On a personal level, I like and respect Cable, the Liberal Democrat Treasury spokesman. I recently chaired a conference where he was the keynote speaker; he was polite, courteous and went down like a house on fire. If they had any sense, the Lib Dems would make him their leader.
But while Cable oozes reasonableness, his decision yesterday to reignite class war and launch a tax attack on entrepreneurs was entirely unwarranted. His language was extreme: to claim, as he did, that “we have seen the super-rich pouring money not into job creating businesses but into acquiring mansions” is economic nonsense and untrue. It also casts doubt on people’s right to do as they please with their rightfully-earned money; it implicitly accuses anybody of living in a home worth £1m or more of having done something wrong.
His answer is a proposed 0.5 per cent annual tax on the value of such homes – even though thousands of shoebox sized homes are worth way more than that in London. Yet the tax won’t raise the £1.1bn he thinks it would, and while Cable is right to want to take the poor out of income tax, this is not the way to do so. His refusal to countenance big enough spending cuts means that value added tax is bound to go up, which will cost the poor far more.
The property tax would hit many families who bought their homes years ago and don’t have high incomes. Many would have to sell up. Pensioners would have to borrow to pay it, turning it into a hidden inheritance tax rise. It is the latest sign that politicians are ready to impose retroactive tax on those with a lot of capital, which will make mobile and highly educated foreigners reconsider why they want to move here.
While the speech picked out foreign-born billionaires as those who would lose out – including Lakshmi Mittal and Roman Abramovich, who have both invested fortunes in the UK, created many jobs and generated plenty of tax revenue – the truth is that as the housing market recovers, thousands of people will be hit. A wealth tax such as this opens up a nasty Pandora’s box. It is a form of double or even triple taxation: people already pay income tax and then stamp duty. And if 0.5 per cent is all right, then why not 1 per cent, or 2 per cent? And if a wealth tax is fine on house prices, why not on stock market investments, or bank accounts?
Another of his policies was just as bad but garnered less comment: he wants to slash the annual exemption on capital gains tax from £10,000 to £2,000, a move which will hit small stock market investors and buy-to-let investors the hardest. Even more disastrously, he wants to raise capital gains tax rates – from 18 per cent today – so they align with income tax. This would undo one of the very few of Gordon Brown’s positive reforms. A worse, more damaging tax on entrepreneurs you could not imagine – it is the final proof that Vince Cable is no economics guru.