Brown's hand-picked minister slams plans for tax crackdown on UK-based foreign nationals

Trade and investment minister Lord Digby Jones said Treasury plans to increase taxes on wealthy foreigners living here could affect London's place as a world financial centre.

The former head of the Confederation of British Industry said it would make it harder to attract top investors and skilled workers.

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Lord Jones was one of the ministers from outside the political sphere brought into Mr Brown's "big tent" Government last summer. He is supposed to be bound by ministers' collective responsibility.

But last year he also questioned Government plans to reform capital gains tax, which he said would hit medium-sized businesses.

The Treasury is consulting on proposals to raise £650million a year by charging "non-domiciles" who live in the UK for more than seven years £30,000 if they do not want to pay tax on their overseas income.

Lord Jones said he was often asked about the plans on trips to India and the Gulf, and he feared they had reduced the attraction of the UK for skilled people.

"It has caused people to say 'Does this mean you don't want us?'," he said, adding that there is a danger that Britain could lose its "badge as the place to come and bring your skill".

Liberal Democrat Treasury spokesman Vince Cable said Lord Jones's intervention, in an interview with the Financial Times, would further undermine the Prime Minister.

"It is utterly bizarre that a Government minister is also acting as an opposition spokesman," he said. "I wonder how long Gordon Brown will put up with this kind of freelancing, which undermines any last shred of confidence in what the Government is doing.

"These comments confirm that the Government's policies on non-dom investors are counter-productive and damaging."

Lord Jones's comments also came under attack from the unions. Brendan Barber, general secretary of the TUC, said: "He must make up his mind whether he is a member of the Government or a business lobbyist.

"The truth is that these extremely modest proposals to make non-doms pay a flat charge for their tax avoidance will have little impact on the super-rich.

"If he thinks that the UK's prime attraction is as a tax haven, he cannot have very much faith in the product."

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A spokesman for Mr Brown said: "Lord Jones was merely reporting concerns put to him when speaking to foreign investors. The Prime Minister has no concerns about his 'big tent' policy - far from it."

Other non-politician ministers have also departed from the official line.

Surgeon Lord Darzi, now a health minister, recently admitted that Labour's pledge to end mixed-sex wards was unachievable while security minister Lord West, a former head of the Royal Navy, expressed doubts over plans to extend the time terror suspects can be held without charge.