Alex Massie

45p is Not the Problem; 40p is the Problem

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I think James and Danny Finkelstein are correct. Political considerations trump the need to satisfy the Conservative party's right-wing. And that means that, regrettably, George Osbourne is probably right not to promise to abolish the new 45% income tax band for the rich. At the very least this should be an aspiration not an immediate priority.

But the problem is not so much the 45p band, but the number of people trapped by the existing 40p band. This has been one of gordon Brown's most successful stealth taxes, drawing more and more middle class voters into his clutches every year. Even this years' widening of the bands does little to redress the matter. The effect is that an awful lot of middle-income earners are paying high-income taxes.

As James wrote way back in October, increasing the 40p entry level to £50,000 ( including the £6K personal allowance) would take more than half a million taxpayers out of the higher band. Coincidentally this could be afforded, more or less, if there were a 45p rate on earnings above, say, £175,000. If that's the revenue-neutral way to do it then I'd say that a significant tax cut for a pretty large swathe of the middle-class is a good idea.

Apart from anything else, arguing that the first thing a Conservative government will do is cut taxes for city bankers does not seem a very sensible strategy at this moment of the political and economic cycles.

The whole tax debate, rather like that of the country's fiscal future, reminds me of the old Irish saw about asking a codger on the roadside for directions only to be told "Ah, well, if I were going there I wouldn't be starting from here." But we are, aren't we?

Written byAlex Massie

Alex Massie is Scotland Editor of The Spectator. He also writes a column for The Times and is a regular contributor to the Scottish Daily Mail, The Scotsman and other publications.

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