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Mansion levy will allow poorest to pay no income tax

Tensions in coalition as, weeks before the Budget, Lib Dems demand £16bn in tax rises for the rich

The Treasury is being asked to consider a £16bn package of tax rises on the wealthy to pay for the bulk of an income tax exemption for anyone on the minimum wage.

The proposal, to be formally adopted as Liberal Democrat policy within weeks, includes ending pension reliefs, shutting stamp-duty loopholes and imposing a mansion tax on properties worth £2m or more. In a dramatic escalation of tensions between the coalition parties, the measures target the wealthiest in order to fast-track the key Lib Dem manifesto pledge to raise the income tax threshold to £10,000. Conservatives are likely to be infuriated by the demands, just weeks ahead of the Budget.

The public appears split on the issue of tax. In a new IoS/ComRes poll, 37 per cent of people said George Osborne, the Chancellor, should make tax cuts a priority in the Budget, but 41 per cent said cuts should wait until the economy has recovered. More than half of Lib Dems (52 per cent) and 38 per cent of Tories back the idea of raising the 50p tax rate for those earning over £150,000 to 60p.

In the poll of voting intentions, the Conservatives are on 39 per cent, ahead of Labour on 38, the first Tory lead in a ComRes survey since October 2010. Almost half (49 per cent) believe the PM is out of touch, a third think he talks down to people and just 12 per cent say he is good on policy detail.

The Lib Dems are on 10 per cent, even after stepping up "differentiation" from their coalition partners.

From 1 April, the income-tax threshold will rise to £8,105. Mr Osborne is under pressure to use the Budget on 21 March to unveil an increase for 2013, perhaps as high as £9,000.

This week the Lib Dems will mount a major campaign to persuade Mr Osborne to agree to a sharp increase in the allowance. Simon Hughes, the party's deputy leader, has urged all members and activists to back an e-petition calling for the Government to go further and faster. David Laws returns to the political front line on BBC2's Newsnight, and Nick Clegg, the Lib Dem leader, will use a party political broadcast on Wednesday to demand "faster tax cuts funded by increasing the amount paid by the richest".

At the Lib Dem spring conference in Gateshead next month, delegates are expected to adopt a hard-line policy on ultimately lifting all minimum-wage earners out of tax altogether, by raising the threshold to £11,860. To do so would cost £18bn, according to party estimates seen by The IoS.

A motion will call for a list of "immediate steps to ensure wealthy individuals and businesses pay their fair share", including imposing a 1 per cent annual levy on homes costing more than £2m, which could raise £1.7bn. A general anti-avoidance rule – expected in the Budget – could net the Treasury £1.4bn; limiting pension tax relief £7bn; a stamp-duty avoidance clampdown £750m; a global financial transaction tax £4.4bn; and targeting non-doms who have been in Britain for seven of the past 10 years would garner £1.3bn, giving a total take of about £16.5bn, according to Lib Dem figures.

Labour yesterday claimed benefit and tax changes in April will leave families with children £580 worse off, on average.

Also in the poll, 71 per cent of people oppose bonuses for public-sector workers who earn more than £40,000. It comes after The IoS revealed payouts this year had topped £100m for Whitehall mandarins.

And 71 per cent believe the Government should ignore the ruling of the European Court of Human Rights and deport the Islamist cleric Abu Qatada to Jordan immediately.

ComRes interviewed 2,014 adults online on 15 and 16 February. Full tables at comres.co.uk