Monday, November 30, 2009

LibDems Try to Mitigate Effect of Mansion Tax on LibDem Marginals

I've said it before, and I'll say it again. Nick Clegg has taken some risky and sometimes brave decisions as LibDem leader. He appeared to have shifted the party to a low tax, market based approach - away from the more social democratic approach of his two immediate predecessors. In fact, he seemed to be trying to move the Liberal Democrats back to being a truly liberal party - at least from an economic viewpoint.

But today's tax announcements leave me wondering. Having moved the party from being a party whose instincts were to put up taxes (remember a penny on income tax for education and the 50% rate for high earners), he then extolled the virtues of tax cuts. But his party were less than gruntled. And then at last year's conference Vince Cable's halo was severely tarnished when he announced a whole raft of measures which appeared very ill thought out. These included a Mansion Tax of 1% of the property's value on all properties worth in exess of £1 million. Susan Kramer and others were incandescent. After all, in her marginal seat there were thousands of people who owned houses in that bracket but who were not cash rich.

Today's tax announcements by Nick Clegg and Vince Cable have some superficial attractions about them as they cut taxes for many of the lower paid - something the Conservatives are committed to doing too. But their means of balancing the books will attract huge controversy. The Mansion Tax stays, albeit it will now only affect properties worth £2 million or more, but at 2%, rather than 1%. Will that placate Susan Kramer and other south west London MPs? In some ways, who cares, as it is clear that this policy is mired in LibDem politics rather than proper economics.

The cost of the LibDem tax cuts is £16.5 billion. The Mansion Tax will raise £1.7 bn. So where;s the rest coming from? They want to restrict tax relief on pension contributions to the basic rate (£4.7 bn). Capital Gains tax increases will bring in £4.1 bn. Taxes on aircraft and passengers will raise a further £2.1 bn, while a massive £4.67 bn is said to be raised through closing various tax loopholes.

For a party which wants to make " savage cuts" in public spending, you might imagine that their tax policies would be more radical than this.

Of coruse the fact of the matter is that the LibDems won't form the next government, so in some ways I don't know why I have spent so long discussing their tax plans, as it would take a political earthquake for them to be in a position to implement them.

Still, makes them feel wanted, doesn't it?

20 comments:

james.bottomley said...

It wouldn't take an earthquake for them to be at least partly in the driving seat in a hung parliament, which looks possible.

Aye We Can ! said...

im off to sell my £2m mansion for something in the £1.9m bracket. Then off to pre-apply for my lib dem postal vote

Johnny Norfolk said...

All tax should be based on your ability to pay. I am sure there are many people living in very valuable houses that do not have the income to pay this tax. They will have lived there most of their lives and the property value has shot up but not their income. This is a very unfair tax in its present form.

Like so much it has not been thought through

rob's uncle said...

Re: ‘ . . a Mansion Tax of 1% of the property's value on all properties worth in excess of £1 million . . ’ NO: the proposal was a tax of 0 % on the first £1 million and 1 % on the balance. So a £2 million house would pay £10,000 p.a. not £20,000. I agree that the tax was poorly described and widely misunderstood and misreported but a political pundit like you should have got it straight by now.

Lola said...

Remeber the 'screwball comedies' produced by Hollywood? Mostly the Libdems indulge in screwball economics. Except, the 'mansion tax' and rasing the tax threshold. These are quite good ideas if properly developed and applied well. The 'Mansion tax' is really a form of Land Value Tax, which superficially I quite like. It is calculated that a 'mansion tax' applied properly as LVT to all UK property at a rate of about 0.5% of the the unimproved site value could raise enough tax to replace council tax, VAT, IHT and CGT. It should also help in damping out property bubbles, but only if the government runs sound money (fat chance under any lefty government).

As far as raising the threshold is concerned I am all for that, but it needs to go to at least £12,000. Whilst you're at it I am in favour of restricting tax relief on pension contributions, but I'd achieve it by combing a rise in threshold with a flat tax of about 20% / 25% with he stated ambition of reducing that to 10% as soon as possible. The question is always then asked 'Which taxes have to rise to apy for these measures', which of course is an entirely stupid question as you can't have unfunded funding. Well, you have to cut how much of our money government coerces from us and then spends badly. If it has less of our dosh it has to spend less. And you need not lose one teacher nurse doctor soldier or policemen when making the necessary deep cuts.

