Tories To Raise Tax For Top Earners

by Jason Gorringe, Tax-News.com, London

23 March 2009

David Cameron, leader of the UK opposition Conservatives, has said that, if elected next year, the next Tory government would have to abandon its tax cutting principles and raise income tax for the wealthy, as the latest fiscal figures show that taxpayers will be paying off the country's mounting debt for a generation.

Cameron used a recent speech to spell out the new economic and fiscal priorities for a future Tory government, which will be focused on deficit and debt reduction before taxes can be lowered. And, according to Cameron, the wealthy will have to pay their "fair share" towards this by paying a higher rate of income tax.

"I am a Conservative who believes in lower taxes. But in today's fiscal circumstances, the priority must go to debt reduction," Cameron said.

"Put simply, our overriding objective will need to change from sharing the proceeds of growth, to paying down our debt. To achieve this, we need clear plans for controlling public spending, in both the long term and the short term," he added.

As a result, the Tories now say that they would keep a planned 5% increase in the 40% top rate of tax for those earning more than GBP150,000 per year in place. This increase, announced by Chancellor Alistair Darling at the pre-budget report last November, is due to be introduced in April 2011, by which time the present government hopes that the economy will be recovering. The rates of employee, employer and self-employed rates of National Insurance Contributions will also increase, but for all taxpayers, by 0.5% from April 2011.

At the weekend, Shadow Business Secretary Ken Clark suggested that the Tories have also shelved one of their core plans to raise the inheritance tax threshold to GBP1m from its current level of GBP312,000, taking a large swathe of the population out of the tax net.

While Cameron and Shadow Chancellor George Osborne have been saying for some time that there would be little room for tax cuts during the first parliament of a future Tory government with spending control the priority, new figures have brought home just how dire the situation will be for whoever is in power after 2010, when elections are due.

On March 19, the Office for National Statistics reported that at the end of February, net debt was GBP717.3bn, equivalent to 49% of gross domestic product. Meanwhile, the Ernst and Young ITEM club, which bases its fiscal forecasts on the UK Treasury's own economic model, has predicted that the budget deficit will swell to 12.6% of GDP this year, likely to be the highest of all the major trading nations.

Recommended