Nick Clegg: Wealthy must pay more tax

Deputy Prime Minister Nick Clegg has said any tax changes in this month's Budget should mean "the wealthy have to pay more".

He repeated his call for any money George Osborne has available for tax cuts to be spent on raising the income tax threshold.

Mr Clegg's comments are the latest in a series of high-profile interventions on the Budget negotiations by Liberal Democrat Cabinet ministers.

Business Secretary Vince Cable has said there was an "understanding" within Government that if the 50p top rate of income tax was scrapped, as favoured by many Conservatives, it would be replaced with a levy on wealth, such as the mansion tax favoured by Lib Dems.

Treasury Chief Secretary Danny Alexander suggested last month that wealthier savers should be stripped of higher-rate tax relief on pensions.

In an interview with Newcastle's Journal newspaper as his party gathered for its spring conference in Gateshead, Mr Clegg acknowledged a mansion tax would be "very controversial" because it would mainly hit homeowners in southern England.

He said 80%-90% of homes worth more than the £2 million threshold proposed for the tax were in "a few areas in London and the South East and maybe a few places in Cheshire".

Mr Clegg added: "Whatever you do, with this change or that change, this rate or that rate, the wealthy have to pay more."

But he stressed: "I don't say that in a vindictive way."

Lib Dems, led by Mr Clegg, have put pressure on Mr Osborne to accelerate the rate at which the income tax threshold is raised to £10,000.

Mr Clegg said he wanted to see that "the largest amount of money by far, if you are delivering tax cuts, is spent on getting people on low pay out of paying income tax and giving people on ordinary incomes a tax cut by raising the point on which they start paying income tax".

But the respected Institute of Fiscal Studies questioned claims the policy was progressive.

The report said: "The common assertion that increasing the personal allowance is progressive is true if one considers the gains across individual income taxpayers. It is not true if one considers the gains across all families, as relatively few of the poorest families contain a taxpayer and two-earner couples gain twice as much in cash terms as one-earner families."

Mr Osborne also came under fresh pressure from the Tory right to axe the 50p rate of income tax.

Tory MP Mark Pritchard, secretary of the influential backbench 1922 Committee, said: "Retaining the 50p rate would be a very expensive political and economic gesture, as it continues to deter jobs and investment, sends an un-Conservative, anti-wealth message and is economically perverse in that it costs taxpayers more money to collect than it actually raises.

"It is not a tax a true Conservative government would ever have contemplated. It is another sign of wretched gesture politics which is becoming pervasive throughout some parts of government."

PA