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George Osborne should arm wrestle David Cameron into considering a deal over council tax bands

By Peter Hoskin
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One of the most intriguing stories in today’s papers comes courtesy of the Mail on Sunday. George Osborne, it tells us, has drawn up a plan with Nick Clegg: in return for Lib Dem support for a benefits freeze, there could be new council tax bands imposed on homes worth over £1 million. The plan is said to be opposed by…

Woah, hold on a minute. New council tax bands?! Didn’t Mr Osborne dismiss the prospect in the very same paper last month? Why, yes he did. “You would have to send inspectors out [to revalue every home in the UK] and it wouldn’t raise much money,” said that Chancellor back then, “I’m not going to let the tax inspectors get their foot in the door.”

But, despite that, this latest story shouldn’t come as too much of a surprise. During the negotiations for the last Budget, Mr Osborne was willing to give the Lib Dems a mansion tax in exchange for a 40p top rate of tax, but was vetoed by David Cameron. Indeed, Mr Cameron is said to be against this latest deal involving a property tax, too. As a source tells the Mail on Sunday, “The Prime Minister is not a fan of property taxes.”

Myself, I hope the Prime Minister relents. Higher taxes are never to be accepted happily or lightly, but there are reasons why new council tax bands make sense during a time of austerity, particularly if they herald a shift away from tax on income. We’ve been through many of those reasons on ConHome before, including:

i) They’re a carrot to offer the Lib Dems. As I’ve mentioned before, there’s a dwindling stockpile of concessions to make the Lib Dems. This might sound like a good thing when it comes to Tory purity — but what happens when the Tories want to introduce policies against opposition from the Lib Dems?  

ii) They’re surprisingly popular among Tory voters. A recent ConservativeHome survey found that “an annual mansion tax on big homes,” of the sort that Vince Cable was pushing on the Marr Show earlier, is “unacceptable” to 73 per cent of Tory voters. However, “higher council tax bands on high value properties” are “acceptable” to 57 per cent. Certain members of the Free Enterprise Group have also proposed new council tax bands on high-value properties.

iii) Taxes on property are less harmful to growth than other taxes. According to this report by the OECD, that is.

As I’ve suggested before, the Osborne/Clegg case might be strengthened if the Treasury sets about enumerating the full effects of such a tax increase — on growth, on those hit by it, on revenues, etc — just as they did for the 50p tax rate. Which is to say: let the arm wrestle begin.


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