A third of workers to pay higher rate of tax by 2033, says OBR

Former Tory Chancellor Lord Lamont believes increasing the higher rate of tax should be 'a top objective for a Conservative government'

Ian Johnston
Thursday 24 July 2014 00:14

A third of workers – including people like teachers and senior nurses - will be on the higher rate of tax within 20 years, according to the UK’s official economic forecaster.

When the 40 per cent tax band was introduced 25 years ago, just one in 20 workers had to pay it.

Today, some 4.6 million people pay the 40 per cent rate and 300,000 who earn more than £150,000 pay 45 per cent, roughly one in six of the near 30 million-strong workforce.

The Office for Budget Responsibility (OBR), responding to a request from The Daily Telegraph, predicted that by 2033 about 9.2 million people would pay the 40 per cent rate and 1.7 million the 45 per cent rate if the threshold of £41,865 rises in line with inflation.

The OBR said: “Because earnings are expected to rise more quickly than prices in the long term (due to productivity growth), this would result in the average tax rate rising steadily over time as more income moves into higher tax bands.”

Lord Lamont of Lerwick, the former Conservative Chancellor, said that increasing the higher rate of tax should be “a top objective for a Conservative government” after the election.

“It makes no sense that a rate that Nigel Lawson intended to be for the richest people in the country is now being paid by secretaries and middle management,” he said.

And Conservative MP John Redwood said: “More and more people are being dragged into the 40p rate and they are not high earners by any stretch of the imagination.

“They have got reasonable incomes but they need the incomes to pay the bills. I hope a Conservative manifesto will be a tax cutters’ manifesto. That is a good Conservative message. If you have lower rates you probably collect more tax revenue.”

A Treasury spokesman said: “The Government has taken significant steps to help hardworking people keep more of the money they earn.”

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