Labour would bring back 50p tax rate

 

Ed Balls: "For the next Parliament, we will restore the 50p top rate of tax for those earning over £150,000."

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Labour would reintroduce the 50p top rate of income tax for those earning over £150,000, if it returns to power, the shadow chancellor has said.

Ed Balls said a government analysis which showed it did not raise much was skewed by ministers' assumptions.

The previous Labour government created a new 50% tax band in 2010 for anyone with income of more than £150,000, but the coalition cut it to 45% last April.

Conservatives said an increase would put "the economic recovery at risk".

Analysis

Labour called it a tax cut for millionaires.

The phrase helped paint their picture of a privileged Conservative leadership keen to help the best off.

In fact, Labour didn't put the top rate of tax up until shortly before they lost the general election.

The government said cutting it back to 45p cost the exchequer a relatively small sum.

Today's move will enthuse some Labour supporters, particularly those disappointed Ed Balls hasn't committed to reverse more cuts.

But the party can't know whether voters at large will see this as a fair change, or - like the Institute of Directors - a "political gesture".

And some business leaders echoed that warning.

Speaking to the Fabian Society in central London, Mr Balls said: "When the deficit is still high, it cannot be right for David Cameron and George Osborne to have chosen to give the richest people in the country a huge tax cut."

He said Labour wanted to finish the job of getting the deficit down by "reversing this unfair tax cut for the richest 1% of people in the country".

Other Labour pledges Mr Balls highlighted in his speech included:

  • Expanding free childcare for working parents to 25 hours a week to help make work pay
  • Requiring the long-term unemployed to take a compulsory job or lose their benefits
  • Legislating for more competition and tougher regulation in energy and banking to make sure these markets serve the public interest
  • Setting up a British investment bank to support small businesses, whose business rates will be cut and then frozen

Mr Balls also announced a Labour government would balance the books and deliver a budget surplus as well as passing a law to ensure it adheres to "tough" and binding fiscal rules, he said.

Canary Wharf skyline A return to the 50p tax rate would see changes for high-earning City workers

This would mean eliminating the deficit and cutting debt as a share of GDP between 2015 and 2020.

Labour's commitment does not include borrowing extra money for long-term investments, such as the HS2 high-speed rail link.

Revenue row

The government said its decision to cut the top income tax rate to 45p had reduced Treasury income by £100m a year - a figure based on a 2012 assessment by HM Revenue and Customs (HMRC).

But Mr Balls said the latest HMRC figures showed the 50p rate had raised "almost £10bn more in tax" in the three years it was in place than was suggested by the 2012 assessment.

Conservative Treasury minister David Gauke said he stood by the 2012 assessment and insisted the 50p rate would "raise little, if anything".

Conservative Treasury minister David Gauke: "The wealthiest are paying a greater share of income tax"

He added: "If Labour want to deliver a reduced deficit, given their opposition to any of the spending cuts we're putting in place, then I'm afraid they're just going to have to put up taxes on everyone - not just the top earners."

Liberal Democrat Chief Secretary to the Treasury Danny Alexander accused Labour of "breathtaking" hypocrisy.

He said bringing back the 50p tax rate would not fix a "system full of loopholes" which Labour left behind in 2010.

Lord Myners - a former Labour City minister under Gordon Brown - said it was "not clear" how the tax would help the UK "compete with the world's growth economies".

"We need to encourage productive enterprise and effort rather than resort to predatory taxation," he said.

Government 'complacency'

The Unite union called Mr Balls' 50p tax plan a sign that Labour "understands the need for a fairer taxation system".

TOP RATE OF INCOME TAX

  • 1979-1988: 60%
  • 1988-2010: 40%
  • April 2010-April 2013: 50%
  • April 2013-present: 45%

A spokesman said: "This is a beginning. Voters will know now Labour is emerging as a positive choice for this country.

"Contrast this move with the complacency of the government, which instead of finding ways to get money into people's pockets, insists to cash-strapped workers everything is rosy."

But Katja Hall, chief policy director of the CBI, warned that a 50p tax rate would put talented people off coming to the UK to invest and create jobs.

Simon Walker, director general of the Institute of Directors, said Labour needed to drop its practice of "knee-jerk reversion to the old socialist nostrums that so damaged Britain's economy in the past".

"It was, and remains, an envy-driven political gesture designed solely to drive a wedge between voters," he added.

Sir Stuart Rose, chairman of Ocado, said: "This will put at risk all the good work that has been done to put the economy back on track."

 

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  • rate this
    -3

    Comment number 1385.

