Debate was sparked over the 50p tax rate today, as a group of economists wrote a letter to the Financial Times, accusing the rate of damaging the UK’s economy.
The rate, which affects those earning over £150,000, was brought in as an ’emergency measure’ in Labour’s 2010 Budget Report, and Osborne has since confirmed that it is only a temporary measure.
In the letter to the Financial Times, 20 business experts, including former members of the Bank of England’s Monetary Policy Committee, said: “We are concerned that Britain’s 50p income tax rate is doing lasting damage to the UK economy.”
“It gives the UK 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.”
According to the signatories, “Only by returning to an internationally competitive tax regime will Britain enjoy long-term sustainable economic growth.”
Chief political correspondent at the BBC, Norman Smith, believes that it is not a question of when to get rid of it, but how to get rid of it.
According to Smith: “The problem is not just selling such a policy to the electorate – remember all that rhetoric about those with the broadest shoulders bearing the heaviest burden – but also squaring such a move with the Lib Dems.
“The hope is that the review being carried out by Revenue and Customs into the 50p rate will conclude early next year that far from raising revenue, the 50p rate may actually cost the Treasury money.
“Why? Because it is thought to deter international investors from coming here and encourages other wealthy individuals to leave Britain.”
Smith believes that if HMRC were to find that the 50p rate is in fact doing more harm than good, that George Osborne will have enough political ammunition to scrap the tax rate before the next election.
