By Tim Shipman
Last updated at 4:13 PM on 14th August 2011
Tax scrapped: George Osborne plans to scrap the 50p tax rate
George Osborne has confirmed that he wants to scrap the 50p top rate of tax because it is not raising much money.
The Chancellor has branded the 50p rate 'uncompetitive' and said there was 'not much point' in having taxes that brought in little revenue.
In an interview at the weekend, he said the tax was not 'a lasting rate' and indicated that he believes the current top rate of tax will drive businessmen and wealth creators out of Britain at a time when the government wants them to create jobs to help boost growth.
Mr Osborne's intervention will cheer Tory backbenchers but puts him on a collision course with senior Liberal Democrats, who have said cutting taxes for the poor should be a priority.
HM Revenue & Customs are currently reviewing the rate to see exactly how much money it raises – with the results due once the final self-assessment forms are returned next January.
But the Chancellor indicated that the first returns do not suggest the tax is raising much money.
He said: 'There's not much point in having taxes that are very economically inefficient.
'I've said with the 50p rate I don't see that as a lasting tax rate for Britain because it's very uncompetitive internationally, and people frankly can move.
'What is it actually raising? It's only been in operation for a year this tax, put in place by the last government.'
The Mail revealed earlier this month that Treasury analysts believe the 50p tax rate will only raise a small amount of money, since it drives the best off to avoid tax altogether.
Their figures show that raising the top rate of tax on those earning more than 150,000 a year from the old rate of 40p in the pound to 45p would bring in 1.65 billion a year
But increasing it to 50p would lead to diminishing returns, with only another 750 million at most.
Ed Miliband, left, has argued to keep the 50p tax rate and Shadow chancellor Ed Balls, right, has suggested having it for those earning more than 100,000
Many senior officials around Mr Osborne and Robert Chote, the boss of the independent Office od Budget Responsibility believe the 50p rate will bring in almost nothing.
Downing Street and Treasury aides openly discuss the prospect of cutting the top rate in next March's Budget
Nick Clegg, Vince Cable and Mr Osborne's deputy at the Treasury, Danny Alexander, have all denounced the suggestion that the government could cut the top rate to 45p.
Mr Alexander said it was a notion from 'cloud cuckoo land' and called for the coalition to prioritise the raising of the threshold at which people start paying income tax to 10,000 instead.
Mr Cable has demanded a mansion tax be slapped on those with large homes.
But the Chancellor has already agreed to raise the tax threshold to 10,000 by the time of the next election.
He tackled the criticism head on. 'I would just say - because it will lead people to say "are we making sure that better off people in our society make a contribution?"- we have increased capital gains tax, introduced for the first time in our history a permanent bank tax and I'm taking very tough action on tax avoidance.'
A Lib Dem source said: 'We still don't think cutting the top rate of tax is a priority.'
Pete Venner, Dewsbury. England., 14/8/2011 17:45..There can also be a fine line between making a profit and a loss when in business. Political decisions, that are out of your control, can mean that line is easily crossed and you are wiped out. The rewards have got to be there for people to take business risks. I, along with millions more, have always dreaded employing anybody. How many do you employ?
- JR, Weymouth, England, 14/8/2011 18:19
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