Leading article: Economic growth must come first

Share

When Alistair Darling introduced the 50p tax rate in 2009 it was billed as a temporary measure – a fair way to spread the pain of Britain's unmanageable debts by leaning on those with what the then Chancellor described as "the broadest shoulders". Two years on, with double-dip recession a very real threat, it is time for the top rate to go.

In terms of revenue-raising, the impact on the Exchequer is minimal. The controversial marginal rate – which is levied on earnings above £150,000 – hits just 320,000 people. Out of this year's total income tax take of around £150bn, it is expected to generate at most £2.7bn. And even that may be optimistic, with some experts predicting that as much as two-thirds of the total could be lost to avoidance.

But while the 50p rate is of limited fiscal impact, it has considerable symbolic significance. A top rate that takes half of every £1 earned for the taxman is a signal against wealth creation, penalising precisely the dynamic, entrepreneurial types that the economy so desperately needs.

Mr Darling's Budget came when the expectation was still of a relatively swift recovery from recession. In fact, the economy is flat-lining. Britain's GDP expanded by a woeful 0.2 per cent in the second quarter. The outlook is darkening, with a slew of indicators on everything from high-street spending to manufacturing output pointing bleakly downwards.

In such a climate, the message that wealth distribution is considered more important than wealth creation is one that Britain cannot afford to send. As the 20 economists who wrote to the Financial Times yesterday point out, there is a real danger of "lasting damage" to the economy if the country cannot compete internationally for foreign investment and high earners.

That said, to call for the demise of the top tax band is not to say that the most well-off should not contribute a proportionally higher share to society. But there are better ways of doing it that may also raise more money, such as using a so-called "mansion tax" to target unearned wealth rather than high earning capacity. In the case of the 50p rate, temporary should mean temporary.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

Commercial Property Solicitor - Bristol

Highly Attractive Package: Austen Lloyd: A VERY HIGH QUALITY FIRM A high qual...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

Read Next
 

The power of anonymity lies in the freedom it grants

Boyd Tonkin
Rebel fighters walk in front of damaged buildings in Karam al-Jabal neighbourhood of Aleppo on August 26, 2014.  

The Isis threat must be confronted with clarity and determination

Ed Miliband
Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone