The Lib Dems' new property tax plan

Clegg and Cable push for a new tax on profits from first homes above £1m.

George Osborne has long made it clear that he regards the 50p tax rate as a "temporary" measure that will be abolished as soon as politically possible. As I noted earlier this year, Osborne has pencilled in 2013 as the earliest opportunity to remove the top rate. One of the most interesting debates in the coalition at the moment is on what (if anything) should replace it.

Both Nick Clegg and Vince Cable believe that the 50p rate should be replaced with a range of new property taxes and details of their plans are beginning to emerge. As today's Daily Mail reports, rather than a version of Cable's "mansion tax", the Lib Dems are now pushing for the introduction of capital gains tax on profits from first homes above £1m. Alongside this, they plan to reduce VAT on home improvements to 5 per cent (to encourage owners to renovate rather than to sell) and scrap stamp duty for low earners.

The move is part of a distinctly liberal attempt to shift the burden of taxation from earned income to unearned wealth (property, inheritance and land). Taking their cue from John Stuart Mill, the Lib Dems believe that the tax system should do more to reward merit, enterprise and innovation. As Vince Cable put it in his essay for the New Statesman on reclaiming Keynes, taxation should be diverted away from "profitable, productive investment" and towards "unproductive asset accumulation".

The NS has long argued that there are strong, principled and pragmatic arguments for higher taxes on property. As a recent editorial noted:

These automatically apply to largely untaxed foreign owners, target the source of much unearned wealth and are harder to avoid than taxes on income. In addition, they reduce the distorting effect that property speculation has on the economy.

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 allowance to £10,000 by the end of this parliament and is now set to restructure the taxation of top earners along liberal lines.

It remains unclear what stance Labour will take on this issue. During the leadership contest, Ed Miliband consistently argued for a "permanent" 50p rate but he has since modified his stance. He now merely says that abolishing the top rate is not a "priority" for him and that he will not take decisions on taxation this early in the parliament.

But having fought so long for a new top rate, many in Labour, including Miliband, will be reluctant to change course now. The tax is an important symbol of the party's commitment to a more equal society and pollsl show that it is popular with the voters. A recent Sunday Times/YouGov survey, for instance, found that 33 per cent think the top rate should eventually be brought down, 49 per cent think it should be made permanent and 51 per cent would like to see the threshold brought down to £100,000, with 29 per cent opposed. But electoral considerations aside, there is little doubt that the Lib Dems' bold agenda will require a more intellectually rigorous approach from Labour.

George Eaton is political editor of the New Statesman.

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The future of policing is still at risk even after George Osborne's U-Turn

The police have avoided the worst, but crime is changing and they cannot stand still. 

We will have to wait for the unofficial briefings and the ministerial memoirs to understand what role the tragic events in Paris had on the Chancellor’s decision to sustain the police budget in cash terms and increase it overall by the end of the parliament.  Higher projected tax revenues gave the Chancellor a surprising degree of fiscal flexibility, but the atrocities in Paris certainly pushed questions of policing and security to the top of the political agenda. For a police service expecting anything from a 20 to a 30 per cent cut in funding, fears reinforced by the apparent hard line the Chancellor took over the weekend, this reprieve is an almighty relief.  

So, what was announced?  The overall police budget will be protected in real terms (£900 million more in cash terms) up to 2019/20 with the following important caveats.  First, central government grant to forces will be reduced in cash terms by 2019/20, but forces will be able to bid into a new transformation fund designed to finance moves such as greater collaboration between forces.  In other words there is a cash frozen budget (given important assumptions about council tax) eaten away by inflation and therefore requiring further efficiencies and service redesign.

Second, the flat cash budget for forces assumes increases in the police element of the council tax. Here, there is an interesting new flexibility for Police and Crime Commissioners.  One interpretation is that instead of precept increases being capped at 2%, they will be capped at £12 million, although we need further detail to be certain.  This may mean that forces which currently raise relatively small cash amounts from their precept will be able to raise considerably more if Police and Crime Commissioners have the courage to put up taxes.  

With those caveats, however, this is clearly a much better deal for policing than most commentators (myself included) predicted.  There will be less pressure to reduce officer numbers. Neighbourhood policing, previously under real threat, is likely to remain an important component of the policing model in England and Wales.  This is good news.

However, the police service should not use this financial reprieve as an excuse to duck important reforms.  The reforms that the police have already planned should continue, with any savings reinvested in an improved and more effective service.

It would be a retrograde step for candidates in the 2016 PCC elections to start pledging (as I am certain many will) to ‘protect officer numbers’.  We still need to rebalance the police workforce.   We need more staff with the kind of digital skills required to tackle cybercrime.  We need more crime analysts to help deploy police resources more effectively.  Blanket commitments to maintain officer numbers will get in the way of important reforms.

The argument for inter-force collaboration and, indeed, force mergers does not go away. The new top sliced transformation fund is designed in part to facilitate collaboration, but the fact remains that a 43 force structure no longer makes sense in operational or financial terms.

The police still have to adapt to a changing world. Falling levels of traditional crime and the explosion in online crime, particularly fraud and hacking, means we need an entirely different kind of police service.  Many of the pressures the police experience from non-crime demand will not go away. Big cuts to local government funding and the wider criminal justice system mean we need to reorganise the public service frontline to deal with problems such as high reoffending rates, child safeguarding and rising levels of mental illness.

Before yesterday I thought policing faced an existential moment and I stand by that. While the service has now secured significant financial breathing space, it still needs to adapt to an increasingly complex world. 

Rick Muir is director of the Police Foundation