Row over ending of 50p tax rate threatens to spark Tory rebellion

Backbench Conservatives say Lib Dems wield too much influence over David Cameron A row over scrapping the 50p top tax rate is threatening to spill over into a wider Tory rebellion over whether the Liberal Democrats are wielding excessive influence over David Cameron. Backbench Tories are angry at the way Lib Dems have delayed the date of election of police commissioners, challenged aspects of the free school programme, revived doubts about the health reforms and engineered the vote against abortion reforms. They also believe Nick Clegg, the deputy prime minister and Lib Dem leader, is acting as a brake on Tory attempts to take a tougher line on the repatriation of powers from the European Union, complaining Cameron should be actively dismantling the ailing eurozone. The 50p tax row was sparked by a letter to the Financial Times from 20 leading economists who called on the government to cut the top rate at the earliest possible opportunity. Led by DeAnne Julius, they claimed the 50p rate “is clearly a self-defeating way for the Treasury to raise the money and a reduction in tax avoidance would be more effective”. Julius was later unable to produce anything more than what she herself described as anecdotal evidence to justify her claim. Conservative sources insisted they had not been behind the FT letter. Cameron will try to defuse the row over withdrawing the 50p tax rate on those earning £150,000 or more by waiting for the outcome of a review commissioned by the chancellor, George Osborne, into whether the tax is bringing in the expected revenue. The review is unlikely to amass sufficient data in time for the spring 2012 budget. Downing Street confirmed that the priority set out in the coalition agreement was to increase personal allowances for the lowest-paid over the parliament. But in a sign of the simmering tensions between the two parties over tax policy, the Tory communities secretary, Eric Pickles, broke ranks by saying he thought the 50p rate, introduced in April, was probably doing more harm than good. Pickles told the BBC: “I think there is a strong and reasonable case to say, ‘Come on, this is not actually contributing very much.’ On balance, it’s probably doing more damage than it’s doing good.” He said he did believe the top rate should be “got rid of” but stressed the timing was up to Osborne. Charles Walker, vice-chaiman of the backbench 1922 committee, said a majority of Tory MPs did want the 50p rate scrapped. Osborne has repeatedly asserted that the 50p rate is temporary. But he needs clear evidence to show it is not producing revenue before he can persuade the public, let alone the Lib Dems, to back off. The Lib Dem president, Tim Farron, said that ending the 50p rate now would be a moral outrage. At a time when Osborne is being forced to admit his tax revenues are going to be lower than expected, he would need to be able to show incontrovertibly that abolition of the 50p tax rate would have little impact on the deficit reduction programme. The coalition could not remove it at least until the end of the public-sector pay freeze in 2013. The increasingly assertive Lib Dems are demanding another wealth tax – possibly a “mansion tax” – if the 50p levy is dropped before the coalition pledge to lift the threshold for paying income tax to £10,000 is achieved. In the Commons, Tory MP Nadine Dorries complained that “the Liberal Democrats make up 8.7% of this parliament and yet they seem to be influencing our free school policy, health and many issues including immigration and abortion. Does the prime minister think it is about time he told the deputy prime minister who is the boss?” Tory MP Mark Reckless complained No 10 had listened to the Lib Dems in delaying the election of police commissioners until next October – and asked if he would now also listen to his own party over a referendum on EU membership. No 10 said Cameron had been assiduous in meeting his own party in recent days, spending time in the tearoom on Tuesday and holding a large dinner for Conservative MPs on Tuesday night. No 10 recognises that Clegg is running a differentiation strategy before his own conference, and has to be given some latitude. Yet there is a cooling in relations, symbolised by the decision not to repeat last year’s political cabinet held to discuss a joint approach to the conference season. Ed Balls, the shadow chancellor, said: “If the chancellor really wants to know how effective the top rate of tax is he should immediately ask the Office for Budget Responsibility, not just HMRC, to produce a report genuinely independent of government.” The government’s current projections show the 50p rate for people earning above £150,000 will raise an additional £12.6bn over the next five years. Economic policy Tax and spending George Osborne Liberal-Conservative coalition Economics Patrick Wintour Polly Curtis guardian.co.uk

Posted by on September 7, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.