Danny Alexander renews push for a Mansion Tax

April 9, 2014 12:45 PM
Originally published by UK Liberal Democrats

The Lib Dem Chief Secretary to the Treasury, Danny Alexander MP, has today outlined his proposals for a Mansion Tax. In a speech on tax this morning, Danny described some of the details of the Tax, which would apply on homes worth over £2 million.

The Liberal Democrats first proposed our Mansion Tax in 2009 and have been pushing for it to be implemented in Government, against huge opposition from the Conservatives.

Sign our petition for a Mansion Tax now.

Danny Alexander

Read the full speech

What a difference three years make.

Last time you kindly invited me to speak here was in 2011, after that year's Budget.

I'd been in government for less than a year, my party for the first time in 70 years.

And having chaired my party's manifesto writing process, I led the Liberal Democrat negotiating team on the coalition agreement.

A few weeks later I arrived in the Treasury via a brief sojourn in the Scottish Office.

A lot has been made of the note found on the Chief Secretary's desk - 'there is no money'.

Of course there's humour in all things, but many a word spoken in jest…

I come from a close family in a rural Scottish community.

We tend to see things fairly straightforwardly.

There was nothing straightforward about what I discovered at the Treasury.

You may be thinking - here we go, more self serving comments from a politician.

But the simple fact of the matter is that we were borrowing £1 in every £4 we spent.

We borrowed £157 billion in a single year.

Just think about that for a moment.

That's a lot of money for a lad from the Highlands to contemplate.

Come to think of it, it's a lot of money for anyone to contemplate.

Yes, whatever way you look at it, we inherited a mess.

I walked through those impressive doors you sometimes see on TV with 'HM Treasury' written on the side in the teeth of a howling storm.

I'm going to leave the detail of the immediate decisions we had to take to my memoirs which I hope are still some way off, but basically you all know the story.

It was a joint effort, sometimes sixteen hours a day, to steady the ship.

All sorts of decisions had to be taken and I'm pleased that everything we've done in coalition at the Treasury has worked so seamlessly - behind closed doors of course.

Of course there have been bumps in the road and the recovery has taken time to gather pace.

The slightest glitch in economic data, sometimes erroneous, was jumped upon by our opponents.

'Double dip!' they cried with delight, then 'Triple dip!'

But the storm has now abated;

There was no triple dip, there was no double dip

And we are seeing the first rays of sunshine.

As the IMF forecast just yesterday, the economy is forecast to grow by 2.9% this year, the highest rate in the G7.

Employment is at record levels.

Inflation is under control.

There's more to do with exports, investment and productivity but the propsects are positive.

And the recent Budget reinforced this momentum with the doubling of the annual investment allowance, the overhaul of the UK Export Finance direct lending programme, the new incentives for savers and radical overhaul of the pension system.

In coalition, especially in the teeth of a financial crisis, you may think it's difficult to preserve your own political identity. I would say that across our economic plan the government's approach bears the hallmark of the Liberal Democrats - balancing the books and doing it fairly; long-term investment in skills and infrastructure; a more competitive tax system.

Of course we all have our own values and beliefs and I dare say there are a few of you in this room who might be of a different political hue to myself.

But there is one area of tax policy that is most clearly and distinctly Lib Dem.

Cutting income tax for people on low and middle incomes,

It was after all on the front of the Liberal Democrat manifesto,

And our Coalition partners are on record as saying it couldn't be done.

But it is a tax cut that I believe everyone should support,

And this week that Liberal Democrat promise to raise the personal allowance to £10,000 came into effect.

It means an income tax cut worth up to £700 a year for 26 million working people.

Real help with the cost of living,

Real help improving work incentives

And real help to jump start the recovery too.

And in the Budget we went further raising the personal allowance to £10,500 from next year.

A total Liberal Democrat income tax cut worth £800 to millions of families up and down the country.

And with Liberal Democrats in government after 2015, we will go further.

We are committed to raising the threshold to £12,500 in the next Parliament.

In the first Budget of our second term we'd seek to lift the threshold by another £500.

Without getting on my liberal soap box, I've always been passionate about delivering this particular policy.

Of course, as we politicians always say, there's more to do, more difficult decisions to make.

