Bloomberg News

Cameron Says U.K. Rich Will Pay More Tax Without Mansion Levy

October 07, 2012

U.K. Prime Minister David Cameron

British Prime Minister David Cameron. Photographer: Scott Eells/Bloomberg

U.K. Prime Minister David Cameron said his government will announce additional measures to increase taxes on the rich, while ruling out a so-called mansion tax wanted by his Liberal Democrat coalition partners.

“We are going to take further action to make sure that the richest people in our country pay their fair share towards deficit reduction,” Cameron told BBC television’s “Andrew Marr Show” yesterday as his Conservative Party began its annual conference in Birmingham, central England. He said people who save and buy large houses shouldn’t be hit “every year with a massive great tax. That’s not going to happen.”

The Conservatives have lost voter support since a cut in the top income-tax rate in the March budget allowed them to be painted by their opponents as the party of the rich. Cameron’s refusal to accept a levy on the most expensive properties risks increasing tensions with the Liberal Democrats, who say they will only support further cuts to welfare if he introduces new taxes on the wealthy.

The prime minister pointed to moves to stop tax evasion, remove tax reliefs and increase stamp duty on purchases of the most expensive homes as examples of measures his government has already implemented.

Cameron said the rich “are paying a greater percentage on their total income than they ever did” under the previous Labour government. He defended reducing the top rate of income tax to 45 percent from 50 percent on the grounds that the higher levy was “completely uncompetitive.”

Labour Attacks

The leader of the opposition Labour Party, Ed Miliband, used his own keynote conference speech last week to accuse Cameron of “writing a check to each and every millionaire in Britain for 40,000 pounds” ($65,000) with that tax cut. Miliband argued that Labour is now the party best able to represent people of all backgrounds and incomes.

Two polls published yesterday showed Labour extending its lead following its conference. A YouGov Plc (YOU) survey in the Sunday Times newspaper found 45 percent of respondents saying they would vote for Labour, 31 percent favoring the Conservatives and 8 percent backing the Liberal Democrats.

An Opinium poll in the Observer put Labour at 41 percent, the Conservatives at 30 percent and the Liberal Democrats at 9 percent. YouGov polled 1,782 people Oct. 4 and 5, and Opinium surveyed 1,965 adults Oct. 2-4.

Deputy Prime Minister Nick Clegg’s Liberal Democrats want to levy an annual 1 percent charge on houses and apartments valued at 2 million pounds or more. Chancellor of the ExchequerGeorge Osborne said the proposal would end up hitting people who are not wealthy. There are 74,000 homes in Britain above the 2 million-pound threshold, according to research published last month by the Centre for Policy Studies, a Conservative research Group.

‘Modest Homes’

“It’s going to be sold as a mansion tax, and then after the election, a lot of people in Britain with more modest homes are going to wake up and find they’ve been reclassified as a mansion,” he told Sky News television yesterday.

Osborne said the rich will have to make a big contribution to closing the budget deficit, though, with a further 16 billion pounds of savings required in the 2015-16 fiscal year, the government will need to consider more cuts to welfare and departmental spending.

In separate announcements, Cameron said the government will freeze local-authority tax in the year starting in April, meaning the average family’s bill will be 72 pounds lower next year than it otherwise would have been.

If councils choose not to hold down the levy, they could face the prospect of putting their planned increase to a public vote, Cameron’s office said.

The government will also cap the increase in average regulated rail fares at the level of retail-price inflation plus one percentage point in 2013 and 2014, Cameron’s office said.

To contact the reporters on this story: Kitty Donaldson in Birmingham, England at kdonaldson1@bloomberg.net; Robert Hutton in Birmingham, England at rhutton1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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