Ian King, Sky News Business Presenter

George Osborne was quick to congratulate himself when, last week, the Financial Times revealed the Government has eliminated the deficit on its day-to-day spending.

It would have been even more interesting to hear the former Chancellor's views on another disclosure, this week, concerning the public finances.

The rather dry-sounding "Personal Incomes Statistics 2015-16", published by HM Revenue & Customs on Tuesday to little fanfare, provided the astonishing statistic that just under 31% of all income tax in the UK is now paid by just 362,000 people - the 1% of all taxpayers who pay the top, or "additional" rate of tax of 45p in the pound.

Another 4.5 million taxpayers who pay the higher income tax rate of 40p in the pound, just 14.5% of the total, stump up a further 37% of all income tax. The remainder comes from 25.3 million basic rate taxpayers and some 806,000 people whose taxable income comes mainly from their savings and investments.


Just think about that for a moment. More than two-thirds of all income tax, the biggest single source of income for the Government, now comes from fewer than one in six of the country's 31 million taxpayers. And just under a third of it is paid by a group of people fewer in number than the population of Stoke-on-Trent.

His (Osborne's) policy - shamelessly purloined from his former Liberal Democrat coalition partners - of raising the personal allowance, year after year, lifted millions of people out of paying any income tax.

It has been known for a while that Britain's income tax take relies dangerously on a small group of high earners. But what these latest figures from HMRC show is that the country's tax take depends more than ever on these people. In 2013-14, additional rate taxpayers accounted for 27.87% of all income tax. In 2014-15, that rose to 27.96%. That has now risen to 30.56% for 2015-16.

The figures also reveal that, assuming a total population of 65.5 million people, more than half the population pay no income tax at all. Clearly, that is partly because 18.9% of the population is aged under 15, and so are not working. A large proportion of the 18% of the population who are aged 65 or over will also not be working. But it is still pretty remarkable that more than half the country pays no income tax at all.

What has all this to do with Mr Osborne? Simple. His policy - shamelessly purloined from his former Liberal Democrat coalition partners - of raising the personal allowance, year after year, lifted millions of people out of paying any income tax.

The potential consequences are frightening. In an age of global labour mobility, it would not require many of those top earners to leave the UK before gaps began appearing in the government's finances. A study of the HMRC tables from previous years reveals that the rate at which people are joining the ranks of employed people paying the additional rate (by far the biggest group of high earners) is slowing.

Image: Shadow Chancellor John McDonnell wants higher taxes to raise money for public services

Among those who should be troubled by all this is John McDonnell. Labour fought the last general election promising higher taxes for the top 5% of earners, with the 45p additional rate kicking in for anyone earning £80,000 or more, rising to the more punitive rate of 50p at annual earnings of £123,000.

In January, the shadow chancellor reiterated the policy, telling The People: "We would ask those who earn the most to give a little more."

The party said at the last election these tax increases for higher earners would raise £6.4bn. The HMRC figures cast doubt on this. There simply aren't enough top earners to raise that kind of money. It would leave Labour having either to raise taxes for people lower down the income scale or having to tax even more heavily those high earners it wants to "give a little more".

And that is before higher earners took remedial action to avoid higher taxes by, for example, leaving the country, working fewer hours or taking early retirement.

Ah, you may say, shouldn't higher and top rate taxpayers pay more taxes because they enjoy a disproportionate amount of income earned?

Not necessarily. HMRC's figures this week reveal that those earning £150,000 or more - who, remember, pay 30.5% of all income tax - enjoy just 14.5% of total taxed income. Arguably, they already pay more than their fair share.

In lifting so many people out of paying income tax, Mr Osborne played right into Mr McDonnell's hands.

The shadow chancellor appreciates that, when you pay no income tax, you will have no problem voting for politicians prepared to raise it for others. When more than half the population falls into that category, promising to do so is shrewd politics, even if you risk later disappointing them by not raising as much as you hoped.