Labour vows to bring back 50p tax rate

Shadow chancellor Ed Balls speaks at the Fabian Society conference yesterday. Picture: PA

The shadow chancellor said he would reverse the decision taken by the coalition to reduce the amount levied on Britain’s highest earners – those on more than £150,000 – so he could help reduce the deficit. Balls told the annual Fabian Society conference in central London that “those with the broadest shoulders” should bear a “fairer share of the burden”.

Balls said: “The latest figures show that those earning over £150,000 paid almost £10 billion more in tax in the three years when the 50p top rate of tax was in place than when the government conducted its assessment of the tax back in 2012.

“When the deficit is still high, when tough times are now set to last well into the next parliament, when for ordinary families their real incomes are falling and taxes have risen, it cannot be right for David Cameron and George Osborne to have chosen to give the richest people in the country a huge tax cut.”

Balls continued: “That’s why, for the next parliament, the next Labour government will reverse this government’s top-rate tax cut so we can finish the job of getting the deficit down and do it fairly.

“For the next parliament, we will restore the 50p top rate of tax for those earning over £150,000, reversing this unfair tax cut for the richest 1 per cent of people in the country and cutting the deficit in a fairer way.”

Chancellor George Osborne announced he was cutting the 50p rate in 2012, insisting it was failing to claw in the cash that had been predicted. The new 45p rate came into effect last year.

But Labour said the most recent figures released by HM Revenue & Customs showed that top earners paid £9.5bn more in total income tax liabilities when the rate was set at 50p than previous analysis had shown.

Business leaders and tax campaigners, however, were quick to criticise the announcement.

Simon Walker, director general of the Institute of Directors, said: “If the Labour Party wants to be taken seriously by business – and especially by international companies which may invest or expand in the UK – it needs to drop its practice of knee-jerk reversion to the old Socialist nostrums that so damaged Britain’s economy in the past.

“It will significantly damage Labour’s credibility with the business community.

“The 50p tax rate – actually 52p, because the last Labour government manipulated national insurance contributions – greatly damaged Britain’s claim to being seen as a low-tax economy and actually drove down total tax receipts.”

Mark Littlewood, director general at the Institute of Economic Affairs, said: “Reintroducing the 50p top rate of income tax would be a disaster for both enterprise and economic growth. As the UK’s economy finally begins to grow, it’s absurd that the shadow chancellor has announced a policy that would jeopardise the fragile recovery.”

Liberal Democrat Chief Secretary to the Treasury, Danny Alexander, said: “It seems Labour have learned nothing from the last few years and would undermine the foundations of Britain’s economic recovery.

“The coalition’s economic strategy is dealing with the catastrophic mess we inherited from Labour.

“The action taken by Liberal Democrats in government is the foundation for the economic recovery that is now under way and helping more British people find work than ever before.

“Labour’s answer is to borrow more over a longer period, which will leave a higher burden of debt to be dealt with by future generations.

“That is not fair or responsible. We need to stick to the plan to secure the recovery, not weaken our resolve now.”

But the move received the support of one of Labour’s biggest union backers.

A Unite spokesman said: “The commitment to restore the 50p top rate of tax is a sign that a future Labour government understands the need for a fairer taxation system in this country.

“This is a beginning. We would urge Labour to also tackle the disgraceful abuse of the system by the evaders and avoiders too.”