Britain lost £7bn thanks to Labour's 50p top tax rate



The number of people declaring incomes of more than £1m slumped from 16,000 to 6,000 after Gordon Brown introduced the new tax rules in 2010

The amount of tax paid by top earners fell from £13.4billion to £6.5billion as a result

TopTories describe the tax hike as 'ideological' and claimed that the rich will now pay a greater share of the tax burden under the Coalition



Labour's 50pm income tax rate cost Britain £6.9billion in lost revenue from its wealthiest individuals, figures revealed last night.

While some 16,000 workers declared an income in excess of £1million in the 2009/10 tax year to HM Revenue and Customs, that number dropped to just 6,000 after then Prime Minister Gordon Brown brought in the new tax rules.

Tax paid by the top earners fell from £13.4billion before the top tax rate came in to £6.5billion in 2010/11.

Cut top rate: Ed Miliband (right) claimed new figures showed that 8,000 people earning more than £1m this year would gain £107,000 each as a result of George Osborne's (left) budget decision to cut top rate to 45p for $150,000 earners

It is thought that many of the highest earners moved abroad or reduced their taxable incomes to avoid paying the new levy.

Many are said to have avoided paying the new rate either by bringing forward payments or delaying them, by moving earnings abroad or by choosing to work less.

Many now appear to be returning to the UK, with the number of £1million plus earners rising again to 10,000 since Chancellor George Osborne announced that the top tax rate would be reduced to 45p from next April as part of the Budget earlier this year.



But while Conservatives used the figures to claim that Labour's decision to increase the highest rate of tax actually lost Government revenue, Ed Miliband highlighted separate figures to accuse ministers of handing Britain’s rich a tax break worth more than £100,000 yesterday.

The number of people declaring incomes of more than £1 million slumped from 16,000 to 6,000

Mr Miliband claimed that new figures showed that 8,000 people earning more than £1 million this year would gain an average £107,000 each as a result of George Osborne’s budget decision to cut the top rate to 45p for those earning more than £150,000.

THE WOMAN BEHIND THE TORY TOP TAX RATE ATTACK

West Worcestershire MP Harriet Baldwin hit out at Labour's 50p top tax rate claiming that it has cost the country billions of pounds. But who is she? Elected at the 2010 General Election following the retirement of Michael Spicer, Harriet Baldwin was Managing Director and Head of Currency Management at the London office of investment bank JP Morgan Chase. She left the company in 2008 with more than 20 years service at the bank under her belt. The 52-year-old mother-of-three has been on the Work and Pensions Select Committee since 2010 and was a member of David Cameron's so-called 'A List' aimed at increasing the number of ethnic minority and female Conservative MPs particularly in safe seats. She made headlines in November last year after saying that jobless families should be banned from claiming benefits for more than four children.



Labour had previously said that earners on more than £1 million stood to gain £40,000 a year as from the Chancellor’s decision Addressing workers at a sheet metal factory in Stevenage ahead of next week’s autumn statement on the economy, Mr Miliband said they were paying the price for the Government’s decision to stand up for the 'wrong people'.

‘David Cameron and George Osborne believe the only way to persuade millionaires to make work harder is to give them more money.



But they also seem to believe that the only way to make you work harder is to take money away,’ he said.

‘Cut your tax credits, squeeze your living standards, get rid of some of the services on which you rely, and put up VAT. That’s where the money is coming from for the millionaires’ tax cut.’

Mr Miliband faced embarrassment earlier this year after wrongly claiming that all millionaires would receive a £40,000 tax cut.

In fact the tax cut relates to earnings, not wealth - and critics pointed out that the Labour leader has assets worth well over £1 million.

Tory sources hit back strongly at Mr Miliband’s latest claim, suggesting that the introduction of the 50p rate was an ‘ideological move’, which had cost the country billions of pounds.

Tory MP Harriet Baldwin, who uncovered the figures suggesting that the 50p tax rate had seen the number of those claiming to earn more than £1million drop, said: ‘Labour’s ideological tax hike led to a tax cull of millionaires. Far from raising funds, it actually cost the UK £7 billion in lost tax revenue.

‘We have taken tough action to clamp down on tax avoidance and make sure those with the broadest shoulders bear the biggest burden.

'That’s why in every single year of this Government the rich will pay a greater share of our nation’s tax revenues than in any one of the 13 years that Labour were in office.’

'Behavioural response': HMRC found that tax rate prompted thousands of wealthy individuals to take action to avoid the new rate, either by bringing forward payments or delaying them, by moving earnings abroad or by choosing to work less

An HMRC report into the tax concluded there was ‘a considerable behavioural response to the rate change, including a substantial amount of forestalling (deferring income to avoid the tax).’



Mr Osborne insisted on slashing the 50p rate, arguing that it made Britain uncompetitive and deterred entrepreneurs from coming to the UK.

He had wanted to scrap the top rate entirely for anyone earning more than £150,000 a year, but that move was blocked by the Liberal Democrats.



Many Tories believe the cut will lead to higher tax receipts in future, arguing that the wealthy will have less incentive to avoid the lower rate.

The Lib Dems also blocked his plan to reduce the top tax rate to its previous level of 40p, claiming that it would send out the wrong signal at a time when the less well off were being asked to contribute more to paying off the deficit.

Labour will hold a Parliamentry debate today to criticise the reduction of the top rate with senior coalition figures thrashing out next week's Autumn Statement which sets out Government tax policy for next year.