50p rate cut will only benefit 1% of people in the south east
8th March 2012
Commenting on today’s vote on the Finance Bill and the Tory Government’s plan to abolish the 50p rate of tax on earnings over £150,000 a year, Alan Whitehead MP said:
“Most people in Southampton are struggling to cope with rising prices, stagnating wages and higher Council charges. It’s extraordinary that this government is asking those families to pay more, while at the same time cutting taxes for the wealthiest 1%.
“The Government’s own figures show that only 1% of people in the whole of the south-east will benefit from the abolition of the 50p rate. Even in our region where wages are among the highest, 99% of people will not benefit from this change. It won’t help drive growth- all it will do is allow the extremely wealthy to keep slightly more of their money while squeezing ordinary families and businesses even further.
“I’ll be voting against this proposal this evening and pressing the government to instead prioritise cutting VAT to get the economy moving again.”
More information
This spreadsheet linked to below shows the number of taxpayers in each region who currently pay each band of tax (in thousands):
Income Tax Liability Statistics December 2011
Region |
All |
20p (basic rate) |
40p (higher rate) |
50p (additional rate) |
% paying |
% paying |
% paying |
North East |
1210 |
1080 |
101 |
5 |
89.26% |
9.35% |
0.41% |
North West |
3200 |
2770 |
318 |
18 |
86.56% |
11.48% |
0.56% |
Yorkshire & Humberside |
2370 |
2050 |
230 |
13 |
86.50% |
11.22% |
0.55% |
East Midlands |
2160 |
1850 |
232 |
12 |
85.65% |
12.54% |
0.56% |
West Midlands |
2530 |
2190 |
253 |
15 |
86.56% |
11.55% |
0.59% |
East England |
2850 |
2290 |
420 |
34 |
80.35% |
18.34% |
1.19% |
London |
3700 |
2840 |
670 |
94 |
76.76% |
23.59% |
2.54% |
South East |
4340 |
3390 |
720 |
67 |
78.11% |
21.24% |
1.54% |
South West |
2640 |
2220 |
295 |
17 |
84.09% |
13.29% |
0.64% |
Wales |
1380 |
1220 |
118 |
4 |
88.41% |
9.67% |
0.29% |
Scotland |
2570 |
2200 |
288 |
16 |
85.60% |
13.09% |
0.62% |
Northern Ireland |
737 |
652 |
64 |
4 |
88.47% |
9.82% |
0.54% |
TOTAL |
29687 |
24752 |
3709 |
299 |
83.38% |
14.98% |
1.01% |
Winners and losers from the Tory budget
- 14,000 people earning £1 million or more are getting a tax cut of over £40,000 each year
- The average family loses £511 as a result of tax rises and cuts this year.
- A family with children earning just £20,000 loses £253 a year from this April. This is on top of the VAT rise which is costing a family an average of £450 per year.
- This Budget includes a £3 billion tax raid on pensioners over the next four years. The freeze in the personal allowance for pensioners will see 4.4 million pensioners who pay income tax losing an average of £83 per year next April. People who turn 65 next year will lose most – up to £322.
Impact on the economy
- One million young people are unemployed.
- Our economy has stalled. The OBR is predicting just 0.8% growth in 2012 compared to 2.5% forecast in last year’s Budget. The UK is growing at half the rate of the United States.
- The government is set to borrow £150 billion more than planned because of slower growth and higher unemployment.
About the 50p rate
- HMRC’s review of the 50p top rate confirms that the government is cutting taxes for the richest earners next year by £3 billion – a tax giveaway to 300,000 existing taxpayers who gain on average £10,000. They have gambled that the result of this tax cut is to get £2.9 billion back from people currently avoiding tax.
- But the OBR says that “the results of the evaluation are highly uncertain”. As the Institute for Fiscal Studies has said: “If the future of the 50p rate is to be determined on the basis of evidence ...then Budget 2012 will be too soon to form a robust judgement.”
- George Osborne’s review of the 50p top rate of tax only covers the first year of the new tax, which the last Government always said would raise much less as people could bring their income forward. The question is how much will it raise in the second and third year, but George Osborne didn’t want to wait and find out – he had already made up his mind.
- No tax rate should ever be set in stone. Labour has said we will set out our tax and spending commitments at the time of the election once we know how bad the state of the economy is after five years of George Osborne. But let’s be clear, if this was a Labour Budget this week or if there was an election tomorrow we would not be cutting the top rate of tax for people earning over £150,000.
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