Clegg wants Budget to target the rich

Lib Dems call for rich to pay mansion tax.

Nick Clegg is demanding a "tax the rich" Budget in March to head off growing fears that the Coalition will lose public support because its deficit-reduction programme is seen as unfair on ordinary families.

The Liberal Democrats are urging George Osborne to include a mansion tax on homes worth £2m and measures to stop the rich avoiding stamp duty when they sell their properties by transferring ownership to a shell company.

Although it is thought the Chancellor is unlikely to introduce a high-value property tax immediately, he may set up a review to look at raising the tax burden on the rich by targeting property assets rather than income, which would be harder to avoid. Mr Osborne is likely to act on stamp duty, amid evidence that rich people reduce the 5 per cent stamp duty on the sale of homes worth £1m to only 0.5 per cent by placing their property in a company.

Mr Clegg and other Liberal Democrat cabinet ministers will make their demands in behind-the-scenes talks with Mr Osborne before his Budget on 21 March. Other Liberal Democrat proposals include a tax on land values and scrapping the 40 per cent tax relief on pension contributions for higher-rate taxpayers. They also want a new crackdown on "non-domiciles" – foreign residents living in Britain who do not pay tax on their overseas earnings.

Today, Mr Clegg will join the debate about "responsible capitalism" before a speech on "moral markets" by David Cameron later this week. The Deputy Prime Minister will call for millions of workers to own shares in their companies in a new "John Lewis economy".

A source close to Mr Clegg said: "Nick is pushing his government colleagues for real, early, radical action on this. Employee ownership is part of a long liberal tradition."

Senior Liberal Democrats are worried public support for spending cuts could melt away unless the rich shoulder more of the burden.

Higher taxes for the rich are popular with the public and the Liberal Democrats do not want to be defined in the year ahead by their pro-European stance, which is not supported by a majority of voters. They believe the Tories might be persuaded to act on property values because opinion polls suggest they are seen by many voters as "a party for the rich" rather than "people like us." To increase the pressure on Mr Osborne, some Liberal Democrats plan to join Labour to try to bring in a mansion tax if it is not included in the Budget.

Lord Oakeshott of Seagrove Bay, a Liberal Democrat peer and close ally of the Business Secretary, Vince Cable, said: "A mansion tax is the real test of whether the Coalition means business on fair taxation. You can't claim 'we are all in it together' when wealth is virtually untaxed."