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Alexander Says He Will Block Tory Moves to Cut Top Tax Rate

Feb. 5 (Bloomberg) -- Chief Secretary to the Treasury Danny Alexander said he’ll block any move by his Tory coalition partners to cut the U.K.’s top rate of income tax, distancing himself from Conservative policy as elections near.

The comments by Alexander, a Liberal Democrat, are a response to speculation that Prime Minister David Cameron’s Conservatives are planning to cut the tax rate for the U.K.’s highest earners to 40 percent from the current 45 percent.

“I think the 45 pence rate is the right place to be,” Alexander was cited as saying in an interview with the Daily Mirror newspaper published today. “I wouldn’t go to cutting below 45 pence –- that would happen over my dead body. It’s better to say we are going to stick where we are.”

The opposition Labour Party provoked a backlash from business leader last month when it pledged last month to reinstate the 50 percent top tax rate, which was cut by the coalition government. With polls suggesting such a move would have widespread support, Alexander’s remarks underscore his party’s desire to distinguish itself from the Conservatives, who Labour says favor the richest.

Asked about Alexander’s comments in an interview with BBC Radio 4’s Today program, London Mayor Boris Johnson, a Conservative, said he could envisage a move to cut the rate when his party sets out an updated policy platform.

‘Sooner or Later’

“Sooner or later there will have to be a new Conservative manifesto,” he said. “I don’t think it is reasonable to keep U.K. tax rates higher than other competitive countries. I don’t see why we shouldn’t bring it down.”

While Cameron said last month that future tax cuts would be targeted “at the lowest paid,” he has refused to rule out cutting the top rate, which applies to incomes above 150,000 pounds ($245,000) a year.

A report by the Institute for Fiscal Studies published today questioned Liberal Democrat claims that their plans to raise the amount of money people can earn before they pay income tax will help the low-paid.

“A large majority of the giveaway would go to families in the top half of the income distribution,” the IFS said in its Green Budget. It said the same was true of Labour leader Ed Miliband’s proposal to introduce a starting income-tax band of 10 percent, which it said would also “add unnecessary complexity to the income-tax system.”

To contact the reporters on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net; Robert Hutton in London at rhutton1@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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