Chancellor George Osborne vows attack on tax loophole

George Osborne said the priority for this week's Budget was help for people on low and middle incomes as he promised an "aggressive" attack on a property tax dodge by the super-rich.

The Chancellor refused to be drawn on any of the headline changes in the package he will unveil on Wednesday - but denied that he was still at loggerheads with the Liberal Democrats.

Most of the major decisions had been agreed almost a week ago between senior figures from the coalition partners and final details signed off on Friday, he told BBC1's Andrew Marr Show.

He is widely reported to be ready to meet Tory demands for a reduction in the 50p top rate of income tax - a politically toxic move as spending cuts bite across the country.

Shadow Chancellor Ed Balls said that showed the Government was woefully out of touch with voters, calling for the money to be used instead to halt cuts in working tax credits.

But Mr Osborne said his overall blueprint was "a Budget for working people".

"What you will see on Wednesday is a Budget for working people, a Budget that shows Britain can earn its way in the world, a Budget that says Britain is not content with being in the second rank of economic powers.

"We want to be in the front rank of economic powers and we are prepared to confront our problems to create jobs, growth and prosperity and a brighter future for the next generation."

He went on: "The bulk of the measures in the Budget are going to be targeted at working people on low and middle incomes. That is our priority."

Mr Osborne pledged to "come down like a tonne of bricks" on wealthy people who sell properties through offshore companies to to avoid stamp duty.

A slew of celebrities were reported today to be among those employing the loophole but it is also a well-known trick of wealthy foreigners with homes in London.

"People want to make sure that all sections of society are paying their fair share," he said.

"On this specific issue of stamp duty avoidance, rich people - often foreigners who come to this country but also people here in Britain - who put homes into companies to avoid stamp duty, that is completely unacceptable and we are going to come down on that practice like a tonne of bricks.

"We are going to be extremely aggressive in dealing with it and people are going to face a very punitive charge.

"People have had their warning: they have got to pay stamp duty on the homes they live in."

The Chancellor confirmed that he would use the Budget to lift Sunday trading laws for two months this summer while London hosts the Olympic and Paralympic Games.

He said it would be a "great shame" not to grab the opportunity to try to stimulate the economy.

"We have got the whole world coming to London and the rest of the country for the Olympics.

"It would be a great shame, particularly when some of the big Olympic events are on a Sunday, if the country had a 'closed for business' sign on it," he told the programme.

But he faced mounting concern over the speed of the move - for which the Government wants to push emergency legislation through the Commons and Lords within the next 10 days.

Campaigners against seven-days-a-week shopping hours claim it will open the door to a permanent shift in the rules, hitting family life.

Mr Balls demanded a consultation, telling him: "Today, on Mothering Sunday, there are mums at home with their kids because Sunday trading (laws) means they can have the morning off.

"We should be very careful about breaking Sunday trading."

The Chancellor declined to disclose the results of an assessment of the take from the first year of the 50p rate but insisted it had been independently checked by the Office for Budget Responsibility.

Deputy Prime Minister Nick Clegg dropped his party's opposition to the rate, introduced at the end of the last Labour government, on the basis that it would be replaced by other measures to squeeze the rich.

Suggestions have included a "mansion tax" or a "tycoon tax" - setting a minimum overall take - and the party also wants moves to end income tax on earnings up to £10,000 to be speeded up.

But a poll showed Lib Dem supporters were the most vehemently opposed to a change in the 50p rate, meaning Mr Clegg could face a backbench revolt unless he has secured significant help for lower earners in return.

The Chancellor appeared to cast doubt on the practicality of a "tycoon tax" but said he would continue to seek loopholes to close.

"It is not just the tax rate they pay, it is whether they are actually paying that rate," he said - insisting he stood by his phrase that rich and poor were "all in it together".

He would not be drawn on whether he would act to reduce petrol prices - though he admitted they were now "jolly high" - pointing out that he had already taken "substantial action to make things easier".

And new planning rules would "make it a lot easier to get things built while protecting our most precious environment", he added.

