Peter Hoskin

The Tories are in line for a 45p tax headache

The Tories are in line for a 45p tax headache
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Have the Tories fallen into Gordon Brown's 40p tax trap?  Since the measure was announcned in the Pre-Budget Report, they've skilfully avoided raising it - after all, an attack on the tax hike could be spun by Labour as a case of the Tories and their "rich friends"; whilst support for it could provoke some ire from the Tory benches.  But no longer.  The Telegraph extrapolates from David Cameron's comment yesterday that "the richest in our society must bear a fair share of the burden" to reveal that:

"Senior Tory sources believe that the 45p tax rate is now necessary if the party is to fulfil its other pledges to reduce public debt and continue to maintain front-line public services such as health and education.

One source said: 'We do not like it but, given the current finances, we cannot pledge to avoid it.'"

Already, there seems to be much consternation among the Tory grassroots.  And you can understand why.  This measure was nothing more than a red herring in the first place, designed to put the Tories in a spot.  At best, on the IFS's calculations, it will raise a paltry £2 billion - a sum that will hardly register against Brown's debt mountain.  And, at worst, it could even reduce tax revenues - as per Laffer - whilst disincentivising those who will help our economy motor out of recession.

Of course, when it comes to curing Brown's addiction to debt, you could argue that every little helps.  But this 45p tax rate seems to offer so little help - and could turn out to be actively unhelpful - that you wonder why the Tories are making noises about it now.

George Osborne has responded to the story.  Here's what he told a Manchester Evening News webchat:

"What's actually happened is that Labour announced last November that it was increasing the top tax rate for those earning over £150,000 to 45 percent. What we've said is that, given the desperate state of the public finances, that is a Labour tax rise we will find it difficult to avoid." 

Hat-tip: ConservativeHome

UPDATE 2: Tim Montgomerie has written a post over at ConservativeHome laying into George Osborne over this.  The headline: George Osborne needs to get a grip.  Tim's words - and the grassroots support he can muster - are certainly influential; so well worth keeping an eye on this situation.