Top tax rate ‘harms UK economy’

7 September 2011 Last updated at 12:01 ET

Twenty high-profile economists have urged the government to drop the top 50p tax rate, which they say is doing “lasting damage” to the UK economy.

In a letter to the Financial Times, they say it should be axed “at the earliest opportunity” to boost growth.

Ministers say the 50p rate is temporary but their policy is to first increase the income tax threshold to £10,000.

Critics said cutting the rate at a time of cuts would be “monstrously unfair” and “phenomenally immoral”.

The chancellor has asked HM Revenue and Customs to check whether the 50p rate, introduced as a temporary measure to tackle the deficit under Labour, is an effective means of raising tax revenue.

The 20 signatories to the FT letter include two former members of the Bank of England’s Monetary Policy Committee, DeAnne Julius and Sushil Wadhwani.

It is part of a campaign being promoted through PR firm Westbourne, which they say is funded by businesses concerned about the impact of the 50p rate.

‘Mobile people’

The economists argue that the tax rate makes is making the UK “less competitive internationally, and making us less attractive as a destination for both foreign investment and talented workers”.

They call on the coalition, “to drop the 50p tax at the earliest opportunity as part of a package of measures to stimulate growth”.

In a speech on Tuesday, Chancellor George Osborne said recent economic data had led to short term forecasts being revised down over recent weeks – but pledged to stick to his budget deficit-cutting plans.

The previous Labour government introduced the 50p tax rate on high earners – it was forecast to raise £1.3bn in 2010-11, £3.1bn in 2011-12 and £2.7bn in 2012-13. HM Revenue and Customs said about 308,000 people paid the 50p rate.

Mr Osborne decided to keep it in his first two budgets but always said it was a temporary measure. He has asked HM Revenue and Customs to look at how much it is raising and he told the BBC last month: “I’ve said with the 50p rate I don’t see that as a lasting tax rate for Britain because it’s very uncompetitive internationally.”

The prime minister’s official spokesman said on Wednesday that the government regarded the rate as “temporary” but said that official policy – in the coalition agreement – was that lifting the income tax threshold to £10,000 should take priority over other tax cuts.

Mr Osborne would have to square the decision with the Conservatives’ coalition partners – the Liberal Democrats. Lib Dem Chief Secretary to the Treasury Danny Alexander told the BBC in July that anybody who believed abolishing the 50p tax rate was a priority was in “cloud cuckoo land”.

Lib Dem Business Secretary Vince Cable has said that if the 50p rate is axed, tax on high value properties may have to rise – perhaps through council tax or stamp duty.

And on Wednesday senior Lib Dem backbencher Tim Farron, the president of the party, said tax cuts for the wealthy “would be phenomenally immoral”.

where in the world, wealthy individuals including France’s richest woman Liliane Bettencourt and the US billionaire investor Warren Buffet have both said they would be happy to pay higher taxes.

Brendan Barber, general secretary of the Trades Union Congress, said a “handout to the wealthiest in our society” at a time of cuts would be “monstrously unfair”.

And Shadow Chancelllor Ed Balls said: “Millions of struggling families and pensioners on middle and low incomes will wonder why the only tax rise or spending cut George Osborne is willing to reconsider is the top rate of tax for the very richest.”

Instead he said the chancellor should temporarily reverse the VAT rise to 20%, to “help to kick-start the recovery and give a much needed boost to millions of people regardless of their income”.

— ’re ’s , . : A ‘Malign Intellectual Subculture’ – George Monbiot Smears Chomsky, Herman, Peterson, Pilger And Media Lens.