Chancellor determined to cut 50p tax rate
The question of whether or not to scrap the 50p income tax rate is dividing the coalition government in the run up to the budget on 21 March.
Chancellor of the Exchequer George Osborne is determined to reduce income tax on earnings over £150,000, but the proposal has been met with disapproval by Lib Dem leader Nick Clegg.
The 50p rate was introduced by Gordon Brown’s Labour government in 2010 as a way of boosting government revenues during the recession.
Mr Osborne insists it was meant to be a temporary measure and is seeking clarification on how much it is actually raising in tax.
The 50p rate has been criticised for deterring entrepreneurship and investment.
Deputy PM Nick Clegg previously said that scrapping the 50p rate could destroy public support, but the Lib Dem’s position seems to have shifted slightly.
The party is now saying that it is not ‘ideologically wedded’ to keeping the 50p rate as long as it is replaced with another tax on wealth.
Suggestions include a tax on properties worth more than £2m, or a new ‘super’ council tax band for high-value properties.
Mr Clegg is also pushing for the income tax personal allowance to be raised more quickly than planned, to help low-income households.
The leaders must resolve the issue quickly so that the Office for Budget Responsibility has the information in time to make its economic forecasts.
The run up to the budget has also seen business leaders criticise the Government’s growth plans.
Speaking at the British Chambers of Commerce conference Willie Walsh, chief executive of International Airlines Group, said that the coalition government changed its policy for growth “every other week”.
At the same conference Stephen Hester, chief executive of the Royal Bank of Scotland, said that companies in the UK lack the confidence to invest and called for a ‘circuit-breaker’ to restore confidence.