The controversial 50p tax rate would be brought back by a Labour government, Ed Balls has vowed.
Top earners will be hit with a tax rise under a Labour government, Ed Balls announced today, as he pledged to reduce the UK’s deficit by ensuring those with the “broadest shoulders bear a fairer share of the burden”.
Battling to restore Labour’s dented economic credibility, the Shadow Chancellor said the top rate of tax on incomes over £150,000 would be increased from 45p to 50p, which he claimed would raise £10bn over three years.
Yet the pledge was criticised by the Liberal Democrats, Labour’s potential suitors in a coalition next year, while business chiefs and the Conservative Party also warned that reintroduction of the 50p rate would be a “disaster”.
While Labour has maintained a lead over the Conservatives in the polls, Ed Miliband and Mr Balls lag behind David Cameron and George Osborne on economic competence. In a speech to the Fabian Society yesterday, Mr Balls tried to address this with a “binding fiscal commitment” that a Labour government would deliver a budget surplus by the end of the next Parliament. The Chancellor has pledged to deliver a surplus by 2019, a year earlier than Labour.
With Mr Osborne setting out plans for yet more cuts to welfare spending, the Shadow Chancellor said reintroducing the 50p rate would reduce the deficit in a fairer way. A Labour government will also introduce a lower 10p starting rate of tax, helping those on middle and lower incomes. The 45p rate was increased to 50p by Gordon Brown before the last election, then slashed again by Mr Osborne in 2013.
Mr Balls said: “When the deficit is still high, when tough times are now set to last well into the next parliament, when for ordinary families their real incomes are falling and taxes have risen, it cannot be right for David Cameron and George Osborne to have chosen to give the richest people in the country a huge tax cut ...
“For the next Parliament, we will restore the 50p top rate of tax for those earning over £150,000, reversing this unfair tax cut for the richest 1 per cent of people, and cutting the deficit in a fairer way.”
HMRC figures show that people earning over £150,000 paid £9.5bn more in tax in the three years when the 50p top rate introduced by Labour was in place than had been estimated by the Government.
But Danny Alexander, the Chief Secretary to the Treasury who is likely to be a key figure in any 2015 coalition negotiations, dismissed the commitment. “Labour’s answer is to borrow more over a longer period, which will leave a higher burden of debt to be dealt with by future generations,” he said.
Financial Secretary to the Treasury Sajid Javid said: “Labour got us into a mess by spending too much, borrowing too much and taxing too much. And now Ed Balls is proposing more spending, more borrowing and more taxes.”
Simon Walker, director general of the Institute of Directors, said Mr Balls’s announcement would “significantly damage Labour’s credibility with the business community”.