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31 July 2011

Danny Alexander rules out cut to 50p tax rate

The Lib Dem minister says government is not going to "shift our priority to reducing the tax burden

By Samira Shackle

Danny Alexander has said that the government does not want to reduce the top tax rate, saying that anyone advocating a cut in the 50p tax rate was “living in cloud cuckoo land”.

This follows calls by Boris Johnson and the former chancellor, Norman Lamont, to scrap the rate. Lamont said yesterday that taxes needed to be cut to make Britain as competitive as other European countries.

Speaking on the Andrew Marr Show this morning, Alexander was unequivocal:

We set out in the Coalition agreement, and it’s something that we as Liberal Democrats pushed very hard for, that the Government’s first priority in tax reductions would be tax cuts for people on low and middle incomes. Those very families who are working hard to try and make ends meet. Anyone who thinks we’re going to shift our priority to reducing the tax burden for the wealthiest has got another think coming.

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It’s another clear statement of Lib Dem identity by a senior minister, and will draw ire from elements of the Tory backbench, who oppose the high rate. It also marks a departure from George Osborne’s line, which has always been that the 50p rate is a temporary measure. The Chancellor said in the Budget earlier this year that high personal tax rates “crush enterprise, undermine aspiration and often undermine tax revenues as people avoid them”, but refused to be drawn on when the 50p rate would be brought down.

Osborne is instinctively a low tax Conservative, and if his hands were not tied by the deficit reduction programme, it is likely he would have brought the rate down by now. It has been reported that the 50p rate could be scrapped in 2013, which would seem to go against Alexander’s implication that it is being retained for ideological reasons. Either way, it is not going anywhere soon.

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