Budget 2012: Labour questions 50p rate ‘gamble’

By Alex Stevenson

George Osborne's claim that taxes on the wealthy will raise five times more than the 50p rate cut costs is being disputed by Labour.

Shadow chancellor Ed Balls called the decision to reduce the top rate of income tax to 45p a "gamble" – and pointed to figures from HM Revenue and Customs (HMRC) which the independence Office for Budget Responsibility (OBR) has labelled "highly uncertain" to back his case up.

HMRC says it will lose £3 billion in revenue from the 50p rate cut. But it believes "behavioural" changes will result in it gaining £2.9 billion from those paying at the 45p rate.

This means the "direct permanent costs of this measure" are £100 million, five times less than the £500,000 expected to be accrued each year from other "taxes on the rich" unveiled earlier.

"Thanks to the other new taxes on the rich I've announced today, we'll be getting five times more money each and every year from the wealthiest in our society," Mr Osborne boasted earlier.

He quoted the OBR stating it believed both the £100 million and £500 million figures were "reasonable".

"That is half a billion pounds we can now use to help people on lower and middle incomes keep more of their earnings," Mr Osborne told MPs.

Labour pointed to an Institute for Fiscal Studies report which found more time is needed before the impact of the change from 50p to 45p will have on top-rate tax receipts can be appreciated, however.

The IFS had stated: "If the future of the 50p rate is to be determined on the basis of evidence about its impact then Budget 2012 will be too soon to form a robust judgement."

Mr Balls warned that the net cost to the exchequer could be substantially higher than currently forecast.

"This is a huge gamble," he said.

"The evidence isn't there… I think if the OBR was authoring the report I think it would have been very different."