Version of 'mansion tax' may come in, says Cable

The rich could face a new charge on the value of their homes in return for a cut in the top rate of income tax, the Business Secretary Vince Cable said last night.

He evoked memories of the discarded Liberal Democrat plan for a "mansion tax", under which people with houses worth more than £2m faced an extra levy, as he said the Government was considering how to shift taxation from income to property.

Although Whitehall sources are not ruling out reviving the mansion tax idea, it is more likely that a new top band of council tax could be introduced or stamp duty increased for multi-million pound property transactions.

Both the Chancellor George Osborne and Mr Cable have referred to the 50p income tax rate being lowered before this Parliament ends in 2015.

Mr Cable said last night: "It needs to be a change which is fair overall and does take account of the fact that the wealthy have got to pay their share. And the emphasis may well have to shift from high marginal rates of tax on income which are undesirable, to taxation of wealth, including property."

Asked on BBC Radio 5 Live's Pienaar's Politics whether he hoped the mansion tax idea could be revived by ministers before the next election, he replied: "There is a very strong argument ... that you need to have a proper base for taxing property.

"I'm sure that's one of the things we're going to have to look at as we change away from these very high marginal rates." Any such move could run into strong opposition, not only from Tory MPs but also from Liberal Democrats with seats in London's suburbs.

But Mr Cable insisted he had broad support from the Chancellor for switching tax from income to property. In last week's Budget, Mr Osborne said: "As well as reviewing revenues from the 50p tax rate, we will also be redoubling our efforts to find ways of ensuring owners of high-value property cannot avoid paying their fair share."

Mr Cable first set out plans to levy homeowners 0.5 per cent a year on a house's value above £1m at the Liberal Democrat conference in 2009.