The UK's 50p rate: Tax or symbol?

George Osborne Image copyright Getty Images
Image caption Twenty economists have written to Osborne saying the tax rate is doing 'lasting damage' to the UK

Taxes you might think live or die according to whether they raise revenue for the Exchequer. Not so. The debate about 50p is as much about political symbolism as economics.

Those who want the rate to go fear that the top rate sends a message around the world that Britain does not want the wealthy to come here.

The rate is higher than many of our competitors and 50% crosses an important psychological barrier for many people who resent the idea of the state taking half their earnings.

Those who want it to stay see it as a symbol of fairness - evidence that the wealthy are taking their share of the pain.

The party politics of all this are also not as simple as some suggest.

Labour's two Eds are instinctively in favour of keeping the 50p rate and are sure to oppose it being scrapped.

However, Alistair Darling made clear when he introduced it that he intended it to last only as long as the economic crisis.

Alan Johnson endorsed this view as shadow chancellor, as do many Blairites who fear that Labour will return to being seen as the enemies of aspiration.

The Lib Dems have declared in recent weeks that scrapping the 50p rate is "cloud cuckoo land" (that was Chief Secretary to the Treasury Danny Alexander) and "impossible" (Vince Cable).

However, the party dropped their policy of backing a 50p rate before the last election.

Behind the scenes Lib Dem ministers are telling their Tory coalition partners - if you're determined to drop this tax we need something in return which will show that the government is committed to fairness eg a new tax on property.

While many Tories are instinctively in favour of tax cuts, some are already telling me that it would be political suicide to cut the top rate for those earning over £150,000 while proceeding with plans to take child benefit away from those earning a third of that amount.

My hunch is that George Osborne will find a way before the next election to scrap this tax and pay for it by another less visible tax increase on the wealthy. Remember how he promised to pay for a cut in inheritance tax by increasing tax on non-doms?