LibDems scale back planned "mansion tax"

By Tim Castle

LONDON (Reuters) - The Liberal Democrats scaled back plans to tax the owners of expensive homes on Monday after criticism the levy would hit people of relatively modest means as well as the super-rich.

Party leader Nick Clegg said the proposed annual property tax will now only apply to homes worth more than 2 million pounds, raising the threshold from the 1 million pounds originally planned.

The change to the so-called "mansion tax" came after an internal review following its chaotic launch at the party's annual conference in September where treasury spokesman Vince Cable failed to fully brief colleagues.

Senior LibDem politicians were left floundering when asked about the proposals on live television while one reportedly denounced the levy at an internal meeting as "codswallop."

"We wanted to make sure that a mansion tax by name was a mansion tax by nature, too," said Clegg, announcing the change in a speech in London.

"We didn't want family homes that might have got caught up in a local property bubble to be hit."

The property charge is designed to help subsidise tax breaks for the poor and had been intended as an eye-catching policy to boost the party's prospects ahead of a general election due by next June.

But critics said the 1 million pound threshold was too low and would unfairly hit homeowners in expensive areas of the southeast. They said it could also hit cash-poor pensioners living in properties whose values have soared over past decades.