Asked about the expected change to the 50p rate, Mr Balls said: "We said the top rate of tax would raise over £1 billion in the first year, £2.5 billion in the second.

"Even if it was half what we were saying that would compensate for the cuts in tax credits to families on £17,000 which means that they will be better off benefit, losing £73 per week.

"I have to say that for families on middle and low incomes - seeing their petrol prices up, their fuel bills up, the living standards squeezed, youth unemployment rising - the idea that George Osborne is saying the number one priority is to cut taxes on salaries of £150,000, they can't be serious.

"They can't be serious. It is totally out of touch. What planet are they on? Whose side are they on? It's crazy.

"The nation needs a plan for jobs and growth. We have not had one for a year or two and instead they are playing politics with the national interest.

"It is not right and it is going to be deeply unfair."

He said Labour's preferred option remained a temporary one-year cut in VAT to stimulate the economy but an increase in personal tax allowances was "better than nothing".

Mr Osborne is due to meet Prime Minister David Cameron, Mr Clegg and Treasury Chief Secretary Danny Alexander - the so-called "Quad" - for final budget talks tomorrow.

But he insisted that they would be talking only about the presentation of Wednesday's package as all of the main measures had been agreed and sent to the Office for Budget Responsibility.

The OBR, the independent watchdog set up by Mr Osborne to make economic forecasts, will publish its own analysis of the effects of measures once the Chancellor has delivered his statement to MPs.

He said he was relaxed about demands being made publicly by senior Liberal Democrats, saying it "perfectly fine in a coalition for people to argue their corner".

Mr Clegg and Mr Alexander had been party to all the internal discussions at the Treasury and the fact that both sides had been involved meant the budget would "satisfy a broad range of public opinion".

Mr Osborne also came under a barrage of angry criticism from trade unions yesterday over plans to push ahead with reductions in public sector salaries in some poorer parts of the country.

The Chancellor is expected to use the Budget to announce he is accelerating moves, first floated in December, to close the gap with wages paid by firms.

He believes the so-called public sector "premium" - which the Treasury puts as high as 18% in some places - is stifling private sector recruitment.

But union leaders described the move, which could affect some pay packets as early as next month, as a "cruel" attack on workers which would spark an exodus and hit services.

Liberal Democrat MP Stephen Williams said it would be wrong to change the 50p rate next week.

"I certainly don't think now would be the right time to announce the abolition or the reduction of the 50p rate of tax; 2012 is going to be quite a difficult year for many families," he told the BBC's Sunday Politics.

"Liberal Democrats are quite clear that our priority in this Budget is to make sure that we make significant progress to raising more people out of income tax altogether and having a tax cut for people on low and middle incomes."

Money could be found instead by reducing pension relief for high earners, he suggested.

Brian Paddick, Liberal Democrat candidate in this year's London mayoral election, said it would be a "tragedy" if the Chancellor failed to increase the total burden on the better-off.

"People are having to make the decision between heating and eating. It can't be right that we give tax cuts to the rich while those people are struggling," he said.

"I don't care whether it's a tycoon tax, a mansion tax or a 50p tax, but we need to make sure that the high earners are paying at least as much tax as ordinary working families.

"It would be a tragedy if this Budget actually gave tax cuts to the rich, leaving ordinary people who are struggling to make ends meet in a worse position."

Confederation of British Industry director general John Cridland called on the Government to "focus on growth" in the Budget rather than prioritising tax cuts.

He told Murnaghan: "Tax cuts are much less efficient as a way of generating growth than investment by business. We need a Budget for growth, which actually means a Budget for investment."

Mr Cridland said he "would love to see the 50p go but I wouldn't put it top of my list of priorities".

Labour peer Lord Sugar, entrepreneur star of TV's The Apprentice, said the 50p rate had been a mistake by the Gordon Brown administration and that "most people" had dodged it.

"It's funny: 50p is not much more than 40p but it's the psychological thing.

"It sounds horrible doesn't it? It sounds wrong and when the maths are done they will realise it wasn't a clever idea anyway because most people just adjusted their salaries to £149,000 and found other ways of maybe getting money out of companies," he told Murnaghan on Sky News.

PA