Leading economists urge Coalition to drop 50p tax rate

| September 7, 2011 | 0 Comments
”Leading

A group of twenty leading economists have called on the Coalition Government to scrap the top 50p tax rate as it is damaging the UK economy.

The request comes at a time when many experts believe the economy could be heading towards a double-dip recession and the rate should be dropped in order to boost growth.

The group of high profile experts have written a letter to the Financial Times highlighting that the top tax rate is doing “lasting damage” to the UK economy and it should be axed “at the earliest opportunity”.

“Only by returning to an internationally competitive tax regime will Britain enjoy long-term sustainable economic growth,” the letter reads.

According to the 20-strong group, approximately 320,000 taxpayers pay the highest rate of tax, 1% of the total number and they claim that the UK has “one of the highest personal tax regimes in the industrialised world, making it less competitive internationally, and making us less attractive as a destination for both foreign investment and talented workers”.

The economists include two former members of the Bank of England’s Monetary Policy Committee (MPC), DeAnne Julius and Sushil Wadhwani, as well as Cambridge University academic Bob Rowthorn, Professor Danny Quah from the London School of Economics and veteran monetarist Professor Patrick Minford of Cardiff University.

The letter comes at a time when weak economic figures led to growth forecasts being revised down – which many believe are related to the Government’s harsh spending cuts, designed to bring the budget deficit down.

Some have suggested they could even push the economy back into recession.

However, Chancellor George Osborne continues to defend the cuts and he has deemed them necessary and fair in order to bring the budget deficit down.

The former Labour Government introduced the 50p tax rate on high earners, intended as an emergency measure to deal with the deficit.

Mr Osborne decided to keep it in his first two budgets but always stated it was a “temporary measure”.

The Chancellor has asked HMRC to review how much money is being brought in from the 50p band – but this will not be available until after the deadline for this tax year’s self-assessment forms in January next year.

Finally, in response to the letter, a spokesperson for the Treasury said: “The Government is committed to a competitive tax system, but in reducing the deficit, we have always been clear that those with the broadest shoulders should carry the greatest burden.”

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