Attacks from inside party force Clegg to retreat on tycoon tax

Deputy PM waters down plans to make the rich pay their share after senior figures' angry reaction

Nick Clegg appeared to back away from his eye-catching proposal for a "tycoon tax" on the very wealthy yesterday after the idea sparked a row with senior Liberal Democrat colleagues.

Mr Clegg used an interview before his party's spring conference in Gateshead to suggest that rich Britons should pay a minimum rate of tax of more than 20 per cent on their total annual income. But the move was immediately attacked by the party's former Treasury spokesman, Lord Oakeshott, who called Mr Clegg's plan a "superficially attractive measure that falls apart under scrutiny".

Other senior Liberal Democrats, including the Business Secretary, Vince Cable, also privately criticised the proposal, arguing that it diluted the party's central policy of a mansion tax on multi-million-pound properties.

Mr Clegg's aides had tried to prevail on Mr Cable to support the plan, which it is believed he knew nothing about in advance. However, all he would say was that the idea was "an interesting one" but that he had "not seen the detail of the proposals".

In his keynote speech to delegates, Mr Clegg made no mention of a specific "tycoon tax". Instead he talked about "calling time on the tycoon tax dodgers".

He said: "We will make sure everyone pays a fair level of tax. Too often, rather than paying their dues, the wealthy pay their accountants to get them out of it. Avoiding tax, minimising the amount they have to contribute – that's the name of their game.

"The sight of the wealthiest scheming to keep their tax bill down to the bare minimum is frankly disgraceful."

Afterwards, Mr Clegg's aides suggested that the tycoon tax plan was just one of a "smorgasbord of ideas" which the Liberal Democrats were bringing to the Budget negotiations with the Tories. Others included the mansion tax, cutting stamp duty loopholes and removing tax relief from the pension contributions of top earners."We're hoping one of them will stick," they said.

In an interview with the BBC, Danny Alexander, the Chief Secretary to the Treasury, also played down speculation that any kind of tycoon tax was imminent. He said the Liberal Democrats were debating "Lib Dem tax policy going forward" and that the tycoon tax was "one of a number of ideas".

Asked how much money the tycoon tax could bring in, Mr Alexander said: "Well, those things are all matters for discussion." Pressed again, he added: "We haven't put forward as a party a particular rate for it. What we're trying to do this weekend is put that, along with many other ideas about tax, on the table."

Asked about opposition to the tax from Lord Oakeshott, Mr Alexander said: "Well, I think the views of one Lib Dem peer who was sacked as our Treasury Spokesman in the House of Lords a year or so ago shouldn't distract you from thinking that the Liberal Democrats very much support ideas like this to ensure that the wealthiest in this country continue to pay their fair share."

Mr Clegg used his speech to attack the assertion by the Chancellor, George Osborne, that green taxes could hamper Britain's economic recovery.

He said: "Some say we have to choose between boosting growth and being green. What a load of rubbish. Going for growth means going green."

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