Coalition divided over Cable's plan for land tax

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a split between Conservative and Liberal Democrat ministers emerged yesterday as Nick Clegg's party demanded higher taxes on land and property to hit the rich.

Vince Cable, the Liberal Democrat Business Secretary, who has already proposed a "mansion tax" on homes costing more than £2m, floated the idea of a "land tax".

Tory MPs dismissed the proposal as unworkable and fear it could alienate the party's natural supporters. It is likely to be vetoed by George Osborne, the Chancellor.

Mr Cable insisted that Britain needed a proper examination of how a land tax could work. He said, "Income tax for high earners is becoming difficult to enforce. The traditional tax bases have been eroded and land tax is one thing you can't take off to Monaco."

He suggested that business rates could be replaced with a tax based on the value of the site, and council tax replaced by a property tax calculated annually on the value of the land.

Mr Osborne set out a very different agenda yesterday as he limited his aspirations to hitting the rich to a further clampdown on tax evasion. "Those who evade taxes, like benefit cheats, are leeches on society," he said. He promised further measures to track down money held offshore following last week's deal with Switzerland which will raise more than £5bn for the Treasury.

The Chancellor wants to scrap the 50p top rate of tax on earnings above £150,000 a year but the Liberal Democrats will demand a price – other taxes on the rich. A land tax is thought unlikely but there could be higher council tax bills for the most expensive properties. The Liberal Democrats want to go further. They warn it would be hugely damaging for the Government to abolish the 50p rate at a time when the incomes of low- and middle-earners are being squeezed. Demands for higher taxes on the rich will be made at the Liberal Democrat conference next month.