U.K. Business Chiefs Attack Labour Over 50% Tax Rate PlanRobert Hutton
U.K. business leaders attacked the opposition Labour Party’s plan to raise the top rate of income tax to 50 percent as a “backward step” that would damage the economy and put jobs at risk.
In a letter to the Daily Telegraph newspaper, 24 company heads said the move, announced by the party’s Treasury Spokesman Ed Balls on Jan. 25, “will have the effect of discouraging business investment in the U.K.” The signatories included Stuart Rose of Ocado Group Plc, Ian Cheshire of Kingfisher Plc and Andrew Coppel of De Vere Group Plc.
Labour originally introduced the 50 percent rate, on earnings over 150,000 pounds ($248,000) a year, in its final months in office in 2010. Chancellor of the Exchequer George Osborne announced in 2012 that he would cut it to 45 percent, something he said would cost 100 million pounds a year, due to the extent of avoidance. Balls declined to say yesterday how much restoring the rate would raise.
“It will cost jobs, cost investment; it’s an anti-business, anti-enterprise, anti-growth measure,” Prime Minister David Cameron told the Federation of Small Businesses conference in London today. “This is something that’s politically convenient but would be very bad for our economy.”
“We are a pro-business party,” Balls, Labour’s treasury spokesman, told BBC television yesterday. “This is not an anti-business agenda. It is an anti-business-as-usual agenda.”
With the election due in May next year, Labour is seeking to convince voters it’s serious about controlling the public finances after it left office in 2010 with the deficit at a record 11 percent of economic output.
Cameron said Labour had “learned absolutely nothing from what went wrong with our economy.” Speaking earlier on BBC Radio 4 today, he said the party’s message was: “if you gave us the key to the car, we would drive it in exactly the same way into exactly the same wall.”
Balls yesterday ruled out further increases in the top rate under Labour, but reiterated proposals to introduce a tax on bank bonuses to help tackle youth unemployment. With more austerity needed, Labour would make cuts to social-security spending, including ending winter-fuel payments for the wealthiest pensioners as part of plans to eliminate the budget deficit “fairly,” he said.
“It’s absolutely not back to the 1980s or 1990s,” he said. “The reality is we are in very difficult circumstances and those difficult circumstances will last well into the next parliament.”
A poll for The Mail on Sunday newspaper found that 60 percent of voters backed Labour’s plan to raise the top tax rate and 40 percent disagreed it would make the rich leave Britain.
The Survation study also found that 57 percent did not believe Balls would meet his pledge to balance the books by 2020, while more people trusted Chancellor of the Exchequer George Osborne than Balls to run the economy. The poll surveyed 1,064 people yesterday afternoon.
Ball’s tax pledge is the latest in a series of announcements designed to cast Labour as the champion of ordinary voters amid what the party says is a “cost of living crisis” as inflation outpaces wage growth.
Leader Ed Miliband said this month a Labour government would limit the market share of banks in the U.K. by forcing them to sell branches to boost competition. In September, he pledged to freeze energy prices for 20 months if he wins power. Recent opinion polls give Labour a lead of about 5 percentage points over the Conservatives.
Labour is “pro-business, pro-investment, pro-market but pro-fairness,” Balls said. “Let’s get this deficit down in a fair way and make the economy work for the long term.”