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MPs have raised questions over the value of the proposed new 50p-in-the-pound tax rate. A highly critical report from the Labour-controlled Treasury select committee said there were “considerable uncertainties” over the ability of the new rate to raise any new money. The committee also called upon the Government to report back on how much new revenue the increased rate has raised in the 2011 pre-Budget report. It also called upon the Government to “assess at that time the yield obtained from the higher rate against its disadvantages.” Chancellor Alistair Darling had previously been accused of “plucking figures out of thin air” after he admitted to the committee that there was “no science” behind the new rate. He told MPs: “There is no science behind it. It's simply my judgment that I thought that figure was an appropriate one.” In typically measured words, the committee described this method as “lacking a robust basis”. But experts have warned the Chancellor that two-thirds of those liable to pay the tax will avoid it, for example through off-shore schemes and limited company structures. Even the Treasury itself has admitted it expects to receive only 31% of the total potential income from the new rate. Angela Beech, a tax partner with accountancy firm Blick Rothenberg, told the Times: “Some of our clients are already talking about leaving the country, while others are looking to retire early or cut their hours to reduce their income.” But Darling has told the committee that it is right that “those with the broadest shoulders” should pay more to bring the economy out of recession. The new rate has been condemned by politicians and business leaders. Miles Templeman, the director general of the Institute of Directors, said the tax would not be a “big yielder” and could be “counter-productive”. Former Labour minister Stephen Byers has also condemned the tax as “cynical” and an “elephant trap” designed to try and tempt the Conservatives into pledging to scrap it. He told the House of Commons: “Just because it is popular with focus groups doesn’t mean it is the right thing to do.” Claiming the move would damage the Labour Party’s credibility as a party of business, he added: “We will regret for many years to come as a Labour party that a manifesto pledge on tax is to be broken in this particular way and broken literally a few weeks before a general election.” The report has been pounced upon by the opposition, with Shadow Chancellor George Osborne claiming the report damaged Alistair Darling’s credibility. He said: “It is clear now that only a change of Government and a return to fiscal responsibility can put the public finances back on track.” The select committee’s report was also critical of Darling’s budget in a number of other areas. It warned the government that it faces missing its target of halving child poverty by 2010-11, and slammed the Chancellor’s predictions that the economy would start recovering this year. On the vehicle scrappage scheme, it claimed it would provide only a “small boost” to the economy, and “boost the foreign-based car industry more than British motor manufacturers.” However, the Chancellor may not have to defend his decisions for much longer: he is predicted to lose his job in a cabinet reshuffle at the end of this week, with the Home Office tipped as his new berth. Graham Taylor Jun 3, 2009 Email this article Printer friendly page Previous Page
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