Lib Dems to target mansions, banks and big businesses with £8bn tax hike

Deputy Prime Minister Nick Clegg will say his party would target those who are “not always paying their fair share”

Nick Clegg and Danny Alexander believe they have the solution for dealing with thw deficit (Getty Images)

Wealthy individuals, banks and big businesses would face an £8 billion tax hike under Liberal Democrat plans to clear Britain's deficit.

In a speech today, Deputy Prime Minister Nick Clegg will say his party would target those who are “not always paying their fair share” as it seeks to balance the books after the general election in May.

At the same time, benefits - excluding pensions and disability benefits - would be uprated by 1% for the first two years of the new parliament.

But Mr Clegg will insist that the Lib Dems in government would continue to protect low and middle income earners as well as spending on education, the National Health Service and foreign aid.

Like the Conservatives, the Lib Dems are committed to a further £30 billion of fiscal “consolidation” in the new parliament in order to clear the deficit in the public finances by 2017/18.

But unlike the Tories - who say they would do it through a combination of spending and welfare cuts and a further clampdown of tax avoidance - the Lib Dems say they would seek to raise at least £8 billion through additional taxes.

Mr Clegg will argue that the party's “measured approach” is necessary in order to protect public services and the most vulnerable in society.

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He will say that the plans do not require any increase in the “headline” rates of taxation - income tax, national insurance, VAT and corporation tax.

Party officials said that among the measures they were looking at were an increase in the banking levy as well as proposals on the tax deductibility of interest payments.

Mr Clegg will say: “We will finish the job of balancing the books but we will finish the job fairly.

“It is incomprehensible to most people that you would try and balance the books without asking for a contribution from the wealthiest people in our country.

“Liberal Democrat plans are for a bigger tax contribution from those who can afford to pay - the wealthiest individuals and big businesses which are not always paying their fair share.

“If public services and the most vulnerable in society are to be protected, then the wealthiest and big business will have to pay their fair share.”

In addition, the Lib Dems say they will raise £16 billion through cutting spending - including £4 billion of welfare savings - and £6 billion through reducing tax avoidance.

The party has already announced that it would raise up to £1.5 billion through a “mansion tax” on homes worth over £2 million as well as setting out plans to scrap the married couples tax allowance and remove winter fuel payments and free TV licenses from better-off pensioners.

Additional reporting by PA