29 Aug 2012

Osborne rejects Clegg’s wealth tax plan

Chancellor George Osborne knocks back a suggestion from Liberal Democrat leader Nick Clegg that the country’s wealthiest should be contributing more to the UK’s fiscal turn-around.

Osborne and Clegg (Reuters)

Mr Osborne warned that Mr Clegg’s plans for a short-term wealth tax to help boost the UK’s economic position could lead to an exodus of “wealth creators”.

During a visit to Sunderland the chancellor said: “I am clear that the wealthy should pay more, which is why in the recent budget I increased the tax on very expensive property transactions.

“But we also have to be careful as a country we don’t drive away the wealth creators and the businesses that are going to lead our economic recovery.”

Mr Clegg’s suggestion, a month ahead of the Lib Dem annual conference, was a “fairer” way of ensuring the asset rich contribute more to the recovery of the UK, he said.

This comes after it was revealed earlier in the month that the Bank of England’s quantitive easing programme has been making the wealthy even wealthier because of its impact on non-pension assets.

“If we are going to ask people for more sacrifices over a longer period of time, a longer period of belt tightening as a country, then we just have to make sure that people see it is being done as fairly and as progressively as possible,” Mr Clegg told the Guardian.

“While I am proud of some of the things we have done as a government I actually think we need to really hard-wire fairness into what we do in the next phases of fiscal restraint.

“If we don’t do that I don’t think the process will be either socially or politically sustainable or acceptable.”

Taking people for fools?

Critics pointed to the deputy prime minister’s decision to back a cut in the top rate of tax from 50p to 45p in the March budget as being at odds with his call for a wealth tax.

Chris Leslie, Labour’s shadow Treasury minister, said: “Nick Clegg is once again taking the British people for fools. He talks about a tax on the wealthiest, but he voted for the tax cut for millionaires in George Osborne’s Budget.

“And he has supported a failing economic plan which has pushed Britain into a double-dip recession and is leading to borrowing going up by a quarter so far this year.”