Clegg: property taxes should replace the 50p rate

Deputy Prime Minister says 50p rate will be scrapped once low and middle incomes are “breathing more

If George Osborne's hint in last week's Budget wasn't enough, we now know for certain that the 50p tax rate will be scrapped at some point during this parliament. In an interview with the Financial Times, Nick Clegg suggests that the tax will be abolished once those on low and middle incomes are "breathing more easily" and will be replaced with a range of new property taxes.

As Clegg points out, Osborne won't want to scrap the 50p rate until he's certain that he can offer relief elsewhere. Polls show that the tax is relatively popular with voters and Labour would seize any opportunity to portray the Chancellor as a friend of the rich. It's notable that while the progressive 50p rate is "temporary", the regressive VAT increase is "permanent".

Senior Lib Dems, most notably Vince Cable, have long spoken of their desire to divert taxation away from income and towards property. In his recent New Statesman essay on reclaiming Keynes for the coalition, the Business Secretary wrote of the need to shift taxation "away from profitable, productive investment (as opposed to unproductive asset accumulation, as with property)".

Before this, in his speech at last year's Lib Dem conference, Cable also argued for higher taxes on land as well as property (the subject of a recent NScover story by Jason Cowley).

He said:

It will be said that in a world of internationally mobile capital and people it is counterproductive to tax personal income and corporate profit to uncompetitive levels. That is right. But a progressive alternative is to shift the tax base to property, and land, which cannot run away, [and] represents in Britain an extreme concentration of wealth.

Over the weekend, Cable returned to this theme in several interviews and spoke of the need to "shift from high marginal rates of tax on income which are undesirable, to taxation of wealth, including property". Asked if he was considering a so-called "mansion tax", he said: "I'm sure that's one of the things we're going to have to look at."

Clegg's FT interview is short on detail, although, unlike Cable, he rules out a version of the "mansion tax" proposed by the Lib Dems at the last election and supported by David Miliband during the Labour leadership contest. Instead, he suggests the coalition will "look at the way the council tax system is structured; the way stamp duty is structured".

Another option, as Jason suggested in his piece, would be to introduce capital gains tax on the profits made from the sale of first homes.

On taxation at least, the Lib Dems can now claim to be exerting serious influence on the Tories. Osborne has embraced their plan to raise the personal income-tax allowance to £10,000 by the end of this parliament and is now set to restructure the taxation of top earners along liberal lines.

Labour must hope that the 50p rate raises some significant revenue. If not, the party could be left on the wrong side of the tax debate.

George Eaton is political editor of the New Statesman.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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