Osborne rejects Clegg's calls for 'wealth tax'

The Chancellor yesterday dismissed a call by Nick Clegg for the Government to bring in a temporary "wealth tax" on the rich to ensure the burden of a new round of spending cuts does not fall entirely on the poor.

George Osborne quickly made clear he is unlikely to impose any such "wealth tax", after the Deputy Prime Minister suggested the super-rich should face an extra levy on their estates and fortunes.

Mr Osborne, who in the last Budget announced a top-rate income tax cut from 50 to 45 per cent, beginning in April, to make Britain more attractive to entrepreneurs, said that he had already raised taxes on very expensive property transactions. "We mustn't drive away wealth creators, businesses," he said. "This country needs to compete."

Mr Osborne, who is under pressure from Tory MPs to cut taxes, has floated another £10bn of welfare cuts. In contrast, the Liberal Democrat conference next month will consider emergency revenue-raising measures including a 0.5 per cent tax on unearned income and the party's long-favoured "mansion tax" on homes worth more than £2m.

Labour accused Mr Clegg, above, of posturing ahead of his party's conference and displaying double standards after allowing Mr Osborne to cut tax for top earners. Allies admitted the Deputy Prime Minister was not outlining government policy but said the Liberal Democrats would press for a four-year "wealth tax" in negotiations with the Conservatives on a new spending programme.

The debate is set to continue, with a study today showing that almost half the population believes that politicians "don't get" the financial pressures facing ordinary people.

The Resolution Foundation found 43 per cent of adults agreed that "most politicians" did not understand the financial pressures facing people like them. The figure is highest (50 per cent) among those on low and middle incomes, the so-called "squeezed middle" earning between £12,000 and £48,000 a year – a key group including millions of floating voters.

A survey of 1,900 adults by Ipsos/Mori for the think-tank also found that 36 per cent felt "financially squeezed", while less than half (42 per cent) felt secure in their job.

Gavin Kelly, the foundation's chief executive, said: "As long as living standards continue to decline ... the public will carry on feeling that politicians just don't get it. Nick Clegg is clearly trying to react to this mood. As we move closer to the next election the electorate will expect a shift from empathy and floated ideas to carefully crafted policy proposals – which is going to be a real test for all the parties when money is so tight."

Simon Hughes, the Lib Dems' deputy leader, said: "There are many people who are sitting pretty on assets which they have not earned," adding that record levels of wealth inequality were "impeding growth".