Ed Balls fails to rule out lowering the threshold for the 40p rate

Guy Bentley
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Is Balls planning a major tax hike? (Source: Getty)

Ed Balls has failed to rule out dragging more people into the 40p tax bracket.

The shadow chancellor said the country still faced a £90bn deficit and could not guarantee the 40p threshold would not be lowered. The higher rate applies to those earning £41,865.

In an interview with ITV News, Balls said:

What I’d like to do is find ways I could have fewer people in the 40 per cent tax bracket. Of course I would.

But I have to be honest with people. The deficit will be £90bn. I have to find a way to get the deficit down in a careful, staged, balanced way.

Thanks to a failure to adjust, tax thresholds have resulted in 3m more people paying the 40p rate between 1990 and 2013/14. Should the Tories win the election and make good on their promise to raise the threshold to £50,000 more than 5m people will still fall into the higher rate bracket.

Many of those now paying the rate were not those intended to be hit by it when Nigel Lawson cut the tax from 60 per cent to 40 per cent in the 1988 budget. Police constables and head teachers are among the groups of workers who could be liable for the rate.

Balls added that Labour will reintroduce the 50p rate for those earning £150,000 a year and said there will be no rise in VAT.

Conservative Party chairman Grant Shapps didn't miss a beat, immediately accusing Labour of wanting to hike taxes substantially.

"This confirms suspicions that Labour will hit hardworking people with a £3,028 tax rise for the average working household," said Shapps.

It should be noted that think tank the Institute for Fiscal Studies lambasted the Tories' claim that Labour planned to raise the average families tax bill by more than £3,000.

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