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Budget 2014: Lawson and Lamont warn over 40p tax rate | Budget 2014: Lawson and Lamont warn over 40p tax rate |
(about 5 hours later) | |
George Osborne must use next week's Budget to raise the threshold for the 40p tax rate, former Conservative Chancellor Lord Lamont has said. | George Osborne must use next week's Budget to raise the threshold for the 40p tax rate, former Conservative Chancellor Lord Lamont has said. |
He told the BBC's Newsnight the Tories would no longer be "the tax-cutting party" unless changes were made. | He told the BBC's Newsnight the Tories would no longer be "the tax-cutting party" unless changes were made. |
Fellow former Chancellor Lord Lawson, who introduced the band, has said "far too many" people are paying 40% tax. | Fellow former Chancellor Lord Lawson, who introduced the band, has said "far too many" people are paying 40% tax. |
Prime Minister David Cameron insisted he was committed to delivering tax cuts for low and middle-income earners. | Prime Minister David Cameron insisted he was committed to delivering tax cuts for low and middle-income earners. |
'Dead end' | 'Dead end' |
The coalition government has raised the threshold at which people start to pay tax to £10,000 but the threshold for the higher rate has increased by less than inflation, meaning more taxpayers fall into the 40p band. | The coalition government has raised the threshold at which people start to pay tax to £10,000 but the threshold for the higher rate has increased by less than inflation, meaning more taxpayers fall into the 40p band. |
Lord Lamont, speaking on Newsnight, said it was a "dead end" to keep increasing the number of those paying the 40p rate. | Lord Lamont, speaking on Newsnight, said it was a "dead end" to keep increasing the number of those paying the 40p rate. |
"I think there ought to be a rise in the threshold of the 40%, maybe to £44,000 or something like that as a first step," he said. | "I think there ought to be a rise in the threshold of the 40%, maybe to £44,000 or something like that as a first step," he said. |
"Long-run, you can't go on and on not increasing this commensurate with earnings because you will end up with a situation where the 40% becomes the basic rate. That is complete nonsense." | "Long-run, you can't go on and on not increasing this commensurate with earnings because you will end up with a situation where the 40% becomes the basic rate. That is complete nonsense." |
He added: "If we go on and on with this policy we will lose the ability to call ourselves the tax-cutting party because more and more people will be paying a rate of tax, which, when it was introduced by Nigel Lawson, was intended to be the tax rate for the very, very rich." | He added: "If we go on and on with this policy we will lose the ability to call ourselves the tax-cutting party because more and more people will be paying a rate of tax, which, when it was introduced by Nigel Lawson, was intended to be the tax rate for the very, very rich." |
There have been calls for a rise in the level at which the rate kicks in, which is currently £41,150. Many Tories say this should take priority over a further increase in the personal allowance from £10,000 to £10,500. | There have been calls for a rise in the level at which the rate kicks in, which is currently £41,150. Many Tories say this should take priority over a further increase in the personal allowance from £10,000 to £10,500. |
When Lord Lawson introduced the tax rate in 1988 by cutting the top rate of tax from 60p, it was paid by about 1.35 million people. | When Lord Lawson introduced the tax rate in 1988 by cutting the top rate of tax from 60p, it was paid by about 1.35 million people. |
The number of those paying the higher rate is now expected to rise to more than five million. | The number of those paying the higher rate is now expected to rise to more than five million. |
Lord Lawson suggested in a Daily Telegraph interview that the chancellor should knock a penny off the basic rate of tax in his 19 March Budget. | Lord Lawson suggested in a Daily Telegraph interview that the chancellor should knock a penny off the basic rate of tax in his 19 March Budget. |
'Significant tax cut' | 'Significant tax cut' |
"Far too many people are paying the 40% rate," he said. "The total should be much closer to the number when I was chancellor. | "Far too many people are paying the 40% rate," he said. "The total should be much closer to the number when I was chancellor. |
"It was intended for the rich, the well-off. The people who are paying it today are middling professionals who should not be in the higher rate." | "It was intended for the rich, the well-off. The people who are paying it today are middling professionals who should not be in the higher rate." |
Mr Cameron said in a BBC interview: "What I am determined to do is to go on delivering tax cuts for low and middle-income earners, and from April this year there will be £10,000 you can earn before you start paying tax, and that has been benefiting everybody earning up to £100,000. | Mr Cameron said in a BBC interview: "What I am determined to do is to go on delivering tax cuts for low and middle-income earners, and from April this year there will be £10,000 you can earn before you start paying tax, and that has been benefiting everybody earning up to £100,000. |
"That's a significant tax cut, a huge change since I became prime minister, and demonstrates that as we take these difficult decisions in our long-term economic plan to turn our country around and make sure our economy works for everyone, we are reducing people's taxes. | "That's a significant tax cut, a huge change since I became prime minister, and demonstrates that as we take these difficult decisions in our long-term economic plan to turn our country around and make sure our economy works for everyone, we are reducing people's taxes. |
"The point, is people on the upper rate have benefited from the £10,000 tax-free income you can earn before you start paying taxes and that is the way it should be." | "The point, is people on the upper rate have benefited from the £10,000 tax-free income you can earn before you start paying taxes and that is the way it should be." |