Scrap 50p tax rate, says Lawson

Former Conservative chancellor Nigel Lawson has urged George Osborne to axe the 50p top rate of income tax, saying it is “dangerous” and “foolish” to leave it in place.

Lord Lawson admitted it would be politically difficult for the government to cut the tax on the country’s top earners, but insisted it would be “better” to push the change through soon.

Mr Osborne is coming under intense pressure from Tory back-benchers to scrap the 50p rate, after an open letter from 20 economists warned on Wednesday it was damaging the recovery from recession.

Lord Lawson, who cut the top rate from 60p to 40p in 1988, said it was “very dangerous, very unwise, very foolish” to keep the rate in the UK higher than in competitor countries.

“The politics are slightly difficult, but I think it should be done,” he said.

“It would be extremely beneficial to the economy. I don’t think it would cost the Exchequer any money at all.

“And you have to remember that when I brought [the] top rate down to 40 per cent – 40p in the pound – it was then the lowest rate.

“Other countries followed, so not only has that advantage gone but we are now at a disadvantage with all our major competitors because they all have top rates which are less than ours. And that is very dangerous, very unwise, very foolish.”

But one of Britain’s leading businessmen called on the government not to scrap the 50p rate, which affects those on more than £150,000.

Sir Stuart Rose, former executive chairman of Marks & Spencer, said: “I don’t think that they should reduce the income-tax rate. How would I explain to my secretary that I am getting less tax on my income, which is palpably bigger than hers, when hers is not going down?”

He added: “If, in the short term, a case was made for me to pay more than 50 per cent tax, which would help UK plc, I personally – Stuart Rose – would be prepared to pay more tax.”