At the Association of Short Term Lenders Conference 2015 he explained that he would encourage downsizing by reforming council tax so it was linked to house prices.
He said: “In the UK you would have to be a dictator to [utilise spare bedrooms] – there’s no way we could get it through.
“The last government that I was part of introduced what was called a bedroom tax for a very limited part of the market, which was social housing and non-pensions, and the amount of aggro and resentment that this created with a lot of poor people and disabled people being forced out of their homes caused so much hatred that there’s no way the government are going to extend that.
“Directly taxing spare bedrooms is never going to happen.”
Cable said the government’s move to raise the inheritance tax threshold discourages downsizing, as people will be incentivised to hold onto their valuable homes for their children.
From 2017 there will be a £175,000 tax free household allowance per person which will sit on top of a £325,000 threshold which will be fixed until 2021.
Cable added: “The sensible way of dealing with this I believe is by reforming council tax.
“If we had an American style [system]… where the price determines the council tax they are paying it would encourage people to think much more actively about how they use their property.
“That again is politically very difficult.”
He said: “There is a very strong populist move which I encountered as a former MP in the London suburbs where people want to pass on their property to their children, but the more you consume that the more you encourage people to stay in owner-occupier properties.”
