Clegg unveils City plan

Liberal Democrat leader Nick Clegg has called for an end to tax loopholes enjoyed by City firms, and has pledged to clamp down on the culture of big bonuses.

Outlining part of his party's manifesto - A New Deal for the City - Clegg denounced the government for failing to stand up to City firms.

He laid out Lib Dem plans to: include house prices in the official calculation of inflation; implement regulatory reform to make the Financial Services Authority subservient to the Bank of England; and require banks to retain increased reserves in economic boom periods.

Earlier, Clegg had described the current tax system as the accountancy equivalent of "a Swiss cheese" and said it essentially encouraged "tax avoidance".

"The success of the financial sector and the wider UK economy is dependent on the government creating a stable environment which encourages innovation but protects against abuse of the system," Clegg said.
 
"It is critical that the government creates a more intelligent system of regulation which prevents the boom and bust excesses which threaten the economy as a whole."

Clegg warned of the detrimental impact of big bonuses on the property market as they helped drive up house prices, making homes unobtainable for some first-time buyers.

He said there was "considerable merit" in forging ahead with plans to make bonuses payable in stock and which can only be exchanged over a period of 10 years.

And he was also critical of big bang reforms of the City brought in by Margaret Thatcher that have created "domestic financial instability".

The Liberal Democrat leader explained: "I want the Liberal Democrats to be the party that the City can trust, but also the party that will take on injustices and bad practice, for the benefit of the country and the economy as a whole."