Lib Dem leader battles to persuade his Tory coalition partners rich should shoulder greater burden of the economic pain
Britain’s wealthiest people should face an emergency tax to avoid a breakdown in social cohesion as the country fights an “economic war” caused by a longer than expected recession, Nick Clegg has said.
In the first interview by a senior member of the cabinet to mark the new political season, the deputy prime minister told the Guardian he is embarking on a battle to persuade his Tory coalition partners of the need to ensure the rich shoulder a greater burden of the economic pain.
“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 said.
“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.”
The intervention by Clegg, who is calling for a “time limited contribution” from the richest in society beyond the party’s current policy for a mansion tax, came as the deputy prime minister marked his return to Britain after a two-week family holiday in Spain.
In a wide-ranging interview, he insisted the coalition would stand by its commitment not to build a third runway at Heathrow. But he said ministers were concerned that Britain may be losing out, as new routes open up to regional Chinese cities from continental Europe. He suggested that Heathrow’s hub capacity could be preserved by moving hundreds of flights to other London airports.
He also used the interview to all but make the first official announcement of David Cameron’s forthcoming ministerial reshuffle, indicating that David Laws would be returning to government. “I have never made any secret of the fact that I want to see David Laws back in government,” Clegg said of the former chief secretary to the Treasury, who is expected to join the Cabinet Office with a particular focus on early intervention and the economy.
He also put in a strong plea for Kenneth Clarke to remain as justice secretary by praising his “earthy common sense” and his approach to criminal justice and civil liberties. And he made clear that he has given up on Britain’s “broken banking system” as he called for the establishment of a new business lending bank.
But he showed his irritation with the prime minister for failing to persuade Tory MPs to support reform of the House of Lords by saying Downing Street is wasting its time if it forces a Commons vote on reforms to parliamentary constituencies. “Personally I don’t think we should put this boundary thing to a vote because it isn’t going to happen,” he said.
Tory eyebrows are likely to be raised by Clegg’s declaration that the rich must pay more as Britain copes with an economic downturn that is far deeper than anything he expected when he took a “collective gamble” to form Britain’s first peacetime coalition in 70 years.
“What people once thought might have been a short, sharp economic battle, a short, sharp recession, is clearly turning into a longer-term process of economic recovery and fiscal restraint. That begs big questions.”
The deputy prime minister said that new taxes should be drawn up which go beyond the Lib Dems’ existing proposal to impose a mansion tax on properties worth more than £2m. Clegg fears for the cohesion of Britain unless the rich do more to help tackle the deficit.
“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,” Clegg told the Guardian. “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.”
Clegg indicates that the new tax would fall on wealth, rather than income, because there are no plans to change the new 45p top rate of income tax. “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.”
Clegg will outline specific proposals for a wealth tax at the party’s conference in September. His call for higher taxes on the rich shows that he will embark on a more aggressive strategy of differentiation from the Tories. “This is the time when we can start spreading our wings more,” he said.
But in the coming weeks the coalition will join forces as both parties try to show they have a strategy to promote economic growth with announcements on housing, infrastructure, planning and banking. Clegg is scathing about Britain’s “severely weakened banking system” as he calls for a new business lending bank.
“I have come to the view that we need to do more to probably bypass the broken banking system altogether – maybe looking at establishing a business lending bank with direct or indirect support from the government might be the kind of thing we need to look at over time. The idea that we can repair the balance sheets of the banks very quickly so they can return to business as before is unrealistic.”
Labour dismissed Clegg’s intervention. Chris Leslie MP, the 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.”