City leaders rally: "Osborne must axe 50p tax rate to aid growth"

George Osborne should speed up plans to axe the 50p tax to protect the UK economy from the eurozone crisis, leading City figures have said.

Entrepreneurs could be attracted to Britain if plans to scrap the top rate of tax are accelerated by the chancellor, while increasing the tax-free personal allowance by £1,000 more than planned in 2012 could also help, said the group.

City leaders have called for new measures at a time when business leader Vince Cable said the contingency plans were being made by the Government as the “Armageddon narrative” of the possible collapse of the euro continues.

• Basic rate of income tax to be cut and top rate of income tax scrapped

More than 30 business leaders have signed an open letter to the chancellor, urging him to take immediate action. They also call for an increase in spending on infrastructure projects to bolster Britain’s faltering economy in the letter published in the Daily Telegraph.

The letter says: “We would encourage an acceleration of the government’s commitments on two areas of tax policy: increasing the personal allowance and restoring 40 per cent as the top rate of income tax. An early removal of the temporary 50 per cent tax rate would attract wealth generators to the UK and support the entrepreneurs we need to help us grow the economy and provide jobs.

“We await the conclusions of the HM Revenue and Customs evaluation of the sums raised by the 50 per cent rate; however, we are confident that the cost to the Treasury, if any, in the short term will not be material and that the advantages over the life of this parliament in terms of generally increased economic activity will more than outweigh any direct costs.”

• Exclusive: Lib Dem employment minister Ed Davey defies Nick Clegg saying 50p tax rate “could be scrapped”

BAA chairman Sir Nigel Rudd, British Land chief executive Chris Grigg, Berkeley Group chairman Tony Pidgley, Prudential chairman Harvey McGrath and PricewaterhouseCoopers chairman Ian Powell are among the powerful businessmen to have signed the letter.

Plans to axe the 50p tax rate on people who earn more than £150,000 are popular with senior Tories, but they also fear it will be politically explosive at a time when the government is pushing through austerity measures. Their coalition partners, the Liberal Democrats, are opposed to the plans.

European economic and monetary affairs commissioner Olli Rehn warned of a risk of a new recession because “growth has stalled in Europe”.

The combined gross domestic product (GDP) of the 27 EU member states is forecast to “stagnate” until deep into next year and the commission has downgraded its growth prediction of 1.8 per cent to 0.5 per cent. This will be followed by “slow growth” of around 1.5 per cent by 2013, it said.