Business leaders fear keeping the 50p rate will hinder economic recovery
The government has accepted that it cannot scrap the 50p rate of income tax before the 2015 general election, it has been reported.
Prime minister David Cameron and chancellor George Osborne have realised they will have to bide their time in order to abolish the levy, according to a report in the Daily Telegraph.
Although Cameron spoke of his determination to scrap the 50p rate – introduced by the Labour government in 2010 – such a measure will not occur in the immediate future, it was suggested.
Business leaders and backbench Conservatives have repeatedly called on Cameron to abolish the top rate of tax to boost the economy, while the prime minister has voiced scepticism over whether it raises that much money for the Treasury.
The prime minister acknowledged that the Government had to “demonstrate fairness” but said it was also important to consider whether it was an effective way of raising revenue. He said: “We have also got to look at the evidence of the 50p tax. Is it raising a lot of revenue? If it isn’t then clearly there will be question marks over it.”
However, the Daily Telegraph reported that a HM Revenue and Customs review of the 50p rate would undermine the case for abolishing it by revealing that it generated hundreds of millions of pounds in its first year.
Cameron’s official spokesman said: “The prime minister has always been very clear that the 50p rate should be temporary but that, in our efforts to reduce the deficit, we need to demonstrate that we are doing that in a fair way, and we need to ask those with the broadest shoulders to contribute the most.
“On what happens to 50p in the future, tax is a matter for the chancellor and tax decisions are made in Budgets.”
Sources say that Osborne is expected to announce in this year’s Budget that the decision to maintain the top tax rate until the next general election remains under review. However, it is unlikely to be scrapped before 2015 unless evidence emerges that it is damaging the economy, the Daily Telegraph understands.
When asked about the 50p rate in an interview on Sunday, Cameron said: “When you’re taking the country through difficult times and difficult decisions, you’ve got to take the country with you. That means permanently trying to make the argument that what you’re doing is fair and seen to be fair.”