Laws contradicts Clegg with call to cut 50p tax

Companies and entrepreneurs could quit Britain unless the 50p top rate of income tax is abolished, David Laws, the Liberal Democrat former cabinet minister, warned yesterday.

In an interview with The Independent, Mr Laws warned senior Liberal Democrats that their attacks on the Tories could backfire, by making it harder to win policy concessions from their coalition partners. His warning came after three possible successors to Nick Clegg – Tim Farron, Vince Cable and Chris Huhne – used their speeches at the party's Birmingham conference to distance themselves from the Tories.

The former City banker accepted that the 50p rate on earnings above £150,000 a year should remain "for the foreseeable future" but insisted that it must be "temporary". He appeared more sympathetic to plans by George Osborne, his former boss at the Treasury, to scrap the top rate, than Nick Clegg, who told The Independent on the eve of the conference that he would veto the move.

Mr Laws said: "If you got stuck with the 50p rate of tax for a long period, particularly if people felt it was permanent, then there is a risk not only that some people might decide to resite overseas, but particularly that where firms and leadership teams face a choice of coming to the UK or some other business centre, that they might not opt for the UK. My own view is that they are unlikely to take that decision, given that they know the Coalition believes the 50p rate should be temporary."

However, Mr Laws said that cutting the top rate soon would look "extraordinary" and undermine public support. "The priority is to deliver tax reductions for people on low and middle incomes," he said.

Mr Laws, who resigned after just 17 days as Chief Treasury Secretary last year following revelations about his expenses claims, warned there was a "risk" that attacks on the Tories could be seen as "oppositionist". He said: "If we spend all our time throwing stones, then over time we will find it more difficult to get them to be co-operative and constructive on policies that we are pressing. We cannot expect the Coalition to work in our interests and the interests of our voters if we are the party that likes to say 'no' to everything the Conservatives do without having a constructive agenda of our own."

But he argued that the party was right to be more open about its differences with the Tories since the May elections. "The truth is that a lot of good news on things we were delivering was being drowned out by a lot of bad news decisions we had to take to get the deficit back under control," he said. "We are now striking a better balance."

Mr Laws, who gives informal advice to Mr Clegg, admitted the Deputy Prime Minister had a "a very tough time" in the Coalition's first year. But Mr Laws never doubted he would stay the course for this parliament. At the next election, Mr Clegg would no longer be the "fresh-faced outsider".

"But if we deliver on the economy and key social policies, people will have respect for Nick... We are a long way from 2015."

After serving a seven-day suspension from the Commons, both Tory and Liberal Democrat leaders are desperate to see Mr Laws back in the Cabinet. Would he return to the top table?

"I am a strong supporter of Nick, the Liberal Democrats and the Coalition. I will go on doing my best to support all three in any way I can." That sounds like a Yes.