Clegg aids Labour's tax attack on the Tories

The Deputy PM went further than before and accused his coalition partners of turning "a blind eye to the super wealthy" by opposing a mansion tax.

The Tories and the Lib Dems have never sought to hide their differences over a mansion tax. But Nick Clegg went further than ever last night when he accused his coalition partners of "turning a blind eye to the super wealthy". He told ITV News

The Conservatives need to speak for themselves. I for the life of me don't understand why the Conservatives think it's ok that an oligarch can buy a palace in Regent's Park for tens of millions of pounds and pay the same council tax as a three-bedroom family house in Lewisham.

That is just unfair. We can't keep turning a blind eye to the super wealthy basically being taxed the same way on their properties as hard working families across the country.

Clegg's words prompt the question of whether the Lib Dems will line up with Labour if and when Ed Miliband succeeds in forcing a Commons vote on a mansion tax. Vince Cable has suggested that his party will vote in favour of the opposition motion provided that it is not tied to the reintroduction of a 10p tax rate (which the Lib Dems oppose) and Clegg similarly indicated that it would depend on the wording. 

Neither Vince nor I know what will be put before us so we can't of course determine in advance how we would vote.

But of course the Liberal Democrats for a long time have been the leading advocate of greater fairness in tax.

I've been told by a Labour source that the motion will not include a commitment to introduce a 10p tax band in order to maximise the chances of support from the Lib Dems. The party sees the vote as a chance to show how the Tories are on the wrong side of the new tax divide in British politics. Miliband believes that the Conservatives' decision to write privately to their donors soliciting funds to combat a "homes tax" leaves them particularly vulnerable to the charge that they are the party of the rich. 

The irony is that before the last Budget, George Osborne, the man now leading the charge against the tax, considered introducting two or three new higher council tax bands on houses worth more than £1m, a measure that the Lib Dems could have presented as a mansion tax. But this option was ruled out after David Cameron's shire Tory instincts asserted themselves and the PM personally vetoed the proposal. With the Tories now having ruled out anything resembling a mansion tax, the Lib Dems see no reason to go easy on their coalition partners.  

Nick Clegg with Ed Miliband at Buckingham Palace to mark the Duke of Edinburgh's 90th birthday on June 30, 2011 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Theresa May's U-Turn may have just traded one problem for another

The problems of the policy have been moved, not eradicated. 

That didn’t take long. Theresa May has U-Turned on her plan to make people personally liable for the costs of social care until they have just £100,000 worth of assets, including property, left.

As the average home is valued at £317,000, in practice, that meant that most property owners would have to remortgage their house in order to pay for the cost of their social care. That upwards of 75 per cent of baby boomers – the largest group in the UK, both in terms of raw numbers and their higher tendency to vote – own their homes made the proposal politically toxic.

(The political pain is more acute when you remember that, on the whole, the properties owned by the elderly are worth more than those owned by the young. Why? Because most first-time buyers purchase small flats and most retirees are in large family homes.)

The proposal would have meant that while people who in old age fall foul of long-term degenerative illnesses like Alzheimers would in practice face an inheritance tax threshold of £100,000, people who die suddenly would face one of £1m, ten times higher than that paid by those requiring longer-term care. Small wonder the proposal was swiftly dubbed a “dementia tax”.

The Conservatives are now proposing “an absolute limit on the amount people have to pay for their care costs”. The actual amount is TBD, and will be the subject of a consultation should the Tories win the election. May went further, laying out the following guarantees:

“We are proposing the right funding model for social care.  We will make sure nobody has to sell their family home to pay for care.  We will make sure there’s an absolute limit on what people need to pay. And you will never have to go below £100,000 of your savings, so you will always have something to pass on to your family.”

There are a couple of problems here. The proposed policy already had a cap of sorts –on the amount you were allowed to have left over from meeting your own care costs, ie, under £100,000. Although the system – effectively an inheritance tax by lottery – displeased practically everyone and spooked elderly voters, it was at least progressive, in that the lottery was paid by people with assets above £100,000.

Under the new proposal, the lottery remains in place – if you die quickly or don’t require expensive social care, you get to keep all your assets, large or small – but the losers are the poorest pensioners. (Put simply, if there is a cap on costs at £25,000, then people with assets below that in value will see them swallowed up, but people with assets above that value will have them protected.)  That is compounded still further if home-owners are allowed to retain their homes.

So it’s still a dementia tax – it’s just a regressive dementia tax.

It also means that the Conservatives have traded going into the election’s final weeks facing accusations that they will force people to sell their own homes for going into the election facing questions over what a “reasonable” cap on care costs is, and you don’t have to be very imaginative to see how that could cause them trouble.

They’ve U-Turned alright, but they may simply have swerved away from one collision into another.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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