Budget will hit rich insists coalition | UK news | The Guardian

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Government claims the rich will pay twice as much as they win back through the abolition of the 50p rate of income tax

George Osborne, David  Cameron and Nick Clegg at a budget meeting

George Osborne is expected to stick to his plans to cut the 50p tax rate as the government claims the wealthy will not be better off. Photograph: Lefteris Pitarakis/AP

The government claimed that the rich will pay twice as much as they win back through the abolition of the 50p rate of income tax, as a Guardian poll showed the scale of the political gamble being taken by the coalition through the decision to cut the top rate.

As the Liberal Democrats seek to protect themselves from the charge that the coalition is imposing austerity on everyone but the “growth-generating rich”, Nick Clegg’s party view it as vital to get the message across that the wealthy will end up paying more.

Government sources said figures published alongside the budget would show the impact of an initial 5p cut in income tax for those earning £150,000 or more would be more than offset by changes to stamp duty, a general anti-avoidance tax rule and a tycoon tax. One source said it would be more than a two-to-one ratio, seen as key to the Lib Dem wing of the coalition.

An initial cut in the top rate of income tax for those earning £150,000 to 45p in 2013 would mean a loss of less than £400m in revenue, some government sources suggested, although these findings are open to challenge. But planned changes to stamp duty alone should raise £500m and other measures such as a new general tax avoidance rule would raise far more revenue, the government sources claimed.

Osborne is expected to stick to his plan to set out a timetable of a 45p cut in 2013 followed by a likely fall of 40p in 2014, finances permitting.

In an apparent effort to edge the public into a more sceptical approach to tax, he will also announce plans to send 20 million taxpayers each year a detailed personalised statement of how their tax is spent, including the proportion spent on welfare. The personal statement will, from April 2014, go out with HM Revenue & Customs tax codes and self-assessment forms.

The poll, meanwhile, shows the danger faced by the coalition by pressing ahead with a headline-grabbing cut in the top rate of income tax.

Fully 67% of voters want to keep the 50p top rate, introduced in 2010 by Gordon Brown. This strong support is spread remarkably evenly across the country, the social spectrum, and the political divide. Even among Tory supporters, 65% want the top rate retained, emphasising just what a hard sell the chancellor will have if he decides to press ahead with abolition.

A similar poll for YouGov in the Sunday Times found opposition to reducing the top rate of tax at 60%, compared with 27% in favour. But YouGov did find, by a margin of 48% to 38%, that voters would like to see the top rate of tax reduced in a future budget, and not retained “for the foreseeable future”.

The Guardian-ICM poll reveals wider signs of a desire to make the wealthy pay more, with 62% of respondents saying they would like to see new charges on costly homes, such as the mansion tax on £1m-plus properties that Liberal Democrat ministers have been pushing, but which is no longer expected to make it into the chancellor’s statement on Wednesday.

Support for this option is lower among Tory voters (48%) and in the south (55%), which might explain some of the resistance on the Conservative benches, which appears to have killed the idea off.

Simon Hughes, the Liberal Democrat deputy leader, reflected his party’s ambiguity about the planned cut in the top rate. He told the BBC: “The 50p tax rate brings in a relatively small amount of money. My test after the budget will be whether the people on high incomes – one in a hundred of people – are paying more or less to help us out of the economic mess we inherited from the Labour party.

“The whole priority is a budget for the millions, and not the millionaires, and a particular tax rate that effects one in a hundred people who pay tax in Britain is not therefore for us a central aspect of the budget. It is not the right thing to do. It is not a priority. It is not our priority. We have our priority to make sure people at the top end of the income scale pay more and our priority is not to take tax rates down from the top.”

But he added: “Our manifesto promise with which we went to the country was to lift people out of tax at the bottom by closing loopholes at the top. We did not say hang on to 50p tax rate, or have a top tax rate at anything else.”

The quad, the four senior politicians in the coalition – Cameron, Osborne, Clegg and the Treasury chief secretary, Danny Alexander – met for the final time to discuss the presentational aspects of the budget, including whether to make an explicit reference to cutting income tax eventually to 40p.

Tory MPs, realising that a gradual timetable for a reduction in the top rate of tax will feature in the budget, were adopting a more sympathetic stance.

MP Andrea Leadsom said she was happy to see Osborne “setting the direction of travel” towards getting rid of the 50p rate. She argued that a high top rate “encourages people to use legal avoidance measures” and that by lowering tax rates the overall Treasury take would increase.

Osborne will have to defend himself from the charge that he is willing to cut the higher rate of tax before sufficient empirical evidence is available on the impact of the 50p rate. He will be replying in a study undertaken by HMRC, but the Institute for Fiscal Studies, a leading economic thinktank, has warned that the government will not have sufficient evidence to make a rounded judgment.

The Labour party, still not trusted on the economy, according to the Guardian poll, believes they have been handed a political gift by Osborne. They will argue that future tax avoidance measures cannot be ranked alongside a cut in the top rate of income tax.

Budget will hit rich insists coalition | UK news | The Guardian.

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