Osborne urged to scrap 50p tax rate

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First Posted: 07/09/11 06:47 Updated: 06/11/11 10:12   PA

George Osborne should scrap the 50p top rate of income tax "at the earliest opportunity" to boost growth, a group of leading economists have said.

In a letter to The Financial Times, 20 high-profile business experts told the Chancellor the UK needed to return to an "internationally competitive tax regime" to stimulate the stuttering economy.

The signatories added the tax levy, which was introduced by the previous Labour government and applies to high earners on an income over £150,000, "punishes" entrepreneurship.

"We are concerned that Britain's 50p income tax rate is doing lasting damage to the UK economy," wrote the economists, who include Cambridge University academic Bob Rowthorn and former members of the Bank of England's Monetary Policy Committee DeAnne Julius and Sushil Wadhwani.

"It gives the UK one of the highest personal tax regimes in the industrialised world, making it less competitive internationally and making us less attractive as a destination for both foreign investment and talented workers.

"It punishes wealth creation by imposing on entrepreneurs and business people a marginal tax rate in excess of 50% once national insurance contributions are added in. This is particularly damaging when the UK needs to create new businesses in new industries."

The economists, who said the rate applies to just 1% of people who pay 24% of all income taxes, added: "We call on the Government to drop the 50p tax at the earliest opportunity as part of a package of measures to stimulate growth.

"Only by returning to an internationally competitive tax regime will Britain enjoy long-term sustainable economic growth."

Mr Osborne has already indicated that he believes the rate should be scrapped if it is not raising significant revenue.

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Filed by Paul Vale  |