Clegg Rekindles Differences With Cameron in Call to Tax Rich

U.K. Deputy Prime Minister Nick Clegg
U.K. Deputy Prime Minister Nick Clegg during the Liberal Democrat conference in Brighton on Sunday. Photographer: Jeff J. Mitchell/Getty Images

U.K. Deputy Prime Minister Nick Clegg rekindled differences with his Tory coalition partners over taxing the wealthy, saying there’s more scope to raise money from the top 10 percent of earners.

“Most people in this country don’t understand why people who have very high-value property don’t pay their fair share,” Clegg said in an interview on BBC Radio 5 today. “It’s easier to stop tax avoidance on bricks and mortar than on money you can move around the world.”

The Liberal Democrat leader is seeking to recoup poll losses and distance himself from Prime Minister David Cameron’s Conservatives. An Opinium poll for the Observer newspaper yesterday showed the Liberal Democrats have dropped into fourth place with support at 8 percent, behind the U.K. Independence Party’s 10 percent.

Many Conservatives say welfare spending should take the burden of the additional austerity needed to narrow the budget deficit. Clegg angered rank-and-file supporters by backing a reduction in the top income-tax rate in Chancellor of the Exchequer George Osborne’s March budget, without securing the “mansion tax” on the priciest homes the Liberal Democrats had demanded in return.

Clegg hinted at the battles to come yesterday, attacking “vile suggestions that have been made from the right of British politics that all the savings should be made from welfare.” Liberal Democrats “will start at the top and work down” in seeking to raise tax revenue, he said in a question-and-answer session at the party’s conference in Brighton on England’s south coast.

‘Belt Tightening’

The Liberal Democrat leader told Sky News television today that his party was “not going to soak anyone,” though “belt tightening will have to continue for a while, for longer than we hoped.”

Asked on BBC Television’s “Andrew Marr Show” yesterday whether he could persuade Cameron and Conservative Chancellor of the Exchequer George Osborne to back a wealth tax, Clegg said that “there is a very considerable chance because we’ve already done a lot of it to make sure the top pay more tax.”

There are “numerous ways that you can do more of it,” Clegg said. “Whether it’s on capital gains, whether it’s on high property transactions; all of that we can do more of.”

Liberal Democrat Business Secretary Vince Cable told the conference today that the coalition would press ahead with moves to tackle “abusive tax avoidance” as well as criminal tax evasion.

‘Shady People’

“No one keeps their cash in tax havens for the quality of investment advice; these are sunny places for shady people,” Cable said.

While ruling out high marginal rates of income tax as counter-productive, Cable reiterated the plan for a mansion tax as “a first step to the proper taxation of wealth and land.”

Such a tax “horrifies the Tory backwoodsmen but it is popular and right,” the business secretary said. “The super-rich can’t move their chateaux to Monaco or Switzerland so let’s get on with it and tax them here.”

The Centre for Policy Studies, a Conservative research group set up by Margaret Thatcher, said in a briefing note today that a mansion tax would “raise very little money” as well as being “difficult and expensive to collect.”

‘Many More’

All 74,000 homes above the 2-million pound threshold “and presumably many more below the threshold” would have to be valued, and an average 20,000-pound levy would bring in only 1.5 billion pounds, the CPR said. “The U.K. already has by far the highest property tax take of any OECD country: property taxes contribute 4.2 percent of GDP compared to the OECD average of 1.8 percent. Within that, high-end property owners already pay a disproportionate amount.”

The opposition Labour Party accused the Liberal Democrats of hypocrisy, pointing to the budget decision to lower the top rate of income tax to 45 percent from 50 percent.

“Nobody will be fooled by Nick Clegg’s empty words on tax,” Rachel Reeves, one of Labour’s finance spokeswomen, said in an e-mailed statement. “This is the man who backed a 3 billion-pound tax cut for millionaires in the budget while asking millions of pensioners and families to pay more.”

Clegg also announced a “pension-for-property” plan that will be introduced by the government to allow parents and grandparents to help their offspring to buy a home by using their pension assets to secure mortgages.

“We’re going to allow those parents and grandparents to use their pension pots to act as a kind of guarantee, if you like, so that youngsters, their children and grandchildren, can take out a deposit and buy their home,” Clegg said. The plan will allow them “to use their pension pots to act as a kind of guarantee.”

Poll Slump

The Opinium poll showed Labour in the lead at 42 percent, followed by the Conservatives with 30 percent. The poll represented the views of 1,681 people who indicated that they were likely to vote from 1,964 online interviews, the Observer said, without indicating a margin of error.

The Liberal Democrats have lost support since breaking a pre-election pledge not to raise university tuition fees, something Clegg apologized for on Sept. 19. A pop single satirizing that apology, remixing his words to music, entered the Top 40 iTunes U.K. downloads.

Clegg insisted he “will not flinch” from staying on as party leader until the next election, scheduled for 2015.

“The idea that when you’re halfway up a mountain you suddenly bail out, when the journey gets most difficult you suddenly flinch, I’m not going to flinch,” Clegg said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE