Top economists tell Osborne to drop 50p tax

In a letter to the Financial Times today, 20 leading economists are calling for Chancellor George Osborne to drop the 50p tax rate in order to boost growth.

“We are concerned that Britain’s 50p income tax is doing lasting damage to the UK economy,” the economists write. “It gives the UK one of the highest personal tax regimes in the industrialised world, making it less competitive internationally and making us less attractive as a destination for both foreign investment and talented workers.”

The signatories, which include former Bank of England monetary policy committee members DeAnne Julius and Sushi Wadhwani, add that the 50p tax rate “punishes” wealth creation by inflicting a tax rate higher than 50 per cent once national insurance contributions are added in.

The letter continues: “This is particularly damaging when the UK needs to create new businesses in new industries and promote growth by small companies, which can grow fast. 

“If a small portion of these highly-mobile workers move elsewhere because of the 50p rate, then it is clearly a self-defeating way for the Treasury to raise money, and a reduction in tax avoidance would be more effective.

“It is often portrayed as a justified tax on the rich but the economic damage it causes means that it is against the interests even of ordinary workers who don’t pay it.”

Instead, the group of economists are calling on the government to drop the 50p tax “at the earliest opportunity”, as part of a package of measures to stimulate growth. 

“Only by returning to an internationally competitive tax regime will Britain enjoy long-term sustainable economic growth,” the letter concludes.

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