British Prime Minister David Cameron has re-stated his commitment to abolishing the 50p rate of tax, despite large returns and heavy opposition from Liberal Democrat MPs within the government coalition, who accuse Cameron of trying to help out his rich friends in the City. The tax was introduced by the previous Labour government in 2010 and applies to those earning over £150,000 per year.
Both Cameron and Chancellor of the Exchequer George Osborne believe that the money that the tax brings in is insignificant. According to the Prime Minister: “We have also got to look at the evidence of the 50p tax. Is it raising a lot of revenue? If it isn’t then clearly there will be question marks over it.” He has, however, now determined to push the tax cut back to 2015, partially due to polls showing the popularity of the tax among the general public.
Osborne’s earlier attempt in 2011 to cut the 50p tax rate was described by Chief Secretary to the Treasury Danny Alexander as “living in cloud-cuckoo land” and the backlash pushed the issue into the background until now, although tension had been boiling under the surface. One criticism of Cameron involves the fact that even cutting the 50p tax down to 45p would lose the government £750million a year – more than the supposed deficit to be cut from the education budget, for example. Some Liberal Democrats believe the tax will disproportionately favour the rich and there has also been some grumbling about Cameron’s decision to rule out a Mansion Tax – a tax on those with houses worth more than £1million.
The problem is, very few people are going to be able to see Cameron’s justification for scrapping the tax rate. Many will see it as unfairly rewarding the super-rich 1% in times of austerity for the other 99%. The decision to push back the repeal of the tax is perhaps evidence of this. The popularity of the so called ‘Robin Hood’ tax has shown that the public is infuriated with the government’s seeming inability to address the matter of wealth inequality and pandering to the wealthy won’t help Cameron’s case.
By Alex MacDonald