Osborne counters Clegg call to tax the rich

The Chancellor said he had already taken steps to ensure the UK’s highest earners pay more but insisted it was vital to hang on to entrepreneurs who would fuel the economic recovery.

Mr Clegg, MP for Sheffield Hallam, has called for those of “very considerable” wealth to contribute more to turning around Britain’s financial fortunes.

But 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 floated plans for a short-term wealth tax in a move that will be widely viewed as an attempt to reach out to Liberal Democrat grassroots ahead of next month’s annual conference as well as sharpening distinctions between the party and its coalition colleagues.

The Lib Dem leader will also be acutely aware of the potential political fallout for the party of continuing cuts to welfare.

But critics such as Shadow Treasury Minister Chris Leslie yesterday pointed to Mr Clegg’s decision to back a cut from 50p to 45p on the top rate of tax in the March Budget, which benefited the UK’s highest earners and accused him of supporting a failed economic plan.

Mr Clegg, however, insisted the temporary tax proposal would hit those with the highest assets rather than incomes.

“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,” he said.

He added: “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.”

Senior Tory backbencher Bernard Jenkin dismissed the move as the “politics of envy” and warned against strangling the “goose that lays the golden egg”.

He added: “I think most rich people are contributing far more in tax than other people.”

Mr Jenkin went on: “This is a pre-conference easy clap line.”