50p tax rate has to go

14 Sep 2011, 11:51 Add Comment

The summer of 2011 can hardly be described as anything other than 'underwhelming'. Promises of a heat wave were soon replaced with warnings of flash floods. Our major cities were under siege from an element that is most generously described as scum. And the economic news has shown no signs of improving, with the once mighty USA losing its triple 'A' credit status, and the money markets going into freefall on more than one occasion.

Economists who were suggesting a serious upturn in fortunes only nine months ago are now busily revising their predictions downwards, confirming what many sceptics often thought. An economist is little more than an astrologist with an economics degree.

Best guesses now are that we will only see a return to any kind of recovery in 2013, and that means that the business community will continue to face huge challenges for at least another twelve months. At some stage, the government will either feel vindicated by its rush to deficit reduction or be obliged to loosen its grip on public finances as we get closer to the next election.

One idea that does appear to be gathering momentum is the suggestion that the 50% top income tax rate will be abolished. Unsurprisingly, the treasury is now predicting that it will get nowhere near the estimated £2.5bn additional cash that was anticipated from this punitive rate. Indeed, one report suggests that the 50p rate has actually cost the treasury somewhere in the region of £500m.

Furthermore, figures also reveal that those people earning between £100,000 and £114,000 per year now pay an astonishing 66% tax on their upper earnings because of National Insurance and the withdrawal of allowances.

The 50% rate was introduced by the last Labour government for the sake of political tokenism rather than for economically sound reasons, and George Osborne ought to dismiss the objections of his Liberal Democrat chums, do what his instinct is telling him, and introduce a tax regime that encourages investment and enterprise in the UK.

The government should also start to deliver on their promise of cutting red tape and bureaucracy for businesses. Every Downtown member I speak to tells me that far from having less paper work to worry about, things have got worse since the arrival of David Cameron in number 10.

And it has to be said that whilst nobody in their right mind thought that the leniency HMRI demonstrated in the run up to the last General Election would continue to the same extent post the election, the new Rottweiler tactics are not what is required given the environment in which we currently find ourselves.

The Prime Minister and the Chancellor promised us support for entrepreneurs and an enterprising Britain. It's time for them to start implementing an agenda that delivers just that.

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