Nick Clegg has announced that the Liberal Democrats are to soften the effect of the mansion tax on properties worth more than £2m, as the party moves to reassure voters in southern England seats alarmed by the original proposal.
The deputy prime minister said the Lib Dems would stagger the introduction of a high-value property levy to ease the burden on owners of homes just over the £2m threshold who would pay £2,000 a year.
The levy was one of a series of measures announced by Clegg that are designed to eliminate the £27bn budget deficit by 2017-18 through spending cuts and tax increases.
The Lib Dems risked a row with motoring organisations by indicating that vehicle excise duty would be increased by an average of £25 a year. This would raise £485m in 2016-17, rising to £850m in 2017-18.
Clegg said the Lib Dem budget plan contrasted with “the complacency of the Conservatives”, who havd made unfunded spending commitments, and the “economic illiteracy” of the Labour party, which he said had made vague commitments to balance the books.
The Lib Dems would deliver a £27bn fiscal consolidation by 2017-18 – thereby eliminating the budget deficit – £12bn in day-to-day government spending cuts, £3bn in welfare savings, £5bn in tax rises and £7bn in tackling tax avoidance.
The high-value property levy will raise £1bn through a staggered charge on properties worth more than £2m. Owners of homes worth between £2m and£2.5m will pay £2,000 a year. This would rise to £3,500 for properties worth £2.5m-£3m, £5,000 for properties worth £3m-£4m. The charge would be set at £9,000 for properties worth £4m-£5m. A decision on how much to charge owners of properties worth more than £5m would be taken in a post-election budget.
The levy follows the announcement last year by Danny Alexander, the Lib Dem chief secretary to the Treasury, that the party was shelving plans to impose a 1% charge on properties worth more than £2m. The Lib Dem proposal takes the party closer to Labour, which is imposing its “mansion tax” in stages.
The Lib Dems say they will use other tax increases to fund three additional policies:
- Raising the tax-free personal allowance to at least £12,500 by the end of the next parliament. This will be paid for by raising £1.22bn in 2017-18 by aligning dividend tax with income tax rates for additional and higher-rate taxpayers.
- Guaranteeing real-terms increases in the NHS budget plus an extra £1bn. This would be paid for by raising £885m by ending shares for rights and restricting relief on capital gains tax.
- Removing the bedroom tax, to be funded with £320m raised by offering lower direct housing benefit payments to landlords.
David Laws, the cabinet office minister who is writing the Lib Dem manifesto, said the party would follow two new fiscal rules. They are to ensure that debt is falling as a proportion of national income every year, except in a recession, and to ban borrowing for day-to-day government expenditure, leaving room for borrowing for capital spending if the first rule is met.
Clegg said: “We are the only party to have the candour to set out what it means in terms of changes to the tax system and changes to the benefits system.
“From Labour’s point of view – their economic illiteracy, which somehow assumes people will be content with a vague and entirely unspecific commitment to balance the books, is only matched by the complacency of the Conservatives who appear to think they have some historical reputation which allows them to make up numbers, make up unfunded commitments and pile them up day in day out.
“It is interesting that the smaller of the mainstream Westminster parties is now emerging in this election campaign as being by far not only the most socially fair and committed to sustained investment in our public services but also the most economically credible.”
This article was written by Nicholas Watt Chief political correspondent, for theguardian.com on Sunday 12th April 2015 18.04 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010