Tory MPs urge George Osborne to cut the top rate of tax for highest earners again

The Chancellor already cut the top rate of tax in the previous parliament

Conservative MPs have called on the Chancellor to cut the top rate of tax paid by people in the top one per cent income bracket.

George Osborne cut the top rate of tax for those earning over £150,000 a year from 50 per cent to 45 per cent in 2012 – and took a popularity hit in the polls as a result.

Tory backbenchers have however called for a further tax cut for the highest earners – even as cuts fall on essential services like childcare and disability benefits.

Sir Edward Leigh told the Daily Mail the tax cut to 40 per cent would be based on “logic”, while former shadow home secretary David Davis called for the rate to go “straight back down to 40p”.

They argued that reducing the rate would actually raise revenue.

The call comes off the back of figures showing people earning over £150,000 paid £8 billion more tax in the first year of the cut than they did in the year before it.

However, tax experts have warned that the rise in revenue is unlikely to be because the rate cut somehow increased revenue.

“If you cut taxes on high earners you will substantially reduce the amount of tax we collect,” taxation specialist Jo Maugham QC told the Independent.

“There is not a solitary shred of reliable evidence to the contrary.”

In an analysis, Mr Maugham pointed out that tax revenue was artificially low the year before the rate was cut because Mr Osborne has promised to cut the rate.

Income had therefore therefore shifted until the tax cut had been passed, he suggested.

“On all the available evidence, [George Osborne’s] tax cut actually cost money,” Mr Maugham wrote in a separate analysis.

“It’s that the whole episode signals a terrible indictment of Government policy.”

HMRC projected that the cut would cost around £100 million. Its figures suggest that people earning £150,000 a year are in the highest one per cent of PAYE earners.

As well as cutting the top rate of tax, the Chancellor has raised the tax free personal allowance for middle earners - but has raised VAT, which is paid by even the poorest.

He has also dramatically cut taxes for corporations, with the Corporation Tax rate falling to 20 per cent. 

The Chancellor will announce his Budget on Wednesday 16 March.

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