Vince Cable has signalled he will examine radical new taxes on wealth to ease inequality in Britain, as he vowed to win over voters from the “cult” of Labour under Jeremy Corbyn.
The new Liberal Democrat leader, who secured the job last week after he emerged as the only candidate, said he wanted to look at ideas such as aligning capital gains tax with income tax to ensure the richest pay more.
The former business secretary also said he was interested in exploring the concept of a land value tax, which would see an annual levy placed on properties according to the size of their plot.
Aligning CGT with income tax would be a drastic move. The higher rate of CGT, paid on the profit on the sale of an asset, is just 20%, compared with the 45% top rate of tax. It was slashed by George Osborne in 2016.
“There were some quite generous tax cuts on capital gains,” said Cable. “Why do that? There is actually a very strong case for aligning capital gains tax and income tax, which is a standard sort of tax avoidance. So, we must certainly do that.” Cable added that while Labour had attacked inequality, it had not announced the policies capable of tackling it. “It wasn’t terribly clear what [Corbyn] was actually going to do that would make any difference,” he said. “Most of his tax policies do involve higher marginal tax rates on high earners, but as far as I know he didn’t say anything at all about wealth and property, which is actually the real source of inequality.
“The Labour party quite cleverly but dishonestly tried to pretend that somehow or other you make the country more of an equal place by taxing corporations or companies, but of course they don’t exist, they are just legal entities, so all they do is pass it on in higher prices or lower wages, maybe lower dividends to pension funds.
“That is not egalitarian, that doesn’t solve the problems, and you can only do that by restoring good economic growth and combine it with Scandinavian types of redistributive tax policy and generous social provision. I’m for a kind of Swedish model of western economy, I’m not in favour of 1970s socialism.”
He hinted he would put greater emphasis on his past support for adding more council tax bands to cover expensive homes, but stopped short of reviving his “mansion tax” idea. “We didn’t make a big deal of this in this election, but in previous elections – and I think I would like to – [we have backed] reforming the council tax system so it’s more of a tax on property value.
“What happened [with the mansion tax] was that that language put a lot of people off: they felt it was attacking people who live in wealthy houses even though they are old ladies who don’t have much of an income. But the idea of reforming council tax bands was something we campaigned on in government and there is a continuing case for it.”
He said the idea of an annual land value tax, in place of business rates in the first instance, could be something he would look at.
“A good place to start is by replacing the system of commercial rates with something based on land values,” he said. “That would be a good place to try it out, experiment, see what the valuation problems are, if any. So let’s try it out. The principle is a good one.
“The Tories are very clever in using it to wind people up, to say this is a Labour or Lib Dem tax on people’s back gardens, which of course is nonsense because you’d exempt smallholdings.” He said he wanted to try to appeal to Labour voters, despite concerns the party had become a Corbyn “cult”.
“Well, as long as it remains cultish and emotional, it’s quite difficult to counter,” he said. “There are two basic problems. One is their economics, which make no sense. Of course if you are in a cult you don’t worry about things like that, but I think a lot of people will start to worry about it.
“The second, and the big contradiction at the heart of it, is their position on Europe, where most of the people have joined the cult because they thought somehow or other the Labour party deep down was on their side of the Brexit debate. Well, they are not – that will become more apparent with the passage of time.”
Cable said he would work with Labour and Tory MPs to frustrate the government’s hard Brexit plans. He said there was significant scope to use the absence of a Tory majority in the Lords to block the government. “Given its weakness, the government isn’t in a position to bring sanctions against the House of Lords if they defy them,” he said. “So I would hope that they are tough.”
He said that should a major realignment happen, he hoped the Lib Dems would be “part of the nucleus”. “In the early days the SDP and the Liberals coexisted,” he said. “The merger came six years later. So if something does happen, then it’s something we have to live with and coexist with, and it will require some careful diplomatic politics.
“I don’t know how it might happen, but I know there are a lot of very angry, very worried Conservatives about the way their party is going, and similarly on the Labour side. Quite a lot of them are vulnerable to deselection, and others who feel that Corbyn has had a good election but is a disastrous recipe.”