Coalition splits emerge over 50p top rate of tax

A Liberal Democrat Cabinet minister stoked up Coalition tensions yesterday as he ridiculed calls from the Tory Right to scrap the 50p top rate of income tax for the highest earners as "cloud cuckoo land".

Danny Alexander, the Chief Secretary to the Treasury, was scathing about a suggestion that cutting taxes for the best-off would make the economy more competitive.

The step was advocated yesterday by two former Tory Cabinet ministers. Lord Lamont said tax rates were "uncompetitive", while Lord Tebbit said: "The 50 per cent rate of income tax could go – it raises no revenue."

Last week, Mayor of London Boris Johnson backed the move as "a signal that London is open for business".

Mr Alexander told BBC1's Andrew Marr Show: "Anyone who thinks we are going to shift our priority to reducing the tax burden for the wealthiest has another think coming. That cannot be the right priority."

He said the Coalition's priority had to be to push through tax cuts aimed at people on low and middle incomes.

"The idea that we are going to somehow shift our focus to the wealthiest in the country at a time when everyone is under pressure is just in cloud cuckoo land," he added.

A Tory Cabinet source acknowledged the policy's popularity on the Conservative Right, but echoed Mr Alexander in describing a cut in the 50p rate as "politically impossible".

Labour last night claimed a policy to promote growth and jobs had flopped. Chancellor George Osborne announced a £1bn "National Insurance holiday" to help new business starts-ups, predicting it would help 400,000 firms over three years and could create 800,000 jobs.

But Ed Balls, the shadow chancellor, said only 5,137 firms had benefited, helping to create just over 10,000 jobs.