Osborne pours cold water on Clegg's wealth tax plan

Chancellor George Osborne has warned against driving the rich out of Britain after Nick Clegg suggested a temporary tax on the wealthy.

Deputy prime minister Clegg believes people of “very considerable” wealth should contribute more to dragging Britain out of its economic slump.

But Osborne said he had already put measures in place to ensure the highest earners contribute more and insisted it was important to hang on to entrepreneurs who can drive the economic recovery.

During a visit to Sunderland, Osborne 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.”

Clegg’s plans for a short-term wealth tax have been widely viewed as an attempt to reach out to Liberal Democrat grassroots ahead of September’s annual conference, while it will also add distinction between the party and its coalition colleagues, the Conservatives.

Critics of Clegg pointed to his decision to back cutting the top rate of tax from 50p to 45p in the March budget.

But Clegg said the temporary tax would hit those who have the highest assets, not incomes.

He told the Guardian: “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.”

Clegg continued: “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.

“If we want to remain cohesive and prosperous as a society, people of very considerable personal wealth have got to make a bit of an extra contribution.

“In addition to our standing policy on things like the mansion tax is there a time limited contribution you can ask in some way or another from people of considerable wealth so they feel they are making a contribution to the national effort? What we are embarked on is in some senses a longer economic war rather than a short economic battle.

“The action is making sure that very high asset wealth is reflected in the tax system in the way that it isn’t now, making sure that we continue to crack down very hard on tax avoidance, making sure that tax breaks don’t go disproportionately to people at the very top.”