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Categories:Politics

Economists call on Osborne to scrap 50p rate

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A group of 20 economists is calling on the Government to scrap the 50p tax rate at the earliest opportunity to help stimulate growth in the economy.

It comes after Chancellor George Osborne last night admitted the short term prospects for growth had worsened over recent weeks.

In a letter to the Financial Times, the economists say that the top rate of tax gives the UK one of the highest personal tax rates in the industrialised world, punishing wealth creation and entrepreneurs and that it could be doing lasting damage to the UK economy.

The letter says: “We call on the Government to drop the 50 tax at the earliest opportunity as part of a package of measures to stimulate growth. Only by returning to an internationally competitive tax regime will Britain enjoy long term sustainable economic growth.”

The letter is signed by Chatham House chairman DeAnne Julius, former Monetary Policy Committee members Sushil Wadhwani and Bob Rowthorn as well 17 other university and consulting firm economists.

It adds that while the tax is portrayed as a justified tax on the rich, the economic damage it causes means it is “self-defeating” and not in the interests of “ordinary workers”.

Last night Osborne admitted the UK’s short-term growth projections are likely to be downgraded. In a speech at Lloyds of London, Osborne said the “overhang of debt” meant that the recovery would be “slower and choppier”.

He said: “While we have all had to revise down our short-term expectations over recent weeks, the only people who should be fundamentally re-examining their position are those who thought this time would be different.”

He added that the slump in global confidence reinforced the case for sticking with the Government’s fiscal consolidation and that while Britain is not immune from the global slowdown “we can remain masters of our own destiny”.

The Office of Budget Responsibility currently predicts growth for 2011 of 1.7 per cent. In August OBR chairman Robert Chote said he now expects growth to fall short of that forecast. The OBR will publish its next growth projections on November 29 and later that day Osborne will give his autumn statement.

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Readers' comments (9)

  • the greed of these people.wer'e all in it together.Idon't think so

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  • Presumably this would be paid for by scrapping Bus Travel Free Passes.

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  • Rather than scrap the 50% rate, which is paid by those who CAN afford it, help out us, the ordinary rate taxpayers who are financially worse off and need every penny. If I had more money at the end of each month, I would be able to spend it, helping the economy.

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  • Put money in the pockets of the poor.

    It is they who spend, not the rich who already own what they desire.

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  • Who wrote this?

    Let me guess, only those affected by the 50% tax rate?

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  • How does cutting the amount of tax an economist pays help stimulate the economy more than, for example, cutting CGT or the Corporation Tax rate?

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  • Wouldn't it be a far better idea to either: (a) reduce the basic rate of tax; or (b) increase the personal tax allowance to, say, £15,000? This would put money into the hands of those who need it most, and who are much more likely to spend on some of the essentials which they are currently struggling to afford.

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  • Oh my heart bleeds for those those "Poor people" on such mediocre incomes of £150,000pa plus.
    They invest overseas, they pay accountants to minimise their tax (often more than saved) and when on holiday travel to exotic destinations and spend outside of the UK.
    They invest short-term which is service based industry and rarely consider long term investments that favour manaufacturing.
    Now that stock markets have tumbled in value by 20% do i hear complaints from the well heeled. NO. they havent even noticed.
    Therefore they wont miss a reduction in net income if tax rates were raised.
    People in Holland and Sweden pay far more BUT get quality Government services.
    Americans might pay less direct taxes but have to fund all additional services such as health from their own pocket, which when included makes them equal to our current rates of tax.
    People with inherited millions dont create wealth, they merely protected it and definetly wont share it. Self made millionaires who acheive their status by hard work deserve reward.
    So i dont object to a 40% rate on earned income (providing they prove they work) and then shift the tax burden onto trusts, non residence property and investments for the non working idle rich. Some will leave the UK. Goood, but as soon as they become ill, they will return to the UK .
    Good olde big society Eh!

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  • Cut the taxes of those who genuinely add value to society - either by the job they do (nurses, policemen etc) or by the companies they run - but please avoid pandering to 20 economists.

    Let's not lose sight of the fact that the 50% rate only kicks in at £150,000. It's not as though someone earning, say, £200,000 is paying half of that in tax.

    Same goes for the bleating we get about IHT - from the whining you'd have thought there was no threahold at all, and that wicked Mr Osbourne was taking 40% of the value of ALL that unearned income...

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