David Prosser: Lib Dem plan to hit the fat cats backfires

Outlook: The latest proposal flies in the face of one of the Lib Dems' touchstone ideals
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The Independent Online

Which political party makes the following statement on the campaigns section of its website? "The council tax is an unfair tax, based simply on outdated valuations of property and with no link to ability to pay. It should be scrapped and replaced with a system based on people's ability to pay."

Step forward the Liberal Democrats, who have long been campaigning for the introduction of a local income tax. Their argument is that council tax bills are based on the value of your home – and a value calculated some years ago, for that matter – rather than taking account of how much you can afford to pay. Plenty of people live in expensive houses but have little disposable income – pensioners, in particular – which means they can find the tax difficult to find.

How does all of this square with the Lib Dems' plans for a "mansion tax", even if they now propose to introduce the levy on expensive properties at a higher threshold, and only for a temporary period before a local income tax can be introduced? This duty, proposed as an annual charge of 1 per cent of the value of all properties worth more than £2m, takes no more account of people's ability to pay than does council tax.

In fact, the mansion tax is an ill-conceived attempt to capitalise on the prevailing anti-fat cat mood. When the Lib Dems realised their first proposal, for a 0.5 per cent tax on homes worth more than £1m, would hit voters in key marginal seats in the South-east, they began back-peddling fast. But the latest proposal still flies in the face of one of the Lib Dems' touchstone ideals, that taxes should reflect people's ability to pay. To add insult to injury, the level at which the Lib Dems have waved that touchstone goodbye has been set arbitrarily for political reasons.