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
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Arts and Entertainment
Jamie T plays live in 2007 before going on hiatus from 2010
arts + entsSinger-songwriter will perform on the Festival Republic Stage
Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Service Desk Analyst- Desktop Support, Helpdesk, ITIL

£20000 - £27000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

Service Desk Analyst - (Active Directory, Support, London)

£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst - (Active Di...

Junior Quant Analyst - C++, Boost, Data Mining

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Junior Quant Analyst (Machine Learning, SQL, VBA)

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

Day In a Page

All this talk of an ‘apocalyptic’ threat is simply childish

Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
Mafia Dons: is the Camorra in control of the Granite City?

Mafia Dons: is the Camorra in control of the Granite City?

So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Once the poor relation, the awards show now has the top stars and boasts the best drama
What happens to African migrants once they land in Italy during the summer?

What happens to migrants once they land in Italy?

Memphis Barker follows their trail through southern Europe
French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

Frank Mugisha: 'Coming out was a gradual process '

Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

Radio 1’s new top ten

The ‘vloggers’ signed up to find twentysomething audience
David Abraham: Big ideas for the small screen

David Abraham: Big ideas for the small screen

A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

Florence Knight's perfect picnic

Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

Horst P Horst comes to the V&A

The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

Mark Hix's summery soups

Soup isn’t just about comforting broths and steaming hot bowls...
Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

Tim Sherwood column

I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
Eden Hazard: Young, gifted... not yet perfect

Eden Hazard: Young, gifted... not yet perfect

Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
Tim Howard: I’m an old dog. I don’t get too excited

Tim Howard: I’m an old dog. I don’t get too excited

The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

Tom Peck on Match of the Day at 50

The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition