As reported in the Daily Mail
Cut to 45p raises £8bn
George Osborne last night faced fresh calls to cut the top tax rate after it emerged that reducing it to 45p raised an extra £8billion.
Figures released by HM Revenue and Customs yesterday revealed a huge rise in the amount paid by the well-off following his controversial decision to reduce the top rate from 50p.
Total income tax paid by those earning more than £150,000 rose by £8billion in 2013/14, the year after the 45p rate was introduced.
The Chancellor yesterday said the figures vindicated his decision to cut the top tax rate – and defied Labour predictions that the move would cost the Treasury at least £2billion a year.
Tory MPs urged Mr Osborne to go further by cutting it back to 40p, where it had been until Labour raised it one month before being kicked out of office in 2010.
Tory grandee Sir Edward Leigh said: These are welcome figures and I hope the Chancellor will act on the logic of them by reducing the top rate further.
The case is unanswerable that if we reduce the top rate back down to 40p, it will not only provide a wonderful fillip for entrepreneurs but also provide us with more revenue.’
Former shadow home secretary David Davis said it was very clear’ that further reductions in the top rate would yield extra revenue for the Treasury.
He said: I argued at the time that [Mr Osborne] should have gone straight back down to 40p.
These figures show once again that you can choose how to deal with the well-off – you can choose to punish them, or you can choose to harvest them. If you want extra taxes for schools and hospitals then you should choose a tax rate that they will pay.’
Tory MP Kwasi Kwarteng said: It is quite widely understood that if you push up taxes beyond a certain point then you end up getting less money. These figures show that Labour went beyond that point. George Osborne took a lot of flak at the time for cutting the 50p rate, but he has been proved right.’
Labour introduced the 50p rate for those earning over £150,000 in April 2010, just a month before losing power.
Mr Osborne cut it to 45p in his 2012 budget. At the time, HMRC predicted the move would cost £100million.
But the latest figures show income tax paid by top earners rose from £38billion to £46billion in 2013/14. They mean that the top one per cent of earners now pay 28 per cent of all income tax.
Mr Osborne yesterday said the figures vindicated his approach. Under this government the richest pay a higher proportion of income tax,’ he told MPs.
He added that the latest figures completely defy the predictions and show that what we have are lower, competitive taxes that are paid by all’. Treasury sources yesterday confirmed that Mr Osborne remained committed to reducing the top rate to 40p at some point.
But they played down the possibility of action in this month’s Budget, saying other priorities, such as raising the allowances for basic and higher rate taxpayers, would take priority.
Shadow Chancellor John McDonnell accused Mr Osborne of using fantasy figures’ to justify his tax cut to the well-off. He said: The truth is that the delay in implementing the 45p rate probably allowed significant time for many wealthy people to structure their tax arrangements so that they could simply pay it at the Chancellor’s new lower rate.
Now George Osborne is trying to hide the fact that this was really a giveaway to people at the top while everyone else pays more.’