Cable defends £1m 'mansion tax' plan

Vince Cable was today forced to defend his proposals for a "mansion tax" on properties worth more than £1 million as he appeared before activists at the Liberal Democrat conference.

The party's treasury spokesman insisted that people with a low income who lived in a home worth more than the threshold would be better off as a result of other proposed changes in the tax system.

Mr Cable, normally a favourite within the party, has come under fire over the proposal, which was not discussed with senior Liberal Democrats before it was announced.

Among those reported to have been left out of the loop was local government spokeswoman Julia Goldsworthy, who chaired the question and answer session at the party conference in Bournemouth during which the subject was raised.

Amid fears the tax might adversely affect pensioners or those on low or medium incomes who had seen the value of their home soar as a result of property price rises, Mr Cable said they may actually benefit.

He said: "We are talking about a very small minority of the housing stock, 1% or less.

"They could actually be significantly better off because if they have a very low income either as low paid workers or average paid workers or if they are pensioners, they could ... be lifted out of tax altogether.

"The whole purpose of the policy is to impose some additional taxes, actually quite modest, on those who are very wealthy and use it to cut taxes at the bottom end."

He added: "Even in this very small category, this 1% of properties or less, there may be people who are asset-rich wealthy but have very low income, that can happen and does happen.

"Even though it is a small number of people we need to be sensitive to their problems.

"There are ways of dealing with it, one of which we suggest is that if they are entitled to council tax benefit already then they would be entitled to property tax benefit in respect of these payments.

"The second is that if there are any obligations that people can't meet because they don't have the income it can be rolled over until eventually the house is sold and deducted from the price of the property.

"That way people can live in complete security but nonetheless make a contribution to a tax cutting approach, because they have substantial personal wealth, to a tax cutting approach which overwhelmingly benefits very large numbers of people on low incomes."

The party estimates about 250,000 homeowners will be hit by the 0.5% annual levy on the value of properties worth more than £1 million.