Exclusive: Lib Dems declare war on the rich with raids on pensions and property in 2015 manifesto

It is not “fair or sensible” to go into the next election promising to cut the deficit solely with spending cuts, a senior figure said

The Liberal Democrats are planning a double election tax raid on the rich, with commitments to introduce new levies on property and pension pots in their 2015 manifesto.

Under plans being drawn up by Danny Alexander, the Chief Secretary to the Treasury, the Liberal Democrats will commit to raising £2bn a year from a banded “mansion tax” on multimillion-pound properties.

The party is also planning to reduce the total amount people can save tax-free for their pensions by 20 per cent to £1m. The move is expected to raise a similar figure. The measures will form key Liberal Democrat demands in any possible coalition negotiations after the next election, as well as being used to differentiate the party from the Conservatives in the run-up to 2015.

Liberal Democrat sources said the Treasury had already drawn up detailed and costed plans to introduce new banded charges on properties worth more than £2m and more than £5m. The work was done in preparation for the 2012 Budget, but the proposals were vetoed at the last minute by David Cameron.

Mr Alexander is expected to say that this policy analysis will form the basis of the Liberal Democrat manifesto.

At the same time, the Liberal Democrats will commit to reducing the lifetime tax-free limit on pension contributions from £1.25m to £1m. The limit currently stands at £1.5m but is due to fall by £250,000 in April. The move would raise between £1bn and £2bn a year. A senior Liberal Democrat figure told The Independent that the party did not think it was “fair or sensible” to go into the next election promising to cut the budget deficit solely with spending cuts.

“This is about showing that we have fully costed plans to reduce the deficit by a more equitable distribution between spending cuts and tax rises,” the source said.

“The Treasury has already looked in great detail at how you would make a mansion tax work in practice. Danny is going to be able to use the Treasury papers to make that case. We’re looking at pension tax relief. The lifetime allowance is now £1.25m. We’d like to see that coming down to £1m.”

Another Liberal Democrat  source added: “We have always been clear that those with the broadest shoulders should bear the greatest burden.”

The growing divisions between the Liberal Democrats and the Tories on tax and spending policies were highlighted last night by Vince Cable, the Liberal Democrat Business Secretary, who accused George Osborne of pursuing a “small state” agenda by cutting for its own sake. He warned that the Chancellor’s efforts to boost the housing market could create another “property boom and bust”.

Speaking to the Royal Economics Society at the Bank of England, Mr Cable said the Liberal Democrats believed in “finishing the job we started” on the budget deficit, but warned that his party would not sign up to Mr Osborne’s plan for £30bn of extra cuts after next year’s general election, which he said was “a political and ideological commitment”.

Mr Cable made clear that the Liberal Democrats would seek to raise the incomes of low and middle earners through further increases in the personal tax allowance, offset by tax rises for the rich. “The Lib Dems will reduce the debt burden but ensure this isn’t done at the expense of public services and the most vulnerable in society,” he said.

He suggested that the Liberal Democrats could allow public spending to rise after the election, a move which could make it easier to reach a deal with Labour in another hung parliament.

“There are different ways of finishing the job,” he said. “Not all require the pace and scale of cuts set out by the Chancellor. And they could allow public spending to stabilise or grow in the next parliament, whilst still getting the debt burden down.”

Although GDP figures to be published today are expected to confirm a strong recovery, Mr Cable insisted that Britain is at the end of the beginning rather than the beginning of the end.

He said: “Recovery is welcome, but much hard work remains… Despite these encouraging signs, the shape of the recovery so far has not been all we might have hoped for. Exports are still too weak and the trade balance has deteriorated as import demand has outstripped export demand, leaving a current account deficit of 4 per cent of GDP. Too many businesses – which often have healthy balance sheets – are sitting on their cash and not investing it.”

Mr Cable accused the Tories of jeopardising the fragile recovery by flirting with withdrawal from the European Union, which created political uncertainty.

“The actual risks of leaving may be small, but one of the most useful contributions to recovery our Coalition partners could make, in the national interest, would be to do more to remove this unnecessary risk,” he said.

On housing, Mr Cable said: “The spurt in prices is also a warning of potential threats to stability. There is a chronic imbalance between supply and demand. One way out of the dilemma would be a massive and rapid increase in house construction.”

Suggested Topics
Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
David Moyes and Louis van Gaal
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
Have you tried new the Independent Digital Edition apps?
ebooksAn unforgettable anthology of contemporary reportage
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
A cabin crew member photographed the devastation after one flight
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Life and Style
food + drink
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
Life and Style
Sexual health charities have campaigned for the kits to be regulated
healthAmerican woman who did tells parents there is 'nothing to be afraid of'
Life and Style
Arts and Entertainment
The John Peel Lecture has previously been given by Pete Townshend of The Who, Billy Bragg and Charlotte Church
musicGodfather of punk will speak on 'free music in a capitalist society'
peopleAt least it's for a worthwhile cause
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Pharmaceutical Computer System Validation Specialist

£300 - £350 Per Day: Clearwater People Solutions Ltd: Pharmaceutical Computer ...

High Level Teaching Assistant (HTLA)

£70 - £90 per day: Randstad Education Birmingham: Higher Level Teaching Assist...

Teaching Assistant

£50 - £80 per day: Randstad Education Birmingham: Randstad Education is the UK...

Senior Java Developer - API's / Webservices - XML, XSLT

£400 - £450 Per Day: Clearwater People Solutions Ltd: Our client is currently ...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments