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Disputes over 'unfair' tax policies expose growing rift in Coalition

A growing rift over tax within the Coalition Government was laid bare yesterday as Vince Cable called for the introduction of a tax on the wealthy in return for a key demand by Tory MPs.

With two weeks to go until Budget day, tax is proving the thorniest issue of all between the Coalition partners.

The Liberal Democrat Business Secretary publicly announced that his party would allow the Conservatives to axe the 50p top rate of income tax if, in return, they bowed to his party's demands for a mansion tax on homes worth more than £2m.

The public pronouncement from Mr Cable made it clear that David Cameron and Nick Clegg have failed to resolve the split between their parties over the key tax policies, which will be announced to a wary British public by George Osborne in a fortnight.

Speaking on BBC Radio 4's Today programme, Mr Cable criticised the current tax system for being unfair and said "the wealthy people of the UK have to pay their share".

"There is a broad understanding that if the 50p rate were to go – and I and my colleagues are not ideologically wedded to it – it should be replaced by taxation of wealth," he said.

"There are a vast numbers of extraordinarily valuable properties around the country netting very large gains for their owners, many of whom come from abroad incidentally, and it is not taxed at all.

"You get people with multimillion-pound properties paying exactly the same in council tax as somebody living in a three-bed semi. That system doesn't work at all."

Mr Cable has long been a vocal supporter of a mansion tax. It is believed the policy could raise as much as £1.7bn a year for public finances, based on the 40,000 to 50,000 properties of that value in Britain, most of them in London and the South-east.

Ed Miliband, the Labour leader, said that while the Government should consider a tax on valuable homes, scrapping the 50p rate would be "absolutely the wrong thing to do".

In his final speech before the Budget, Mr Osborne sought to dampen speculation of a giveaway, even if public borrowing turns out to be lower than expected.

He told the Engineering Employers' Federation last night: "Our action is bringing the deficit down – but it is still far too high. The days of unfunded giveaways are over."