Lib Dems may still get mansion tax in return for 40p top tax rate
Andrew Grice has been Political Editor of The Independent since 1998. He was previously Political Editor of The Sunday Times, where he worked for 10 years, and he has been a Westminster-based journalist since 1982. His column, Inside Politics, appears in The Independent each Saturday.
Tuesday 20 March 2012
George Osborne, who will cut the 50p top rate of tax to 45p in tomorrow's Budget, will leave the door open to a further cut to 40p before the next general election.
The move would mean the abolition of the top rate and would leave people on incomes over £150,000 a year paying the same rate as those earning £43,000 a year and above. However, the Liberal Democrats would demand the introduction of a mansion tax or another form of wealth tax in return for approving another cut in the top rate.
Although a mansion tax on homes worth more than £2 million was blocked by David Cameron, the Chancellor is unlikely to rule it out forever. Cabinet sources said yesterday there is still "unfinished business" in Budget talks and there could be a trade-off next year between a 40p top rate, favoured by many Conservatives, and the wealth tax demanded by the Liberal Democrats.
Some Treasury officials see the advantages of a property-based wealth tax, which would be relatively easy to collect because homes cannot be moved abroad like funds. But Mr Cameron remains reluctant for one of his legacies to be a wealth tax.
As The Independent revealed on Saturday, the 45p rate on incomes over £150,000 is due to take effect in April 2013. In return, Mr Osborne is expected to raise the tax-free personal allowance, which will rise to £8,105 a year next month, to about £9,000 in April next year – a big step towards the Liberal Democrat goal of £10,000.
Nick Clegg is also likely to win a cap on the total amount of reliefs and allowances the rich can claim as a proportion of their income – meeting his demand for a "tycoon tax". The figure could be set at 20 per cent to prevent the rich employing accountants to ensure they pay a smaller share of their income in tax than basic-rate taxpayers.
Although some Liberal Democrat MPs believe this is not the right time to cut the 50p rate, the leadership is preparing the ground for the move. Simon Hughes, the party's deputy leader, said: "The 50p tax rate brings in a relatively small amount of money. My test on Wednesday will be whether the people on high incomes are paying more or less. The priority is to make sure we have a Budget for the millions, not for the millionaires."
Cutting the 50p rate is a huge gamble for Mr Cameron and Mr Osborne, with some Tory MPs believing it could undermine the Chancellor's "we're all in it together" mantra.
Labour believes a cut in the top rate would hurt the Tories and Liberal Democrats. Ed Miliband, the Labour leader, said yesterday: "Labour wants a Budget that makes a priority of jobs, growth and using every single penny of scarce resources to help hard-pressed families make ends meet. Instead, this Government's priority appears to be cutting tax for people earning £150,000 a year. That is the wrong priority and shows how out of touch the Tories are."
- 1 Bill Clinton portrait features Monica Lewinsky reference, artist admits
- 2 What happens to your body when you give up sugar?
- 3 Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
- 4 Have sex with your iPad thanks to the new sex toy no-one asked for
- 5 Average penis size revealed: Scientists attempt to find what is 'normal' to reassure concerned men
Bill Clinton portrait features Monica Lewinsky reference, artist admits
Japanese island overrun with cats after population explodes
China's 'Inconvenient Truth': video exposing country’s smog crisis watched 100 million times
Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
The 'sex selfie stick' lets you FaceTime the inside of a vagina
New theory could prove how life began and disprove God
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
This is what it's like to be dead, according to a guy who died for a bit
Durham Free School: 'Creationism taught at' free school facing closure
Ukip would cut billions from Scottish budget to fund English tax cuts
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
£25000 - £35000 per annum: Recruitment Genius: Have you got a proven track rec...
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...
£38000 - £48000 per annum: Recruitment Genius: This B2B content marketing agen...
£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...