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Labour 50p tax plan 'very bad' for economy, says Cameron Labour 50p tax plan 'very bad' for economy, says Cameron
(about 3 hours later)
Labour's plan to raise the top rate of income tax to 50p is "politically convenient" but "very bad" for the economy, David Cameron has said.Labour's plan to raise the top rate of income tax to 50p is "politically convenient" but "very bad" for the economy, David Cameron has said.
The prime minister told a business conference in London that the move would "cost jobs and investment".The prime minister told a business conference in London that the move would "cost jobs and investment".
Shadow Business Secretary Chuka Umunna said the move was not "ideological" but would help cut the budget deficit. He said the strong reaction from business to the plans illustrated how damaging they could be.
Most directors of firms with sales of less than £5m would not have to pay the extra tax, he insisted. But Labour leader Ed Miliband said it would not stop firms investing and voters now had a "clear choice" on tax.
Senior Labour figures have been defending the pledge to raise the top rate on income tax on salaries above £150,000 from 45p to 50p if they win the next election in 2015.Senior Labour figures have been defending the pledge to raise the top rate on income tax on salaries above £150,000 from 45p to 50p if they win the next election in 2015.
The last Labour government raised the top rate of tax from 40p to 50p in 2010 but the coalition lowered it to 45p last April.The last Labour government raised the top rate of tax from 40p to 50p in 2010 but the coalition lowered it to 45p last April.
'Fair and reasonable'
Business has attacked Labour's pledge, while former trade minister Lord Jones suggested it showed the party was reverting to "tribalism" and putting politics ahead of sound economics.Business has attacked Labour's pledge, while former trade minister Lord Jones suggested it showed the party was reverting to "tribalism" and putting politics ahead of sound economics.
Mr Umunna told the Federation of Small Businesses (FSB) annual conference that the move - which would last until 2020 - would be popular with the public and it would be "absolutely disingenuous" to deny that. But Mr Miliband said it was "utterly fair and reasonable" to reverse the coalition's move, given that the majority of taxpayers had suffered an "unprecedented" squeeze on their living standards.
However, he said Labour was motivated not by politics but how it could bring the public finances back into surplus, which it has pledged to do by 2020. "It will help get the deficit down and it reflects my principle and the principle of the British people that those with the broadest shoulders should bear the greatest burden," he said.
"It is a temporary measure, it is not some sort of ideological expedition," he said of the tax plan. "It is a recognition that if we are elected in 2015, we are going to be inheriting an incredibly difficult economic situation." Reacting to calls from the Mayor of London Boris Johnson for the top rate to be reduced to 40p, Mr Miliband said there was a clear difference on tax between the two largest parties.
The Institute for Fiscal Studies has said the 50p rate would raise less than 1% of what is needed to eliminate the deficit - with the vast bulk likely come from further cuts to public spending. "Labour has shown very clearly we want fairness in the tax system and we have seen the prime minister offering a different view... so we have set out a very clear choice and the British people know what that choice is."
Mr Umunna said the government was due to borrow £200bn more in 2015 than it planned in 2010 and debt levels were on course to rise to about 80% of national income by the end of the current Parliament. Shadow Business Secretary Chuka Umunna earlier the told the Federation of Small Businesses annual conference that the move was not "ideological" but would meet Labour's pledge to deliver a budget surplus by 2020.
"We have got to bring it down somehow. That does mean difficult decisions and I don't think different parts of society can expect to be immune from that.
"It is not something we would wish to do but it is unfortunate given the situation with the public finances."
'Whinging''Whinging'
Shadow chancellor Ed Balls has insisted Labour is "pro-business" and it wants to see taxes fall in the long-term. Speaking at the same event, Mr Cameron said reinstating 50p was "anti-business, anti-investment and anti-growth".
But speaking at the FSB Conference, Mr Cameron said it was "anti-business, anti-investment and anti-growth".
While the government had been right to cut the top rate of tax last year even though it was "politically difficult", Labour was now doing the reverse, he claimed.While the government had been right to cut the top rate of tax last year even though it was "politically difficult", Labour was now doing the reverse, he claimed.
"I want rich people to pay more taxes," he added. "The way to get rich people to pay more taxes is to get the economy moving, to get them investing, to get them spending, to get them buying, to get them employing.""I want rich people to pay more taxes," he added. "The way to get rich people to pay more taxes is to get the economy moving, to get them investing, to get them spending, to get them buying, to get them employing."
More than 20 company bosses have written to the Daily Telegraph to condemn the plans but businessman and Labour donor John Mills said the 50p rate had not led to an exodus of entrepreneurs in the past.More than 20 company bosses have written to the Daily Telegraph to condemn the plans but businessman and Labour donor John Mills said the 50p rate had not led to an exodus of entrepreneurs in the past.
He told BBC Radio 4's World at One programme that it may have "some adverse consequences economically but the evidence is they are fairly small".He told BBC Radio 4's World at One programme that it may have "some adverse consequences economically but the evidence is they are fairly small".
The BBC's economics editor Robert Peston said the 50p pledge showed how far Labour had moved to the left on tax since Tony Blair was its leader. But Plaid Cymru said Labour were "running scared" of the City and the 50p tax should be made permanent.
The Institute for Fiscal Studies has said the 50p rate would raise less than 1% of what is needed to eliminate the deficit - with the vast bulk likely come from further cuts to public spending.
The BBC's economics editor Robert Peston said the pledge showed how far Labour had moved to the left on tax since Tony Blair was its leader.
He said a commitment not to raise income tax had been a bedrock of New Labour but Ed Miliband believed the banking crisis had changed attitudes and had shifted Labour's position on a range of business issues.He said a commitment not to raise income tax had been a bedrock of New Labour but Ed Miliband believed the banking crisis had changed attitudes and had shifted Labour's position on a range of business issues.
The evidence of what the 50p rate might raise in future was "murky", he added, given the likelihood that some firms would seek to avoid the tax by paying bonuses early or converting income into capital.