax evasion and avoidance was currently widespread in relation to very high value properties, with one dodge including buying property through companies to avoid normal stamp duty rates.
The confirmation of changes to taxation on high-value homes followed similar hints dropped by Business Secretary Vince Cable over the weekend, but is likely to draw the wrath of Conservative backbenchers known to be hostile to such plans.