    If Ed Balls had said he would keep it at 45% then the same people engaging their bile ducts on here would have said that he was a hypocrite for attacking the Tories over lowering it.
    You guys don't posess a modicum of cohesive objectivity between you all.Your raison d'etre is to vote down comments that aren't worn out tabloid cliches and Daily Mail platitudes.
    Tory Grima Wormtongues.

  • rate this
    -6

    Comment number 1384.

    Gosh is the BBC slipping by continuing to accept comment on this?

  • rate this
    -3

    Comment number 1383.

    go on tax the high earners , that means me as well but at least I would be able to look my drinking buddies in the eye

  • rate this
    -18

    Comment number 1382.

    It's worrying that so many mugs are taken in by tory propaganda regarding stewardship of the economy - it's one of the biggest myths being peddled and regurgitated - in the same League as Farage's 70% of uk law is made in Brussels.

    Not an endorsement of Balls by any means, just recognition of the fact that the big 2 are equally inept and short sighted.

  • rate this
    +35

    Comment number 1381.

    Increase the tax free allowance to £15,000.
    Abolish employee National Insurance Contributions.
    Have a single tax rate of 30%.

    Simpler and fairer. No need for Working Tax Credits or other tweaks.

  • Comment number 1380.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +1

    Comment number 1379.

    Balls by name and it looks like he talks it too

  • rate this
    -2

    Comment number 1378.

    Google employ over 2000 in Irelend for better tax breaks than we can offer but that's 2000 more employed in Ireland than we have, so why give these big corporations such a hard time when they could go elsewhere and not provide massive employment. Just because it wasn't a Brit that invented Google, doesn't mean we can't let them trade here

  • rate this
    -4

    Comment number 1377.

    The average individual earnings are £26,000 per person. The question, "why is anything below that taxed at all?" is not asked. Until politicians have an active, working policy that takes all people earning less than the average out of taxation, there is something very very wrong. At Davos it was revealed that 85 actual people have as much wealth as 3.5Bn average people. 50% is low.

  • rate this
    +1

    Comment number 1376.

    The appropriately-named Balls should also focus on getting US giants like Amazon and Google to pay tax. It is totally unfair they are able to undercut tax-paying businesses due to the huge savings they make by dodging tax.

  • rate this
    -1

    Comment number 1375.

    The "high achievers" i know gained their wealth from plundering their "home" countries, sound familiar.

  • rate this
    -5

    Comment number 1374.

    I think £150k's probably about right.

    The tax should not be onerous towards those on "normal" incomes who approach that by working long hours say. That could easily happen.

    It must be remembered that many high incomes are largely dividends, rent etc., that is, what was once called "unearned".

  • rate this
    0

    Comment number 1373.

    The 'cost of living crisis' can be solved at a stroke by increasing the tax threshold even further and/or reducing the basic rate of tax by 1p. Why we keep divering and scratching our heads is a mystery.

  • rate this
    -4

    Comment number 1372.

    Ed Balls got nothing to prove. We know how dysfunctional labour government was in 13 years. That is why he is suggesting we should pay until 2020 to fix his legacy.

    All I can say is good luck Ed Balls because you need it!!

  • rate this
    -3

    Comment number 1371.

    In a free society;

    Regardless of who you are, you're a person, and are entitled to keep the fruits of your labours. You are not the idiot incompetent and corrupt MPs treat you as, arguing you are too unreliable to decide how best to spend your own money on your own family.

    Without the discriminatory penalty upon success (income taxes), our wealth imbalances would be reduced dramatically :)

  • rate this
    +2

    Comment number 1370.

    What makes this country great it's its people. As many successful people, businesses the more respectable status in the global economy and world. It's a disgrace that once you are successful in financial terms, everyone seems to think it is acceptable to put their hands into your pockets and help themselves. It's something for nothing acceptable? Charity is a choice, taxation not.

  • rate this
    +4

    Comment number 1369.

    I guess the high earners could all move to the US? ;-)

















    Cough, 55.9%

  • rate this
    +1

    Comment number 1368.

    I am Canadian... although I did a number of years in the UK (11+ and all that), as well as served in the British Army on exchange.
    While I admire many things British, what I simply cannot comprehend is how any reasonable person would even consider voting Labour. Their policies led the country to complete financial ruin.

  • rate this
    -4

    Comment number 1367.

    Sally so answer the question how do you rebalance when one has (whether inadvertently or premeditated) stolen a greater share of a transaction that is damaging to both parties & the third party society/economics than is good
    No any Libertarian in the world is free to answer it

  • rate this
    -3

    Comment number 1366.

    Someone said ones " if you are rich and dont pay your fair share to society, stop investing into shares. Better invest in security as the people will come after you one day and take their fair share from you"

 

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