Liberal Democrats narrowly back the 45p top rate of income tax

LIBERAL Democrat members yesterday said they wanted to keep the top rate of income tax at 45p – but only by a tiny majority.

Activists voted by 224 to 220 to back the government's decision to abolish the 50p rate, in a major victory for leader Nick Clegg, who had been expected to lose the vote.

Business secretary Vince Cable spoke in favour of the leadership, calling the 45p rate “economically practical and rational”, adding that it is balanced by other tax policies.

Activists also backed a broad range of measures designed to shift the burden of taxation from income to wealth, endorsing a mansion tax on houses worth over £2m, suggesting introducing a system of land value taxation, and saying capital gains should be taxed at the same level as income.

In a move that would hit high-earners, members backed limiting lifetime pension relief to £1m.

Clegg also won a crunch vote on the government’s austerity agenda.