To build the stronger economy and fairer society that this country deserves.

With the deficit next year forecast to be 4% of GDP next year,

It is still two years away before we will see our debt falling in relation to GDP.

Even to achieve this key goal will require the same pace of deficit reduction which we have delivered in this Parliament to continue for another two years.

The truth is that the Great Recession had a much bigger impact on our economy than anyone realised at the time.

This is a difficult message to get across.

Most people accept the need for austerity in the face of a difficult economic outlook.

Understandably, many will feel it counter intuitive to have to find more savings at a time when the economy is growing.

Achieving a reputation for economic competence is, as I have discovered, a high wire act.

It is also easy to make grandiloquent comments from the Opposition benches

- without, may I point out, the slightest acknowledgement of past error -

about easing up, borrowing more, we're out of the woods, it'll all be OK.

I say this to the Opposition -

We still have the note that your Chief Secretary left on his desk in the Treasury.

Having navigated the first phase we now have the confidence and experience to look at a second.

We have moved from emergency resuscitation to long term repair.

A stronger economy can only be built on sound finances, and those sound finances can only be secured by sticking to a long term plan.

Most people in this country support deficit reduction, because they can see it is necessary, and because we have made sure it has been done fairly.

The most important public services - the health service, schools - have had their budgets protected by the coalition.

The poorest people in the world have seen our aid commitments met.

The richest people in Britain have made the biggest contribution. While everyone is making a contribution, unlike any other country in the world going through this process, in the UK those with the broadest shoulders have borne the biggest share of the burden.

As someone who was brought up in small communities in the Highlands and Islands of Scotland, this sense of doing things fairly is important to me, as is making sure every penny we do have is used wisely.

No one of us like waste, inefficiency, or money being spent on things that aren't necessary.

That's why in this Parliament I have worked hard to control public spending, reform public services and get better outcomes for less money.

So 80 per cent of the deficit reduction work is being done through spending reductions.

But we have also increased some taxes, to ensure that the wealthiest, who are affected less by spending cuts, also make a proper contribution.

That's what lies behind our changes to capital gains tax rates and the restrictions on tax relief for the very largest pension pots, to give just two examples.

As a Liberal Democrat, we are committed to finishing the job fairly too.

That means that in the next Parliament the job can't all be done through spending cuts alone. That is in sharp contrast to the Conservatives, who think this can all be done through spending cuts, and in particular that the working age poor should bear the burden.

It is perhaps unsurprising that in addition to inheriting the consequences of a full blown financial crisis we also discovered a tax system which was a mess.

Full of anomalies, and opportunities for those intent on avoiding paying their fair share - it had more holes than Swiss cheese.

I've already mentioned capital gains tax and pensions tax relief as two key areas where in coalition we have made some changes.

One of the other most obvious was, and is, council tax.

Let me put this proposition to you …

Someone in a £700,000 home should pay the same council tax as some living in a house worth 7 million or 17 million, or even 70 million.

How do you feel about this?

Most people would agree that it is not right.

Well, over the past couple of years I've done a lot of work in the Treasury thinking through a fair reform.

Vince Cable had already done much of the ground work, much of the heavy lifting.

But now, in the Treasury, modelling and analysis has been done, property data processed, to understand how this can be delivered.

And so the new system I, as a Liberal Democrat, am proposing is really simple -

A modest additional banded levy on top of council tax for high value properties.

The annual charges, in addition to council tax will be set out in good time ahead of the General Election next year.

By building on the council tax system, there will be no need for a detailed valuation of the small proportion of properties affected.

Crucially this means that this policy could be implemented quickly after the election.

And people in homes valued at below £2 million would continue to pay just council tax.

Let me be crystal clear - There would be no additional charge on homes valued below £2 million.

The new levy will be collected in the same way as council tax, via local authorities, then pooled nationally.

Of course there will be appeals, and of course these will be heard properly, as they are currently with council tax.

But with a simple banded structure,

And with the level of the bands up rated annually, people living in typical family homes need have no fear of being sucked into this levy.

So, just as with the increases to the income tax personal allowance, I think there's widespread support for what is self evidently a fair correction to an outdated system.

