No mansion tax: Tories refuse to ‘clobber’ middle classes

George Osborne and David Cameron have rejected Liberal Democrat calls for a 'mansion tax', in a move set to prompt further recriminations between the coalition's two parties.

The chancellor said he would not introduce a new tax based on a percentage value of people's properties, in an interview given before the Conservative party conference gets underway in Birmingham today.

His decision will frustrate Lib Dems, including deputy prime minister Nick Clegg, who had expressed optimism that the Tories could be persuaded to adopt the policy to demonstrate the Lib Dems were making a difference to the coalition.

"Before the election they will call it a mansion tax, but people will wake up the day after the election and discover suddenly their more modest home has been labelled a mansion," Osborne told the Mail on Sunday newspaper.

"We don't think people who have worked hard, saved up to buy a home, should be clobbered with a mansion tax."

Cameron made clear he supported the move on BBC1's The Andrew Marr Show, saying: "I don't believe we should be a country where if you work hard, you save, you buy yourself a house, you try and pay down the mortgage… I don't want to be a country that comes after you every year with a massive great tax. That is not going to happen."

The move will be greeted with dismay by Lib Dem politicians. Matthew Oakeshott, a close ally of Vince Cable, told a fringe meeting at the Liberal Democrat autumn conference in Brighton two weeks ago that the adoption of a mansion tax was the best route to securing a much-needed "clear Lib Dem win".

Oakeshott had argued that the party needed "something really specific" which it could tell voters it had achieved in government. The mansion tax policy now appears a clear defeat for the coalition's junior party.

Instead the Tory conference will be focused on boosting aspiration, sources close to the prime minister have indicated.

"If you help people who aspire, it creates a virtuous circle. It means they do better, the country does better," one told the Sunday Times newspaper.

Osborne is expected to use his conference speech on Monday to confirm the details of a £500 million package designed to achieve this aim. Council tax will be frozen for a third consecutive year. Rail commuter fares will be capped at inflation plus one per cent.

These limited measures will win the support of the "fair-minded" British people, Cameron believes.

"We've got a lot to prove and there's no doubt that the mountain in front of us has got steeper and more difficult to climb," he told the Sunday Telegraph newspaper.

"But I think the determination that I have is that I see it even more clearly than when I first got the job… the things that need to be done, the steps that need to be taken. Deep inside the Conservative soul is the way to make sure you succeed, not only taking those big decisions, but actually firing up the aspiration of people to get the first home, the first job, the first mortgage, the first car, the first success in life."

Osborne also sought to put a positive spin on his work. He added: "I can't think of the last time anyone came up to me and was hostile or aggressive. Almost everyone who does says, 'you have an incredibly difficult job and good luck with it'."

The Tories are now 14 points behind the resurgent Labour party after Ed Miliband's 'one nation' speech to delegates in Manchester last week, putting the pressure on Cameron and Osborne to respond with good conference performances of their own.

They will spend the week resisting pressure from the right wing of the party over calls for further tax cuts. Former defence secretary Liam Fox is calling for a temporary suspension of capital gains tax, for example.

"We will always be fair and seen to be fair," Cameron said this morning.

"We have cut the deficit by one quarter in two years. The key thing is the economy is rebalancing. The government is absolutely determined to stick to its plan."

Not all the calls on the prime minister will be pulling him towards the right, however. Ryan Shorthouse, director of the Bright Blue organisation, wrote in an article for the Observer website that the party ought to consider another coalition with the Lib Dems after the 2015 general election.

"Conservatives are not libertarian loners, obsessed only with jaguars and spreadsheets. But, since the crash, deficit reduction has dominated," he said.

"Liberal Democrats, determined not to be swallowed up and lose a purposeful identity, desperately portray themselves as the human brake on Tory excess. Sceptical voters stay away, unconvinced that our politics is motivated by hearts, rather than just heads. Tory modernisation needs a reboot."