Speaking at a fringe event at the LibDems’ annual conference in Bournemouth on Monday, Cable said that the rich had an “extraordinary capacity for self-pity”, judging by reaction to his proposals for a 0.5 per cent levy on properties worth over £1m in a bid to axe income tax for people earning less than £10,000.
When asked why he did not propose introducing residential CGT, Cable said: “I think probably because we are a bit cowardly. The idea of putting CGT on people’s homes is theoretically correct, you should do it.” But he warned it was “pretty brutal stuff”. He said: “If one is being strictly honest and clear about fairness in taxation, you cannot really avoid this difficulty. Maybe we should be a bit braver. We have seen the super-rich pouring their money not into job-creating businesses but into acquiring mansions. This small levy alone will lift 300,000 low-paid workers and pensioners out of tax.
However, The Centre for Economic and Business Research chief executive Douglas McWilliams says Cable’s “mansion tax” plan is a regionally-biased “crackpot scheme” that will wipe thousands of pounds off property prices across the board. He says: “What they have failed to appreciate is that such a tax would have a major effect on house prices.”
Under the LibDems’ proposals, the owner of a £2m property would pay £5,000 a year and the CEBR estimates that the resultant depreciation on the property value would be 20 times this at £100,000 as potential buyers would factor in this extra living cost.
McWilliams says: “On our calculations, this would reduce the average UK residential property price by £2,000.”