John Fitzsimons reckons the UK's most trusted politician is off his rocker with his `mansion tax' idea, which would cripple the housing market in the UK.
If there's one man who's had a brilliant credit crunch, it's Vince Cable.
The man who for years had warned about the UK's debt bubble looked like a sage soothsayer when the crash happened, and followed it up with an impressive reign as caretaker leader of the Liberal Democrats.
He is now officially the most trusted politician of any stripe in the UK, the most recognised Lib Dem, and the poster pin-up of economic students the nation over.
But I think his idea for a 'mansion tax' is plain daft, and would cripple the recovery the housing market is currently enjoying.
The proposed tax
Cable chose last week's Lib Dem party conference to unveil his idea, and it has certainly attracted the attention he no doubt hoped for.
Here's what he has proposed, for those of you who didn't avid follow the conference: If a property is valued at more than £1m, a tax of 0.5% will apply to each pound over that mark the property is worth.
So if the property is worth £1.5m, the tax will only apply on the portion over £1m: i.e. £500,000. As a result, the owners will have to fork out £2,500 in tax, which will enable the Government to stop charging income tax to low-income workers and low-income pensioners.
The reasoning behind it
There is a certain logic in favour of such a tax, which has won over my colleague Ed Bowsher. The Government needs to boost its coffers somehow, and a tax on the rich to help the poor in this way (particularly one that won't have them all running overseas to avoid it) sounds like an inspired move.
But unfortunately, I agree with the unnamed MP who has described the idea as 'codswallop'.
Don't get me wrong - I have no problem with the idea of taxing the rich, and redistributing wealth. And with 250,000 properties in the UK worth more than a million pounds, this tax could soon bring in a serious amount of cash - indeed Cable reckons it would bring in more than £1bn.
So what's my problem?
But it's nuts!
My problem is, there are more holes in the idea than a cheap sieve.
Firstly, it punishes those that live in high-valued properties but do not necessarily have high incomes, particularly pensioners. The Lib Dems have said that under the plan, pensioners could defer paying the tax until after death. Oh well, that's OK then - as if Inheritance Tax wasn't bad enough, they have another posthumous tax to worry about.
There are also understandable issues over just how they will judge which properties are worth more than a million pounds. The favourite method appears to be Land Registry figures, but it's understood they may use house sales or even ask local authorities to carry out new valuations.
But valuations can easily be disputed or even worse, manipulated, especially if the property is on the brink of that £1m mark.
If it wasn't so terrifying that the Cable hasn't even figured out how this - let's face it - fairly crucial element will work, it would be funny.
And what happens when the value of the property changes? The last two years have shown just how turbulent the housing market can be in this country.
And finally, it's political suicide. The vast majority of properties valued in excess of £1m are in the South East - an area where the Lib Dems, up to now, have done pretty well. So those Lib Dem MPs in affluent areas are already looking pretty shifty.
Killing the housing market
Of course, the biggest problem with the plan is that it will act to stall movements in the upper end of the housing market, particularly in the South.
It doesn't take an awful lot for a property to be worth a £1m in London for example, but why would people want to buy them when they know they will be hit with an extra tax every year? Sure, £2,500 a year for a £1.5m house might not sound a lot, but it certainly stacks up over a couple of years.
This tax would also artificially constrict property prices - nobody would want their property to be valued at more than a million pounds.
As a result, that would also constrict the values of properties further down the chain. That means people like you and me, that can only dream of living in million pound properties.
And if our properties are forced down in price, it means more of us could end up in negative equity, unable to move. Coupled with the costs of Stamp Duty and Home Information Packs, the housing market could grind to a halt.
What he should do
I think that if Dr Cable were to become Chancellor - and let's be honest he only has a marginally better chance than you or I - he should drop this daft idea, and focus on sorting out the existing taxes on homeowners.
First would be to sort out the Council Tax bands, which have been untouched for 18 years. In fairness to Cable, the Lib Dems have long lobbied for them to be ditched, and replaced with a local income tax.
Then he should ditch Home Information Packs. Lovely idea, but in practice they have been an utter waste of space.
Next should be Stamp Duty. The current boundaries are utterly farcical. For a start, first-time buyers should be exempt - the tax is a significant barrier to entry for those desperately trying to save the money for a deposit, and to cover legal fees, let alone having to fork out in tax as well. It's a nonsense.
After that, Stamp Duty should only apply at 2% on all transactions over £200,000, 3% on transactions over £350,000 and 5% on transactions over £500,000. Threshold levels should also rise with house price inflation.
And if you really must implement an extra property tax in order to raise funds, then why not implement it on all second and third homes? That way, you are not arbitrarily punishing London homeowners, or pensioners who are being punished for their achievements retrospectively. That strikes me as a far more sensible, fairer, and in all probability more lucrative tax than this nonsense.
Sorry Vince, you may have been right about the credit crunch, but I think this screwball idea is probably best consigned to the rubbish bin.
What do you think? How would you reform housing tax? Share your thoughts using the comments box below!
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