Liberal Democrat Business Secretary Vince Cable has hinted at the Government imposing a new council tax band on high-value properties, and Tory Chancellor George Osborne is believed to be sympathetic to the idea.
The move, which could feature in the Chancellor's autumn statement next month, would likely have a large impact in Devon and Cornwall where property prices have spiralled in the last decade, though London would be hit hardest.
Conservative ministers have resisted Lib Dem pressure for a 1% annual levy on homes worth more than £2 million, which would have hit around 2,300 properties in second-home hotspots and estates in the greater South West. Instead, other new wealth taxes for the best off are coming to justify another £10 billion of cuts in welfare that are necessary to keep deficit-reduction plans on track.
An increase in the rate of stamp duty on properties selling for seven figures and a rise in capital gains tax are also thought to be "on the table", according to sources. The highest rate of council tax is currently Band H, levied on properties worth £320,000 or more in 1991. But that means the super-rich in multi-million-pound mansions pay no more than many whose properties have simply grown in value to around £1 million now.
Mr Cable said: "There needs to be a sense of fairness, and these best-off people in society have got to contribute more. This is all under discussion."
Dan Rogerson, Lib Dem MP for North Cornwall, welcomed the proposal if it helped to reverse the soaring number of part-time residents in the region. Devon and Cornwall boast about 26,000 holiday homes and have among the highest levels of second home ownership, which critics blame for pushing up house prices beyond the reach of local people.
Mr Rogerson said: "There might be a case to split the top band. But we have to make sure it does not hit people living in modest properties who are affected just because of where they live."
George Eustice, Conservative MP for Camborne and Redruth, said: "It is important that everyone pays their share towards getting the country's finances back in order but we must be very careful to ensure we don't do anything that will undermine people's aspirations or hit those who have worked hard."
