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.