Income Tax

Oral Answers to Questions — Treasury – in the House of Commons at 2:30 pm on 24th April 2012.

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Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Foreign and Commonwealth Affairs) 2:30 pm, 24th April 2012

What estimate he has made of the revenue which would accrue to the Exchequer from maintaining the additional rate of income tax at 50 per cent in 2013-14.

Photo of David Gauke David Gauke The Exchequer Secretary

The 50% rate raised a fraction of what was expected, which is why we are reducing it to 45% from April 2013. Maintaining the 50% rate would accrue an extra £50 million on top of what is expected in 2013-14, rising to £100 million a year once the impact on self-assessment receipts is included. However, any additional yield could be offset by reduced indirect tax revenues, and as such it may raise nothing relative to the 45% rate.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Foreign and Commonwealth Affairs)

I think the Minister has somewhat deliberately obfuscated matters. What I wanted was a figure. It has been estimated that the 50p tax rate could have raised £3 billion in future years when there was not a forestalling effect. Have not the Government made a deliberate decision that they want tax cuts for millionaires as opposed to money being put back into the pockets of hard-working people?

Photo of David Gauke David Gauke The Exchequer Secretary

It is worth pointing out that this £3 billion figure that the shadow Chancellor and others recite suggests an entirely static process. Nobody believes that a 50p rate has no behavioural impact whatever, but that is the Labour party’s ridiculous position. That was not its position when in government, and it is not a position that any credible economist would support.