Slash top tax rate to 40p to boost the economy, says sacked Lib Dem minister Jeremy Browne

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The top rate of tax on incomes over £150,000 a year should be cut from 45p to 40p, a senior Liberal Democrat MP will propose today.

Jeremy Browne, a former Foreign Office and Home Office minister, accuses Nick Clegg and David Cameron of “timidity” in reducing the 50p rate to 45p, claiming that a lower level would help Britain compete in the “global race”.

Writing in The Independent, Mr Browne warns that the UK is in danger of being left behind as economic power shifts to Asia and Latin America. “A nostalgic yearning for a Britain insulated from globalisation will only lead to marginalisation and failure,” he writes.

Mr Browne, who is on the right wing of the Lib Dems, has rebuffed attempts by the Conservatives to persuade him to defect to them. Although he has been tipped as a possible future Lib Dem leader, Mr Clegg surprised Westminster by sacking him as a Home Office minister last October. Since then Mr Browne has written a book, Race Plan – an authentic liberal plan to get Britain fit for the global race, which is published today.

His proposal on tax is a challenge to Mr Clegg’s authority. The Deputy Prime Minister resisted moves by Mr Cameron and George Osborne to bring in a 40p top rate and says the Lib Dems’ top priority at next year’s general election will be a further rise in the personal tax allowance. The Prime Minister and Chancellor believe the 45p rate will bring in more revenue than the 50p level and have not ruled out cutting it again after the next election. The decision to reduce the 50p rate was one of the Coalition’s most controversial decisions and has been dubbed “a tax cut for millionaires” by Labour.

Mr Browne admits the timing of the cut last year was “regrettable”, saying it should have been delayed until the personal allowance was raised to £10,000 a year on Sunday.

“If a 40p top rate was high enough for Tony Blair and Gordon Brown (until his last few weeks in office) then it should surely be high enough for David Cameron and Nick Clegg,” Mr Browne says in his book. “Authentic liberals should also feel uneasy about confiscatory levels of taxation. The 50p rate had, at the heart of the policy, the assumption that an individual had no more claim to his or her private income than did the state… A 45p rate is less presumptuous, but it is still too high.”

Mr Browne also criticises Mr Clegg’s plan to bring in free school meals for all five-to-seven year-olds this autumn, regardless of family income. He says the move undermines the Government’s deficit reduction programme and that it is “confusing” for the public to see such a “lavish” spending commitment when child benefit and education maintenance allowances for 16- to 18-year-olds have been cut.

Although he is a strong supporter of the Coalition, the Lib Dem MP accuses the Government of jeopardising Britain’s efforts in the global race by putting off difficult decisions such as airport expansion in the South East until after next year’s election. He calls for a new hub airport on the North Kent coast, preferably with six runways, and for a new runway at Gatwick as an interim measure.

Mr Browne also parts company with the Lib Dems on public services. Attacking “institutional inertia” over the NHS, he suggests the health budget should no longer be protected and calls for a debate on charging for some treatments. Ring-fencing  the health and overseas aid budgets has put unfair pressure on other departments, he argues.

His personal manifesto proposes a huge extension of choice, through measures such as education vouchers to allow parents to shop around for a school and a much wider range of “providers” including private firms. He wants personal budgets for service users, weighted in favour of the most disadvantaged, and calls for the number of police forces in England and Wales to be reduced from 43 to 10 or 12.