Vince Cable revives idea of higher property levies as way of restructuring UK tax system

Tim Montgomerie

Pienaar's Politics (7pm every Sunday on Five Live) is one of the BBC's best politics programmes and it's thrown up two good stories tonight. One comes from an interview with Ed Miliband in which the Labour leader says he and his brother are working closely again - with the latter helping on the recent Libya speech to the Commons.

It's the other story I want to focus on, however. The Business Secretary appears to revive his pre-election idea of a tax on high value properties and suggests that George Osborne is sympathetic. Here is the verbatim exchange between John Pienaar and Mr Cable:

JP: "When it comes to tax policy, it seems to me that you're not going to be fighting any rear guard action to keep the higher rate tax where it is come what may, but you are, you have been keen, to see more tax on property? To see property treated more like wealth? Do you think we can see some movement on that possibly before too long?"

VC: "Well it may well be. And indeed the Chancellor said that in the budget..."

JP: "He didn't talk, Vince, about a Mansion tax, then idea of a levy on million or 2 million pound properties?"

VC: "He certainly didn't use that phrase. But the position where we are with taxes on the wealthy is this:  I argued in opposition, and the Liberal Democrats as a party accepted, that a 40p, 40% rate was a reasonable , er, it went up to 50. In fact its over that if you take into account national insurance, erm, it moved up to 50, in an emergency because  we had to have a sense of solidarity that everybody was bearing some of the pain, and the Chancellor said in the budget that we're going to have to move away from that. I agree with him. The Liberal Democrats agree with him. But 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, and the Chancellor said that, as much as that, in his budget.

JP: "As you say he didn't mention mansion taxes but are you hopeful that we may move in that direction this side of another election?"

VC: "Well there is a very strong argument, its actually set out by our Nobel Laureate James Mirrlees in his analysis of tax policy, that you need to have a proper base for taxing property and 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."

JP: "It's not a very Tory sort of tax, it would have to be one of those battles that you win rather than them, wouldn't it?"

VC: "No I don't think we're talking about winning and losing, we're in the business of designing a sensible tax policy, of course the Chancellor is leading that, this is a matter for him primarily as the Chancellor, but certainly within the coalition, what certainly I and my Liberal Democrat colleagues will want to see is a very strong commitment of fairness in taxation and that means lifting low earners out of tax which is what we have done in this budget for the second year in succession, but also making sure that the people who are very wealthy and very privileged do pay their share."

We recently asked Tory members if they'd support "replacing the 50p tax band with a tax on high value property transactions". 28% said they would. 55% said they would not.

If George Osborne's review into the 50p tax band concludes that it's counter-productive it might be possible to scrap it without hurting revenue. That's Janet Daley's argument in today's Sunday Telegraph.

Overall, however, I'm largely with Vince. We need to move to a tax system that taxes property, pollution and "sin" more in order to reduce tax on job creation, investment and things like giving. The Chancellor did make small steps in this direction last week. I'm with the Business Secretary in hoping the steps are bolder in the years ahead.