The Horsell's Mouth Politics, pedantry and personal interests

Vince Cable deep in thought

Up until today, I thought the Liberal Democrats had some good ideas about fair taxation, even if I disagreed about the end result of implementing them. They had argued to replace council tax with a local income tax because they didn’t believe the rich were paying enough and the poor were paying too much. There’s something to be said for that, certainly I feel the council tax is capable of improvement.

But where does this “tax income, not property” stance fit in with Vince Cable’s “£1m homes tax” proposed at the Lib Dem conference? It appears to throw that whole idea out of the window in a headline-grabbing exercise.

Let’s look at this properly. People who own homes worth £1m-plus largely, but not exclusively, have large incomes to match. The Labour government has already increased the top rate of income tax to 50% and I think that is right – I would even support it going higher on a temporary basis but I hope that in due course that it will return to 40%. People who earn enough to pay mortgages on large homes have already paid stamp duty, tax on their mortgage, tax on their income and high council tax bills. I think that’s enough punishment for owning a big house (or a not-so-big house in a sought-after area),

Go to the other end of the scale. A widow, 85, has lived in her family home all her life. Her husband fought in the RAF and subsequently worked for the same manufacturing company for 35 years as a middle manager – he died three years ago after a long illness on which the couple had to spend some of their savings to fund treatment. She has the resultant widow’s entitlement to his pensions and her own state pension.

The family home, which has been in their ownership since 1912, is a 5-bedroom house in a desirable part of Andover, Hants, and would fetch around £1m on the market today (who’s measuring this, by the way?) She has two children, one of whom has expressed an interest in living in the house and they have been putting money aside to pay inheritence tax.

Where is this £2,000 a year going to come from? Her income largely goes on heating, maintaining and paying council tax on the house. If the children are to pay it, that is a mis-directed tax and Vince’s tax should be on them (a tax on parents, the mind boggles). Should she spend more of her savings on paying the tax, even if that means she can’t afford healthcare at a later point?

Should she transfer ownership to her children now, forcing her to relinquish ownership early? How illiberal. Or sell up? Similar. This lady was born in the house and wants to die there – surely she should not be denied that dignity? She also wants to pass it on to her children – it forms the only significant asset of her estate. I cannot believe any party could contemplate legislation that would put that basic wish in jeopardy.

The LDs argued against council tax for precisely these reasons – that there is a small but significant section of society that is capital-rich but revenue-poor. They know very well the impact on pensioners in possession of historical but valuable assets of laws intended to catch the rich.

So why come forward with this poorly considered idea other than to catch some headlines during a conference that is sure to be eclipsed as the autumn continues?