vallierojas: Cable confirms end of 50p tax rate, and reveals 'mansion tax' plans

Business secretary in agreement with the chancellor over tax rate, but says the wealthy have to 'pay their share'

The business secretary, Vince Cable, has confirmed the 50p rate on tax will be abolished ? and revealed the government would consider bringing in a 'mansions tax' to ensure the wealthiest pay their way.

The chancellor, George Osborne, ordered a review of tax on top earners in the budget last week, restating that the 50p rate on those who earn above �150,000 was only temporary, and triggering speculation that the rate could be wound down as soon as 2013. Cable in two interviews raised the issue of the rate and alternatives to it.

The move would leave the government exposed to accusations that it is softening taxes for the rich, amid intense public anxiety about the fairness of the cuts. The business secretary's intervention comes just a day after up to 500,000 people took to the streets to demonstrate against the government's economic plans.

Labour pointed out that the coalition would be reducing the tax for the richest while forcing the poorest to lose the largest proportion of their pay packets through the VAT hike.

Cable, who argued in opposition for a 0.5% levy on properties worth more than �1m, told the BBC's Politics Show: "I and George Osborne agree that we have to move away from extremely high marginal rates of tax on income, including that [the 50p rate of tax]."

He told BBC Radio 5 Live: "It moved up to 50p in an emergency because we had to have a sense of solidarity that everybody was bearing some of the pain, and the chancellor said in the budget that we're going to have to move away from that. I agree with him. The Liberal Democrats agree with him.

"But it needs to be a change which is fair overall and does take account of the fact that the wealthy have got to pay their share. The emphasis may well have to shift from high marginal rates of tax on income which are undesirable, to taxation of wealth, including property, and the chancellor said that, as much as that, in his budget."

Asked if he was advocating a mansion tax, he said: "Well, there is a very strong argument ... that you need to have a proper base for taxing property and I'm sure that's one of the things we're going to have to look at as we change away from these very high marginal rates."

Labour originally introduced the tax rate last year, and the Tories promised to keep it temporarily. Osborne said at the budget: "I am clear that the 50p tax rate would do lasting damage to our economy if it were to become permanent. That is why I regard it as a temporary measure."

The Treasury expressed concern about how much revenue the higher rate was bringing in. The Office for Budget Responsibility later revealed that it expected �2bn of the revenue to go uncollected amid evidence that companies had paid large bonuses prior to its introduction to avoid paying part of the costs.

A Treasury spokesman said last week's budget set out all existing tax plans. Treasury sources also distanced it from Cable's proposals, saying there was "no detailed planning" on taxes for top earners currently being developed by officials.

Cable has raised the possibility of a new mansion tax amid increasing nervousness in the coalition over the AV referendum in May. The issue will prove the biggest test for the coalition, as a totemic policy for the Lib Dems and a test of David Cameron's leadership to his backbenchers, all of whom oppose AV. If the Lib Dems lose, the leadership will need to prove to the rank and file that it is making serious gains elsewhere. A mansions tax would appeal to the disillusioned left of the party.

Asked about the effect the referendum could have on the coalition, Cable said he was "pretty sure" the government would survive it, even if the Lib Dems fail to secure AV: "I am pretty sure it would [survive]. But there is a lot at stake and that is why we are fighting hard for it."

He added: "We are a grown-up party, we have not thrown our toys out of the pram because things happen we disagree with. I think you will find the approach to this whole thing is a very mature one."

The competing campaigns for the referendum step up a gear on Monday when the No to AV group launch a national advertising campaign appealing to people to keep the one person one vote system.

Matthew Elliott, director of the No campaign, said: "One person, one vote is the cornerstone of our democracy. It represents our most profound political belief. It is a statement that when it comes to electing those who lead us, we each have an equal say and an equal voice. That is why we are clear in our aim: Keep One Person, One Vote and stop supporters of extremist, fringe parties getting more than one vote."

The Yes to Fairer Votes campaign Monday publishes the names of all its funders, demanding that the No campaign does the same. It has received �951,000 from the Joseph Rowntree Reform Trust, �909,517 from the Electoral Reform Society and �114,000 from the Electoral Commission.

Polly Curtis

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