Budget 2012: The Robin Hood Tory Chancellor? Critics aren’t convinced
Labour described the cut as the government’s own “bankers’ bonus” that would hand a tax boost to the top 1 per cent of earners and dashed the coalition’s claims that the country is “all in it together”.
But Mr Osborne said a new HMRC study, validated by the independent Office for Budget Responsibility (OBR), showed the top rate of income tax had collected at best £1 billion since it was introduced by Alistair Darling, following the banking crisis – just one third of previous estimates.
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Hide AdHe said reducing the figure to 45p – it had been 40p before being raised by the previous Labour government – would reduce the amount of income tax collected by only £110 million, and in future might even lead to a higher return because the 50p rate was “uncompetitive.”
He told MPs that the 50p rate was the highest in the G20, while reducing it to 45p put it below France, Germany, Italy and Australia, and only 1p above the United States.
Mr Osborne said: “No Chancellor can justify a tax rate that damages our economy and raises next to nothing. It is as simple as that.
“And thanks to the other new taxes on the rich I’ve announced today, we’ll be getting five times more money each and every year from the wealthiest in our society.
“So the richest pay more. The economy benefits. Britain is competitive again.”
The measures he announced on tackling the rich included a new stamp duty of 7 per cent on homes worth £2m or more, or 15 per cent for homes of the same value bought through holding companies.
He also revealed that he would cap the amount that individuals could write off for charitable donations.
And he told MPs that he would introduce a new law to close down tax avoidance loopholes, which he said were “morally repugnant”.
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Hide AdHowever, critics pointed out people who earned £150,000 a year or more, and did not purchase a home worth over £2m, would now be better off.
Labour leader Ed Miliband called it a “Budget for millionaires”, but was met with Cabinet members holding up five fingers to symbolise the fact they believe that the rich would be taxed five times as much in future.
Later, Labour’s shadow Treasury minister Cathy Jamieson, the MP for Kilmarnock and Loudoun, said the Chancellor was more interested in helping those earning more than £150,000 than taking action to support people suffering because of fuel duty.
She said: “George Osborne says he can afford to give a tax cut for people earning over £150,000, but he can’t afford to cut fuel duty for hard-pressed families.
“Drivers already facing record petrol prices are now facing a 3p rise in fuel duty in August.
“Labour’s five-point plan for jobs includes a temporary VAT cut which would take 3p off the price of a litre of petrol – and jump-start our stalled economy.”
Business leaders welcomed the reduction in the 50p rate to 45p.
CBI director general John Cridland said: “Reducing the 50p income tax rate will send a clear signal that the UK is open for business. We must continue to encourage top talent to live and work in the UK.”