INDUSTRY bodies backed calls for the 50p top rate of income tax to be scrapped yesterday, as Labour politicians and trade unions argued relieving pressure on high-earners should not be a priority.
Chancellor George Osborne is coming under increasing pressure to cut taxes or boost spending in his budget later this month, after public borrowing figures revealed he was £7bn ahead of schedule in his deficit reduction plan.
Over 500 small business bosses argued the tax is damaging the economy, with their supporters claiming it may even reduce revenues for the government.
“If you punitively tax hard work, aspiration and wealth creation, you will get less of all three,” said Conservative MP David Ruffley.
“It sends the message the UK is no longer open for business.”
The Institute of Directors’ Simon Walker also backed the call, explaining “Scrapping the rate, and encouraging business, would increase the tax take and reduce the tax burden on lower-income people.”
“If there was ever a win-win for the chancellor, scrapping the 50p rate is it.”
However, opponents dismissed the argument that lower taxes can increase revenues.
“It’s not surprising to learn that rich people want to pay less tax,” said Trades Union Congress general secretary Brendan Barber.
“The chancellor will probably reject their special pleading in this year’s budget, but it is clear that his long-term priority is cutting tax for the rich rather than restoring the services he has cut or investing in jobs for the young unemployed.”
Labour’s shadow chief secretary to the Treasury Rachel Reeves also said cutting the top rate would be wrong.
“When millions of families and pensioners on middle and low incomes are being squeezed by the VAT rise and cuts to tax credits, cutting taxes only for the richest one per cent cannot be the right priority now,” she said, arguing instead that a VAT cut would do more to help families and pensioners.