With the Budget less than three weeks away, it’s time for yet another letter calling for the 50p tax rate to be scrapped. Some 537 business owners have signed a missive to the Daily Telegraph urging George Osborne to abolish the “unfair, politically motivated tax”.
Will the Chancellor act? Not unless he has a political death wish. Polls consistently show that a majority of the public oppose the abolition of the 50p rate (indeed, according to a recent ComRes poll, 48 per cent of voters would like to see a top rate of 60p, with 33 per cent opposed) and its removal would definitively signal that we’re not “all in this together”. For this reason David Cameron has already indicated that the rate is likely to remain for the duration of this parliament. With most people’s real incomes falling, a tax cut for the top 1.5 per cent of earners is not on the agenda.
But the letter still puts Osborne in an uncomfortable position. In his Budget statement last year, he declared that the 50p rate would do “lasting damage to our economy” were it to become permanent. The contention of the business leaders is that it is doing damage now. And with the economy still under-performing, Osborne will find it harder to shrug off their concerns. Even Labour, though supportive of the 50p rate, says the business leaders are right to “call on the government to take action to stimulate growth and jobs in our economy.”
What the latest intervention will do is reignite the debate about the possibility of replacing the 50p rate with a property-based tax. From the right, ConservativeHome’s Tim Montgomerie has called for the tax burden to be shifted from income and towards wealth (an argument we’ve long made in our leaders) and a small but growing number of Tory MPs also see merit in this approach. Conveniently for Osborne, if growth is his priority, a recent report by the OECD suggested that property taxes are the least economically harmful. (Indeed, as the OECD noted, they can aid growth by “shifting investment out of housing into higher-return activities”.) They’re also popular. A YouGov poll last week showed that 75 per cent of voters support a “mansion tax” on properties worth more than £2m.
All the signs are that we’ll see little progress on this agenda in the Budget. But if Osborne wants to stimulate the economy, please business and cheer the Lib Dems up, he should look again at the merits of property taxes.