Osborne sparks new war with Labour on top rate tax cut

George Osborne has re-ignited his war with Labour over the top rate tax cut after the publication of figures which claim to show the cut to 45p raised an extra £8bn in revenue.

It marks a revival of the dispute in the last parliament when Ed Miliband repeatedly attacked the Tories’ “tax cut for millionaires”.

Now Osborne has claimed “the richest pay a higher proportion of income tax” as HMRC published a report saying the cut had led to an increase in revenues in 2013/14, the year after it came into force. At the same time Tory grandees such as Sir Edward Leigh have urged Osborne to go further and cut the top rate of tax to 40p.

Yesterday John McDonnell described the report as being comprised of “fantasy figures”.

“It will come as no surprise that yet again this bankers’ Chancellor is playing fast and loose with figures to justify his tax giveaways to a wealthy few, while making the rest of us worse off”, the shadow Chancellor said.

“The truth is that the delay in implementing the 45p rate probably allowed significant time for many wealthy people to structure their tax arrangements so that they could simply pay it at the Chancellor’s new lower rate. Now George Osborne is trying to hide the fact that this was really a giveaway to people at the top while everyone else pays more.”

Economists have repeatedly argued that City workers delayed the payments of bonuses and dividends in order to pay a lower tax rate – which Osborne had announced a year in advance of the change.

The HMRC report also said the average taxpayer will pay £270 more a year, even though the highest earners are paying at a lower tax rate.

In the five years to 2015 Labour led a long-running campaign against the chancellor’s changes to the top rate of tax. Osborne claimed the 50p tax rate raised “next to nothing” but Miliband, and Ed Balls, then the shadow Chancellor, said “millions will be paying more while millionaires pay less”.