Is Osborne planning higher rate tax cut?

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Former Conservative chancellor Lord Lawson is urging George Osborne to slash the top rate of income tax to 40p in next month’s Budget, with the Treasury reportedly considering the move.

According to the FT, Osborne plans to use the Budget to signal a shift towards a “lower tax, lower welfare” economy.

The Chancellor has reportedly indicated in Treasury meetings he could cut the top income tax rate from 45p to 40p on earnings above £150,000.

Lord Lawson told the FT: “I would strongly support this: It would significantly enhance the attractiveness of the UK as a place to do business, at no cost in terms of lost revenue.

“That was the experience when I brought the top rate down to 40 per cent in 1988 and it is even more relevant today.”

The move, which is expected to cost £900m, would likely be presented alongside reforms to hit the rich, including slashing pensions tax relief and tackling tax avoidance.

Ahead of the general election, the Conservatives outlined proposals to reduce the annual allowance for people earning more than £150,000. Under the plans, annual allowances will be tapered away on earnings between £150,000 and £210,000, with those earning £210,000 seeing their allowance cut from £40,000 to £10,000.

However, in an interview with Money Marketing, former pensions minister Steve Webb described the plans as “hideous”.