Osborne’s 50p tax rate claims trashed
George Osborne's claims about the lack of income from the 50p tax rate are deeply uncertain, experts have warned.
The chancellor claimed the Treasury would lose only £100 million from cutting the top rate from 50p to 45p for incomes over £150,000, but experts have warned the data he is using is unreliable because it refers only to the first year of the tax.
"Perhaps one worry for the chancellor as the dust settles on his third Budget is that on his attempt to achieve a fiscally neutral package he has created some risks," Institute of Fiscal Studies (IFS) director Paul Johnson said.
"We know pretty much for sure that the increase in the personal allowance will cost about £3.5 billion in 2014/15. We do not know with anything like such certainty that the cut in the 50p rate will cost only £100 million.
"This Budget may turn out to be less fiscally neutral than intended."
Mr Osborne was met with similar criticism this morning when he told the BBC's Today programme that Robert Chote, chairman of the Office of Budget Responsibility (OBR) had agreed with his figures.
"The actual 50p rate, it was a con, it was a thing on a press release," the chancellor said.
"We have got Robert Chote, a veteran of the Today programme who would normally…"
Host Evan Davies then interrupted, saying: "He was very uncertain, he had very little idea about what it raised. No one knows."
Mr Osborne continued: "We asked him, we asked him. Evan, we asked him and he said it was a reasonable and central, ie the best guess, the reasonable and central estimate that it raised £100 million."
The IFS warned that the cut of the top rate could reduce Treasury income by more than £100 million and, importantly, that measures such as stamp duty hikes and caps on tax relief may not bring in sums Mr Osborne expects.
The finding is particularly damning because a Budget which was not fiscally neutral would end up costing the Treasury more money, potentially adding to the national debt and affecting Britain's credit rating.
The IFS also warned that some 1.3 million people could be forced on to the 40p income tax bracket as a result of yesterday's Budget, after Mr Osborne reduced the threshold to £41,450 from April 2013.
That would bring the number of higher rate taxpayers to five million for the first time in 2014.