The Champagne flows in the city

The top rate of tax has been cut for high earners – and corks are popping in the Square Mile, finds Owen Jones

Of all the arguments that George Osborne could present to the House of Commons in favour of reducing the 50p tax band, public opinion was not one of them. A recent poll for The Independent revealed that the vast majority of Britons across the social scale had wanted it to remain in place. Even most Conservative voters backed the 50p tax, which was introduced at the fag end of Gordon Brown's government.

In the City yesterday, there was relief and jubilation among high earners. Liz Green, 39, who works in financial insurance and pays the 50p tax, summed up the mood in the Square Mile as "Delighted!" and said they would "all be out in the wine bars celebrating".

John Gully agreed that champagne would be flowing in the Square Mile. "I think there needs to be a levelling out of tax," he said. Like many other financial workers, he felt this was a big step in the right direction. Sue Brown, 47, who works in insurance, added: "It's about treating everybody fairer."

Other City professionals hinged their arguments on the alleged failure of the tax to generate revenue and its impact on entrepreneurship. Christian James, 44, a banker, said the news was "fantastic". "The higher rate doesn't create any higher revenues, and wealth creators are working to create jobs. We need more carrot and less stick." Although welcoming the reduction in corporation tax, he argued it should go even lower. "It should be less than 20 per cent, encouraging corporations to come here and employ more people, train more people. Taking is the wrong approach, incentives should be the way to go."

Tom Carey, a 23-year-old insurance broker, agreed, arguing that there would be a "trickle-down effect" of wealth if taxes were reduced much further.

Some argued that the tax had driven the wealthy to foreign shores. "If you can get a better life somewhere with lower taxes and where it's sunnier, why not?" asked Nick Morgan, a company director in his late 30s. "The rich pay enough tax as it is."

Banker Adrian Thompson, 34, agreed, claiming to know a number of businesspeople eligible for the tax who had left the country. But despite paying the top rate himself, he stayed put in London. "I'm not rich enough to make it cost-effective to go elsewhere, but it's also because of lifestyle reasons, and because I've got family here."

A common sentiment expressed in the Square Mile was that those paid £150,000 or more were not particularly wealthy. "I wouldn't say £150,000 was rich," argued 38-year-old financier Mark Smith. But there was real confusion about how many people are really eligible to pay the tax. Nick Morgan estimated that "up to 10 per cent" of the population were impacted by the tax rate: the actual figure is around 1 per cent.

And while the alleged impact on enterprise is a popular argument against the 50p tax, not all experts are convinced. Eileen Burbidge, a venture capital investor, doesn't think the young entrepreneurs she works with have any interest in the top rate of tax. "They're not in that high bracket, it doesn't affect them," she said. "They're more interested in whether there are people who want to support the kind of things they want to do." Getting to the level where the top rate of tax comes into force "would be a nice problem to have for most of them".

Anton Howes, a 21-year-old history student at King's College, is a self-described libertarian and founder of the anti-state youth movement, the Liberty League. His father works in wealth fund management in Kazakhstan and would be eligible for the tax if he lived in Britain, but Anton insists his own wealthy background has nothing to do with his own opposition. "I think the biggest problem isn't so much taxing those who are already rich," he said, "but taxing those people who are entrepreneurs who need a return on their investment." But for him the key issue isn't whether the tax brings in revenue, but rather the morality of the policy. "The opposition is not so much the tax itself; it's what it represents," he argues. "It represents a very big government, a very controlling government."

For 24-year-old Rob Leitch, who runs a charity and works part-time for a Conservative MP, opposition is less ideological. "When you look at any tax, you have to look at whether it's working in practice, and at the tax rate." If it was bringing in significant revenue, he would accept the tax "in these tough economic times", but it had "only brought in a fraction of what was predicted". There are indications that some of those eligible for the tax paid themselves far larger dividends than normal before the rate was imposed, making it difficult to judge its success after a year. "But you still get an indication if this is a tax that is working effectively, even if it be a slightly distorted one," he argued.

While most City workers were happy with the reduction in the top rate of tax, there was unease about Osborne's hiking of stamp duty on homes costing more than £2 million to 7 per cent. "Prices have risen in London, and if it includes houses worth £2m then people are going to be stung," suggested Tom Carey. And while Mark Smith suggested that the Government should "find ways of taxing assets instead of income", he remained vehemently opposed to any form of mansion tax.

But, overall, few in the Square Mile felt they had much to worry about from Osborne's Budget. "Many people are happy about the reduction in the top rate," as Adrian Thompson put it. "Whether it's fair is a matter of debate."