City leaders want 50p tax band axed

Business leaders want the Chancellor to 'accelerate' plans to scrap the top rate of income tax (PA)

Axing the 50p tax should be among the "immediate actions" George Osborne takes to shore up Britain's economy against the fallout from the eurozone crisis, leading City figures have urged.

The Chancellor should "accelerate" plans to scrap the top rate of income tax to help attract entrepreneurs to the UK and increase the tax-free personal allowance by £1,000 more than planned next year, the group said.

The call comes as Business Secretary Vince Cable confirmed the Government was making contingency plans amid the "Armageddon narrative" of the potential collapse of the euro.

Europe's economic crisis deepened yesterday as Economic and Monetary Affairs Commissioner Olli Rehn warned: "Growth has stalled in Europe, and there is a risk of a new recession."

Overall EU GDP - the combined national wealth of the 27 member states - is now projected to "stagnate" until well into 2012, with the commission downgrading its growth forecast of 1.8% next year to 0.5%.

The only optimism was a projected return to "slow growth" of about 1.5% by 2013.

David Cameron has called on eurozone leaders to "act now" to save the single currency but warned Italy now posed a "clear and present danger" to the eurozone's future.

That would "damage our economy" and our banks, he warned.

Italy's prime minister Silvio Berlusconi is refusing to stand aside as promised until economic reforms are in place but may be gone this weekend.

That would clear the way for a new government, likely to be headed by former EU commissioner and leading economist Mario Monti.

Meanwhile, in Greece, former European Central Bank vice-president Lucas Papademos was installed as caretaker leader in an interim government whose urgent job is to approve the terms of more austerity measures in exchange for the latest slice of EU bailout money to stave off bankruptcy for a few more months.

Greek elections are now likely in February, but the immediate political future remains unclear in Rome.

UK Treasury officials are drawing up contingency plans to deal with the impact on Britain of a collapse of the single currency.

But in an open letter to the Chancellor, more than 30 business leaders pleaded for action to be taken now.

In the letter, published in the Daily Telegraph, they also called for a hike in spending on infrastructure projects to help revive Britain's ailing economy.

"We would encourage an acceleration of the Government's commitments on two areas of tax policy: increasing the personal allowance and restoring 40% as the top rate of income tax," the letter says.

"An early removal of the temporary 50% tax rate would attract wealth generators to the UK and support the entrepreneurs we need to help us grow the economy and provide jobs.

"We await the conclusions of the HM Revenue and Customs evaluation of the sums raised by the 50% rate; however, we are confident that the cost to the Treasury, if any, in the short term will not be material and that the advantages over the life of this Parliament in terms of generally increased economic activity will more than outweigh any direct costs."

Senior Tories are keen to push ahead with plans to axe the levy on those who earn more than £150,000 but fear it will be politically explosive at a time of austerity. Coalition partners the Lib Dems are fiercely opposed to the plans.

The powerful group pushing for the move includes Sir Nigel Rudd, the chairman of airports operator BAA; Chris Grigg, the chief executive of British Land; Tony Pidgley, the chairman of Berkeley Group, the house-builder; Harvey McGrath, the chairman of Prudential; and Ian Powell, the chairman of PricewaterhouseCoopers.

PA