Business secretary says his party is willing to back Tory moves to scrap top tax rate – in exchange for 'mansion tax'

Vince Cable has confirmed that the Liberal Democrats are ready to scrap the 50p top rate of tax in exchange for a new tax on multimillion-pound properties.

His party leader, Nick Clegg, has opposed calls for the abolition of the top rate of tax, but Cable indicated there was a deal to be done in the runup to the budget amid pressure on the chancellor, George Osborne, from the business lobby and fellow Conservatives to scrap the measure.

The business secretary stepped up the pressure on Osborne as he became the first cabinet minister to confirm there was a "very broad understanding" in the coalition of a reciprocal deal that would see the tax shift from income to wealth.

The Lib Dem minister also signalled that new higher rates of council tax bands could be the levy of choice. He said a possible tradeoff for ditching the top rate of tax was just one part of a "complex set of negotiations which my colleagues are conducting".

The Lib Dems have campaigned for a "mansion tax" on properties worth more than £2m, to pay for the poorest workers to be lifted out of the tax system.

Cable told BBC Radio 4's Today programme: "If the 50p rate were to go – and I and my colleagues are not ideologically wedded to the 50p tax rate – if that were to go, it should be replaced by taxation of wealth, because the wealthy people of the country have got to pay their share, particularly at a time of economic difficulty.

"How exactly that is configured is a detailed matter for negotiation, but that principle must be upheld, and the mansion tax is actually a very economically sensible way of doing it. But there are different ways of approaching it."

Cable did not rule out new, higher council tax bands on multimillion-pound properties. "There are vast numbers of extraordinarily valuable properties now around the south of England netting very large gains for their owners – many of whom come from abroad, incidentally – and it's not taxed at all," he said. "Basically, you get people with multimillion-pound properties paying exactly the same council tax as somebody in a three-bedroom semi. So the system doesn't work."

Cable said the Lib Dems were also emphasising in negotiations the importance of lifting low earners out of tax altogether – one of the party's key themes. "We are making progress with that," he said. "That's certainly an important part of the mix as well."

Jeremy Browne, the Lib Dem foreign spokesman, signalled over the weekend that the Lib Dems were not "ideologically wedded" to the 50p rate of income tax.

But Boris Johnson, the Conservative London mayor, who has repeatedly called for the 50p rate to be scrapped, balked at the idea of a mansion tax. He said he was under the impression that there was "no agreement in the coalition".

Johnson said on Sunday: "Obviously, in a city like London … you're going to find many more people who might be hit by such a tax. I'd much rather that we stop focusing so much on bashing people and started thinking what we can do to help people into work."

A London Tory MP echoed Johnson's concerns, claiming that the tax would hit London the hardest and hurt middle-class families. Writing in the Evening Standard, Malcolm Rifkind, Conservative MP for Kensington and Chelsea, said 81% of properties affected would be in London, half of which are in his constituency backyard.

He said the levy would be "arbitrary, disproportionate and unfair" and declared himself "resolutely opposed to such a tax".

Many homes costing more than £2m are "fairly ordinary townhouses", he wrote. "Such a wealth tax would target not mansions but desirable locations," he said, adding that it would affect people with "comfortable but not wealthy middle-class incomes", many of whom had bought their homes prior to the "explosion in house prices".

It would be "extraordinary" if a Conservative-led government incorporated such a levy into the tax structure, he said. "If we are to target the super rich for taxation, the least we can do is ensure that carelessness doesn't leave middle-class families in the crossfire. Failure to do so could force hard-working Londoners out of homes they have lived in for decades."