Tory MPs and members grudgingly move towards acceptance of higher council tax on high value properties as price of deficit reduction deal

By Tim Montgomerie
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1.15pm update: Dom Raab MP has made it clear that the report referred to below does not represent his view, even though he is a member of the Free Enterprise Group. He commented:

"It is vital we hit the Coalition's existing debt target, but any shortfall should be made up from public spending savings, not whacking those who have worked hard, saved and already been massively taxed on their homes".

I suspect he may not be the only FEG member who doesn't agree with the view attributed to Kwasi Kwarteng. I suspect Eric Pickles is also an opponent. I'm with Kwasi, however, and not just because higher bands are likely to be necessary to persuade Nick Clegg and the Liberal Democrats to back the "public spending savings" that Dom mentions. I favour a judicious rebalancing of the tax system, away from the taxation of today's earnings and gently towards property and wealth. Such a rebalancing is both economically efficient and socially just.

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The Sunday Times (£) reveals that the Free Enterprise Group of Tory MPs is ready to back higher council tax bands on higher value properties as a way of getting agreement with the Liberal Democrats on further deficit reduction. The newspaper reports that the group led by Kwasi Kwarteng and involving MPs such as Chris Skidmore, Margot James and Dom Raab believes that new upper bands could raise £650 million.  "The MPs," writes Jack Grimston, "propose two new bands of council tax, one on properties valued at £1m-£1.2m, and another for those above that. The average charge would be £4,000 and £7,000 a year respectively."

Higher council tax bands have always been the likely way of appeasing the Lib Dem demand for higher taxes on the wealthy as their price for accepting deeper cuts in welfare. George Osborne has ruled out Vince Cable's preferred option of a mansion tax - partly because it would require an expensive new collection system.

Voters - even Tory voters - have long supported higher taxes on wealthier voters and the latest ConservativeHome survey of Tory members (conducted since Friday afternoon) also finds support for higher council tax bands. While "an annual mansion tax on big homes" is rejected as "unacceptable" by 73% of Tory members "higher council tax bands on high value properties" are deemed "acceptable" by 57% of them.

No tax is an attractive proposition but in this fiscal climate it is more just and more economically efficient to tax high value properties than to tax petrol, work and investment.