The Government is unlikely to implement any cut to the top rate of income tax until June 2013, according to Conservative MP Andrea Leadsom.
Leadsom says the Government must stick to its promise not to cut the top rate of income tax before ending the public sector pay freeze, currently set to lapse in June 2012, but likely, she says, to have to be extended to June 2013.
Last week it emerged the Government is considering cutting the rate of tax for those earning over £150,000 from 50p to 45p, possibly as early as next April’s Budget. Treasury projections suggest as much as 70 per cent of the £2.4bn generated from the 50p rate of tax would still be collected if it was cut to 45p.
But MP for South Northamptonshire and Treasury select committee member Leadsom says the cutting the rate while public sector wages are squeezed would be politically difficult.
Speaking to Money Marketing, Leadsom says: “The Conservatives said we would only drop the top rate of tax when the public sector pay freeze is over and I think we should stick to that. This is where the politics comes into it, even if the tax take from it is only marginally positive, or even if it is marginally negative, we still have to stick with what we said because it is about fairness.
“I think we do have to drop the top rate but we are where we are. We will need to look at the economy but I think the pay freeze may have to go for another year taking it to 2013, in that case I do not think we will see changes until then.”
The Conservative Manifesto said the party planned a one year pay freeze for public sector workers, but that was doubled in the coalition’s emergency Budget last June. In his speech to the Conservative Party conference in 2009, Chancellor George Osborne said it would be “grossly unfair” to “abolish” the 50p rate while asking public sector workers to accept a pay freeze.
Last week, Business Secretary Vince Cable said if the 50p rate was scrapped it would have to be replaced by another levy, hinting that a revived “mansion tax” on valuable homes could take its place.