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By Peter Hoskin
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One
of the most intriguing stories in today’s papers comes courtesy of the Mail
on Sunday
. George Osborne, it tells us, has drawn up a plan with Nick
Clegg: in return for Lib Dem support for a benefits freeze, there could be new
council tax bands imposed on homes worth over £1 million. The plan is said to
be opposed by…

Woah,
hold on a minute. New council tax bands?! Didn’t Mr Osborne dismiss the
prospect in the very same paper last month? Why, yes he
did
. “You would have to send
inspectors out [to revalue every home in the UK] and it wouldn’t raise much
money,” said that Chancellor back then, “I’m not going to let the tax inspectors
get their foot in the door.”

But, despite that,
this latest story shouldn’t come as too much of a surprise. During the negotiations
for the last Budget, Mr Osborne was willing to give
the Lib Dems a mansion tax
in exchange for a 40p top rate of tax, but was
vetoed by David Cameron. Indeed, Mr Cameron is said to be against this latest
deal involving a property tax, too. As a source tells the Mail on Sunday, “The
Prime Minister is not a fan of property taxes.”


Myself, I hope the
Prime Minister relents. Higher taxes are never to be accepted happily or
lightly, but there are reasons why new council tax bands make sense during a
time of austerity, particularly if they herald a shift away from tax on income.
We’ve been through many of those reasons on ConHome before, including:

i) They’re a carrot to offer the Lib Dems. As I’ve mentioned
before
, there’s a dwindling stockpile of concessions to make the Lib Dems.
This might sound like a good thing when it comes to Tory purity — but what
happens when the Tories want to introduce policies against opposition from the
Lib Dems?  

ii) They’re surprisingly popular among Tory
voters.
A recent
ConservativeHome survey
found that “an annual mansion tax on big homes,” of
the sort that Vince Cable was pushing on the Marr Show earlier, is “unacceptable”
to 73 per cent of Tory voters. However, “higher council tax bands on high value
properties” are “acceptable” to 57 per cent. Certain members of the Free
Enterprise Group have also
proposed
new council tax bands on high-value properties.

iii) Taxes on property are less harmful to
growth than other taxes.
According
to this
report
by the OECD, that is.

As I’ve suggested
before
, the Osborne/Clegg case might be strengthened if the Treasury sets
about enumerating the full effects of such a tax increase — on growth, on those
hit by it, on revenues, etc — just as they did for the 50p tax rate. Which is to say: let the
arm wrestle begin.

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