September 25, 2012 / 1:12 PM / in 5 years

Cash-strapped Britain targets tax dodgers in deficit fight

BRIGHTON, England (Reuters) - Britain will target wealthy tax cheats to raise funds for public finances, the Liberal Democrat junior coalition partners said on Tuesday, the latest attempt by ministers to drag a wayward austerity drive back on track.

Treasury minister Danny Alexander said the Conservative-Lib Dem coalition would also have to outline how it would deliver 16 billion pounds ($26 billion) in cuts in the first year of the next parliament, after an election in 2015.

The coalition had intended to all but eliminate Britain’s record budget deficit and steer a sluggish economy back to health by the time of that election, but a return to recession this year has raised the prospect of cuts well beyond 2015.

That has triggered debate over how to share the burden of extra austerity, with the Lib Dems wanting the rich to pay more, including a tax on expensive homes, and the Conservatives eager to target spending areas such as welfare payments.

This year, Alexander said the government was on track to raise an extra four billion pounds from a tax crackdown and would widen its net to the wealthiest half a million people in Britain, with a net worth of more than one million pounds.

“We have this message to the small minority of wealthy people who don’t play by the rules: we are coming to get you and you will pay your fair share,” Alexander told his party’s annual conference in Brighton, on the south coast of England.

Alexander - number two to Conservative finance minister George Osborne - said the government was doubling its team investigating those who hide assets offshore in Liechtenstein, potentially raising three billion pounds in extra tax revenue.

The Lib Dems, whose popularity crumbled after joining the Conservatives in coalition in 2010 and breaking pre-election promises, are trying to rebuild support as a credible centrist alternative to the Conservatives and opposition Labour Party.

Analysts predict the 2015 election could result in another coalition government, with the Lib Dems as kingmakers again.

Alexander said the Lib Dems would promise in the next parliament to raise the income tax threshold to 12,500 pounds, from a current target of 10,000 pounds, meaning anyone working full time on minimum wage would not have to pay income tax.

Such a pledge could prove a deal breaker in any future coalition negotiations.

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