Coalition could scrap 50p tax rate

Tory MPs want to reduce the top rate of tax, currently set at 50p on earnings over £150,000, to be cut to 40p. At last year’s Liberal Democrat party conference, Nick Clegg promised to stop any attempts to scrap the rate – unless it was replaced with new taxes on unearned incomes.

On Tuesday the Liberal Democrats announced that they are in discussions over how to replace that tax, to ensure what they see as an adequate taxation on higher earners. The talks are taking place in preparation for the upcoming budget, due at the end of March.

Speaking to Channel 4 News, Mr Cable said the idea of a tax on property rather than earnings isn’t new: “It certainly isn’t new. The Liberal Democrat view is that we want to cut income taxes, particularly at the bottom end of the scale. In general we want to switch the burden of taxation from income to wealth. There are various ways in which we can do that and the mansion tax on high value property is Liberal Democrat policy.”

He said it was not a policy coming from him alone: “It’s not a personal agenda, Nick Clegg is leading the discussion and he is focusing in particular on lifting low earners out of tax. That will help millions of people.”

A rise to the minimum tax threshold was a key pledge in the party’s 2010 election campaign.

The so-called mansion tax is a wealth tax rather than one based on earnings and has been criticised for being unfair on elderly people who have low incomes but whose homes have accumulated value, particularly in the south east of England where property prices have soared over the past decade.

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‘Not ideologically wedded to the 50p tax rate.”

The announcement about tax discussions came on the BBC’s Today programme. Talking about plans to cut the higher rate of tax Mr Cable said: “It should be replaced by taxation of wealth, because the wealthy people in the country have go to pay their share, particularly at a time of economic difficulty.

“How exactly that is configured is a detailed matter for negotiation. But that principle must be upheld and a mansion tax is actually a very economically sensible way of doing it.”

He continued: “I and my colleagues are not ideologically wedded to the 50p tax rate.”

Ed Balls criticisms

Shadow Chancellor Ed Balls said no tax was “set in stone” but said there were other priorities. “Do we really think families on £150,000 plus are the first priority?” Labour has called for Mr Osborne to cancel measures coming into force in April that will see around 200,000 working parents lose up to £4,000 in working tax credits.

The budget will be announced in detail on March 21. Chancellor George Osborne has said he will proceed with stringent austerity measures amid the economic downturn.

Leaked letter attacks government industrial policy

Also today, a leaked letter written by Mr Cable revealed criticisms of the government’s economic strategy – saying it lacks a “compelling vision” for industry.

He told Channel 4 News’ Jon Snow that in his travels around Britain promoting industrial policy he has seen some worrying problems, although he said he letter was mainly positive about government policy.

But he added: “Market forces are not always adequate. There is not enough training or research and development unless government is actively involved. “

He ended by saying there is cause for celebration as the car giant Nissan announces they will be developing a new car at their Sunderland plant. he said: “The very good news is Nissan’s new jobs. That’s what we should be focusing on.”