Tories eye mansion tax and raid on pensions

Party stunned as No10 and Treasury discuss series of levies on better-off homeowners and workers

BORIS JOHNSON has been weighing up shock plans to impose a “mansion tax” on owners of expensive homes, in a move which will infuriate the Conservative Party’s grassroots and stun MPs.

Severe cuts to pension tax relief enjoyed by millions of voters are also being considered by the Prime Minister and his Chancellor, Sajid Javid, for the Budget next month in an effort to pay for a huge increase in public spending.

Two separate sources told The Sunday Telegraph that ideas to raise more tax from better-off homeowners had been discussed on separate occasions in the past few weeks at the highest levels of the Treasury and No10.

Some Treasury officials are understood to be keen on introducing what has been described as a “recurring” wealth tax that would primarily affect London and the South East, possibly as a quid pro quo for cutting stamp duty.

It is not clear exactly what form the tax would take if it were included in the March 11 Budget, but options range from a levy – first mooted by Ed Miliband, the former Labour leader – to an additional higher band of council tax.

Some Tory advocates of the move point to New York, where property taxes are much higher. But the fact that an idea originally floated by Labour is being discussed by the Government will infuriate many Tory activists.

The talks come as Treasury officials have privately compiled a lengthy menu of tax rises, including the proposed levy on expensive homes, capital gains, other stealth raids on business and even inheritance tax to pay for increased public spending while sticking to the Chancellor’s new fiscal rules.

One of the ideas being considered includes cutting pension tax relief for those earning £50,000 a year or above from 40 per cent to 20 per cent to raise an extra £10billion a year, as the Financial Times reported yesterday. More than four million people, including many traditional Tory voters, would stand to lose out from such a policy.

Any move would be partly designed to send a signal to Northern and Midlands voters that the Tories were no longer the party of the Southern shires and middle classes, one source said. The Treasury’s desire to balance the current budget by 2023 was another reason cited.

Writing in The Sunday Telegraph, John O’Connell, chief executive of the TaxPayers’ Alliance, says: “It seems to be a misunderstanding of what the Tories’ new voters were looking for.

“They may be new converts to the message, but they still expect the Conservatives to be the ones backing them when they succeed. Levelling up doesn’t mean cutting other people down.”

A senior Conservative MP said he would be “stunned” if Mr Johnson and Mr Javid went ahead with either of the taxes, saying: “It is ridiculous. They need tax cuts, they need to promote growth.

“We have already got a mansion tax in excessive stamp duties and as a result the volume of transactions has halved and the revenues have come down. They should do the reform without the trade-off.

“They have got to get rid of this idea that people believe in the politics of jealousy. If you want to tax the rich out of the country you vote Labour or Liberal Democrat.

“If you are happy for people to get on in the world and make a good living you vote Conservative.”

News of the bombshell wealth tax plans – discussed since Mr Johnson’s landslide election victory – will alarm Tory activists already bruised that the Prime Minister dropped a pledge

during last year’s leadership contest to lift the higher rate of income tax. There is also disquiet among Tory ranks about the expected decision to give the High Speed 2 rail project the go-ahead, even though it will cost £106billion, and the decision to allow Huawei to build the UK’s 5G network.

The Conservative manifesto only proposed modest reforms to stamp duty by bringing in “a stamp duty surcharge on non-UK resident buyers”. They also pledged to “redesign the tax system so that it boosts growth, wages and investment and limits arbitrary tax advantages for the wealthiest in society”.

Mr Johnson floated the idea eight months ago of raising the threshold for paying stamp duty from its current level of £125,000 to £500,000 at the same time as lowering the top rate from 12 per cent to 7 per cent, freeing more than 300,000 buyers from the tax.

But Tory advocates of such a move had not previously believed that it should go hand in hand with a tax raid on existing homeowners, many of whom may not have sufficient income to afford it.

The Government has also already

‘The Budget must be full of optimism, promoting growth and encouraging people to spend their wealth and income, not to destroy it’

announced that it is not going to cut corporation tax, as previously agreed, and that it is cracking down on entrepreneurs’ relief.

John Redwood MP, a former Cabinet minister, said: “The Budget must be full of optimism, promoting growth and encouraging more transactions and people to spend their wealth and income, not to destroy it.”

John Strafford, a spokesman for the Campaign for Conservative Democracy, a grassroots group, added: “I am a little bit worried about the direction the party is going in on this tax issue.

“I feel that we are a low Government spending and low tax party. That is what people like to see. Many of our new voters – that is what they want to see.

“They want to get out of these big spending commitments like HS2, and get back to having a good, Conservative government.”

An HM Treasury spokesman said: “While we keep all aspects of the tax system under review, we do not speculate ahead of the Budget.”

No10 declined to comment. A source said no decisions had been made and talks were at a very early stage about policies to be announced in the Budget.