Even our esteemed Mayor gruffly conceded that new council tax bands were - 'the kind of thing you need to look at'.

Simple. Practical. Deliverable. Fair.

Just as we've dealt with this particular anomaly in the tax system, there have been others to grapple with too.

Something that really gets my blood up, not just as a Liberal Democrat but as a British citizen is tax avoidance and evasion.

I'm sure it does with you as well.

One might express surprise at the juxtaposition between the political colours of the previous Government and those who benefited from its lax tax regime.

I can't imagine why they didn't get to grips with this.

It was just so manifestly wrong.

Since 2010, we have invested £1 billion extra in HMRC's compliance activities.

We have also closed down all sorts of avoidance loopholes, as well as introducing a new General Anti-Abuse Rule.

The extra revenue from this is estimated to be over £5 bn this year, increasing to over £7 bn next.

These are huge sums.

But tax avoidance and evasion are not confined to our shores.

Just last week I was very proud to welcome The Pakistani Federal Board of Revenue to the Treasury - they were here to learn lessons from HMRC about how to tackle tax avoidance and evasion, to strengthen their tax base.

A lot of our international tax rules were written in a different age, decades before the internet was invented.

I'm really proud that we Brits have led the way in pushing for new global tax rules.

Helping to pay for OECD work to draw up new rules that are fit for the purpose of making sure proper amounts of tax are paid in a modern global economy.

That work - on so called Base Erosion and Profit Shifting - we expect will come to fruition by the end of this year.

I commit my party to fully and appropriately implement the results of that work.

It will help us to collect more tax, but it may also mean that we have to look again at areas of our tax system that are outliers internationally.

Any changes would need to be made carefully, but our own tax system needs to be fit for the modern world just like other countries.

And we have led a global leap forward in tax transparency, meaning there are fewer places to hide.

New international agreements mean we are getting access to more information on offshore accounts than ever before.

So far, 44 jurisdictions have signed up to a new system of sharing financial information.

For those individuals involved - the clock is ticking on that information coming in.

In many ways the tax priorities and systems of a country reflect the values of that society.

My priority through the last 4 years has been to focus whatever tax cuts we can afford on ensuring that working people are able to keep more of the money they earn.

That helps people, but it also improves rewards and incentives for work too.

We now have one of the most competitive tax system in the G7.

For businesses, we have focussed on corporation tax to increase the incentives to invest in the UK.

We now have the lowest rate of Corporation Tax in the G7.

But we have also introduced a generous system for capital allowances,

Cultivated a generous environment for oil and gas exploration,

And we are supporting the creative sector through tax reliefs on video games, high end television and theatre.

With the best income tax and corporation tax systems, it is no coincidence that we have the highest growth rates in the G7.

So much for tax, what about spending?

I don't know about you, waste of any sort gets my blood boiling.

Dealing with anomalies in our tax system and closing evasion and avoidance loopholes is one thing, but spending wisely and with caution is another.

That's why since arriving at the Treasury my team and I have worked hard to control public spending, reform public services and get better outcomes for less money.

Nearly 80 per cent of the deficit reduction is being done through spending cuts, difficult though some of those decisions have been. We are on track with those spending reductions.

It is now almost four years since my party came into Government.

I'm not sure how you felt about the coalition at the time.

I seem to remember there was hope and scepticism in equal measure.

I'm not here boasting a perfect record.

There have been bumps along the road.

Believe me I have felt them.

Almost 4 years since I first walked through the doors of the Treasury, to try to confront the deepest economic problems for many decades.

I daresay four years ago some of you had your doubts about the Liberal Democrats, and maybe even about me too.

Well I hope that after four years we have proved the doubters wrong.

We have shown ourselves capable of making the right decisions for the country and sticking to them.

So much so that coalition government has gone from being seen as a huge risk, to being the model of government that most people who care about the future of our economy want to see continue.

A lurch back to single party government, of either hue, is rightly seen as perhaps the biggest risk to the strength, stability, and fairness that is the foundation of our recovery.

With the Liberal Democrats in government for a second term we can again have a Government anchored in the centre ground.

A Government that can be trusted to spend your money wisely and deal with the remaining challenges fairly.

Thank you