George Osborne will announce plans for an “aggressive” crackdown on stamp duty avoidance by the super-rich on Wednesday in a Budget that he claims will be aimed at “working people”.
The Chancellor’s pledge on stamp duty comes amid reports that rock stars, including Sir Mick Jagger and Bob Geldof, are denying Britain more than £1 billion a year in tax by placing properties into offshore companies.
Mr Osborne described the practice yesterday as “completely unacceptable” and said that he would come down on it “like a ton of bricks”. Anyone buying a house to live in will have to pay the tax, however they structure the purchase, under new rules that are expected to raise about £200 million.
Mr Osborne said that the Budget was designed to benefit low and middle income workers. The move is one of a series of measures hinted at, or already announced by the Chancellor, for his second Budget. These include:
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Speaking on the BBC’s The Andrew Marr Show, Mr Osborne also spoke of changes to the policy to remove child benefit from higher rate taxpayers, but hinted that they would simply be tweaks. The likely change is to raise the threshold for losing the benefit closer to £50,000 rather than the current £43,000.
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Mr Osborne said that he understood that families on £45,000 or £50,000 did not “feel particularly rich” but said they were among the better off 15 per cent of families. Without losing child benefit they would not be contributing at all to deficit reduction, he added.
Sources said that the crackdown on stamp duty, alongside the anti-abuse law and a “tycoon tax” that would include a cap on tax breaks, would send a message to tax avoiders.
Liberal Democrats will claim the measures as the price they demanded in return for the Chancellor being able to cut the 50p top rate of tax for those earning more than £150,000 a year.
A senior Lib Dem source said that their ambition was to “call this a Robin Hood budget”. He added: “The people who must benefit are working people in the squeezed middle. Top-earning tax dodgers and their army of flashy accountants should be quaking in their boots.” But not everyone in the party is convinced. Stephen Williams, the Liberal Democrat Treasury spokesman, told the BBC that now was not the time to “announce the abolition or the reduction of the 50p tax rate”.
Lord Oakeshott of Seagrove Bay said that while he welcomed the tax avoidance plans, they were simply measures to close loopholes and could not be described as actual “wealth taxes”.
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He added that he wanted to see the introduction of a mansion tax on expensive property, although sources said that this had been ruled out because of the practical difficulties in implementing it. “How can it be a fair Budget if it leaves people with a £40 million mansion paying only £41.50 a week in property tax?” Lord Oakeshott asked. “Can’t Mr Cameron and Mr Osborne see that Notting Hill is turning into a northern outpost of Monte Carlo?”
However, others will call on party members to welcome the measures. Simon Hughes, the Lib Dem deputy leader, urged MPs not to forget the “great steps” in raising the personal allowance. Lord Ashdown of Norton-sub-Hamdon, a former party leader, said he would judge the Budget not on individual measures but on the overall tax burden afterwards, and whether it fell disproportionately on the wealthy.
Lib Dem sources in the Government believe that the Budget will please their party. But they are angry about briefing by Conservatives claiming that the move to regional pay deals will be accelerated. One source said that this was not a Budget announcement and was still not ready for implementation.
Ed Balls, the Shadow Chancellor, rejected Mr Osborne’s claim that the Budget would help ordinary working people. He said the fact that the Chancellor was willing to drop the top rate of income tax showed how “out of touch” he was. “Whose side are they on?” he asked on The Andrew Marr Show.
He accused Mr Osborne of “throwing scraps” to Tory and Lib Dem backbenchers instead of focusing on growth and youth unemployment. Labour has said it would repeat the bankers’ bonus tax to help boost jobs for the young and cut VAT for a year.