Mark Senior said...

I quite like the Conservative Home take on this proposal - to paraphrase it
LibDems propose mansion tax on £2 million pound homes - man who lives in £ 5 million pound home ( Lord Heseltine ) opposes it .

Duncan Stott said...

How are the Conservatives committed to cutting taxes for the low paid? I am not aware of any policies they have to justify this statement.

Johnny Norfolk - who is more able to pay tax: Someone earning £6K a year, or someone with a £2M mansion? I say the latter; they are clearly wealthier.

ILLIBERAL DEMOCRATS said...

The LDs are just crypto socialists.

The Lib Dems have their hands dipped in the blood of this economic collapse caused by Labour. Why? Because the LD had voting alliances and pacts that made it very difficult for the Tories to oppose any tax measure from 1997 - 2005. The lib dem voting and organisational pacts probably gave Labour upto another 40-50 seats in 1997-2001 and the Lib Dems an extra 20 seats or so.

So I hope the LD are happy in getting a few extra Lib Dems to shine westminster seats at the expense of the countries prosperity. The LD deserve to be wiped out like Labour.

John Moss said...

As ever the parties of the left cleave to redistribution of wealth rather than redistribution of income.

Using the tax system to impoverish cash-poor pensioners who happen to have bought lucky 50 years ago, is typical of those obsessed by socialist ideology with no practical sense at all.

Mirtha Tidville said...

I think `Illiberal Democrats` speaks for a lot of us.....

Twig said...

@Duncan Stott
If you only earn six grand a year you don't pay any income tax.

Like this guy who also doesn't pay tax:
Former assylum seeker lives in six bedroom property with four bathroomsnear Edgware Road

It's the poor suckers who work that have to pay tax.

Will said...

actually it was a 0.5% tax on >1m and has now been moved to 1% tax on >2m. But don't let a minor error like that get in the way of a good polemic.

Nick Thornsby said...

May I just correct your facts, Iain? The original mansion tax proposal floated at conference was for a 0.5% levy on properties worth over £1 million, which has today been altered to a 1% levy on properties over £2 million. Not 1% on those over £1 million or 2% on those over £2 million as you suggest.

Mark Senior said...

Quite correct Mr Moss , let the unemployed scroungers starve or accept jobs from the impoverished owners of £2 million houses at 50p an hour plus left over food from their dogs and cats .

ILLIBERAL DEMOCRATS said...

Mark Senior - You have had more cheap Cracks at the expense of the Unemployed than a sailor down the docks!

Give it up Mark Senior as I will have the last laugh matey when your edifice of excrement i.e. the LD are reduced to yellow Taxis!

Paul Lockett said...

John Moss: "Using the tax system to impoverish cash-poor pensioners who happen to have bought lucky 50 years ago"

So we're supposed to view people living in £2million+ houses as the poor and vulnerable? Really?

I disagree with the "ability to pay / tax income not wealth" arguments when applied to Council Tax, let alone when applied to a tax set as such a high level.

Duncan Stott said...

Yeah I could have phrased that better, Twig.

But similarly to your point, if you own a pad worth *only* £2M you wouldn't pay Lib Dem mansion tax. Those are the starting point that the taxes kick in.

quietzapple said...

It isn't supposed to add up.

It is yet another "positional" policy.

If it was possible they would declare global warming to be a fiction so as be able to OPPOSE the two main parties. (As it is the BNP can use that as part of their brand - no-one else wants it)

They must be looking for 3 such BIG policies and another 3 minor ones. A little bit of hypothecation would suit their profile too . . .

Twig said...

@Duncan Stott

Thanks for the clarification, that'll be a relief for Mr.Warsame, if the LibDems were to hold the balance of power after the G.E.

If that were the case and the value of his home were to increase above two million who would have to pay the LibDem tax? him? or the local authority? or would it be waived for mansion dwellers on benefits?

Ben said...

Never mind how long you have spent discussing their tax plans; why did I make the mistake of spending any time reading about them?