Labour would reintroduce 50p tax rate

Ed Balls: "For the next Parliament, we will restore the 50p top rate of tax for those earning over £150,000."

A Labour government would reintroduce the 50p top rate of income tax for those earning over £150,000, shadow chancellor Ed Balls has said.

He said a government analysis which showed it did not raise much was skewed by assumptions made by ministers.

The last Labour government raised the upper tax band from 40% to 50% in 2010 in response to the recession but the coalition has since cut it to 45%.

Tories say the wealthiest are already paying more income tax than ever.

'Unfair tax cut'

Speaking to the Fabian Society in central London, Mr Balls said: "The latest figures show that those earning over £150,000 paid almost £10bn more in tax in the three years when the 50p top rate of tax was in place than when the government conducted its assessment of the tax back in 2012.

"And when the deficit is still high... it cannot be right for David Cameron and George Osborne to have chosen to give the richest people in the country a huge tax cut."

He went on to say the next Labour government wanted to finish the job of getting the deficit down by "reversing this unfair tax cut for the richest 1% of people in the country".

Conservative Treasury minister David Gauke said he stood by the figures produced in HMRC analysis which showed the 50p rate would "raise little, if anything".

He added: "Under this government, the wealthiest are paying a greater share of income tax than they ever have before and we are bringing in a whole host of measures to ensure that the wealthiest pay the most.

"If Labour want to deliver a reduced deficit, given their opposition to any of the spending cuts we're putting in place, then I'm afraid they're just going to have to put up taxes on everyone - not just the top earners."

Katja Hall, of the CBI business group, warned that a 50p tax rate would put talented people off coming to the UK to invest and create jobs.

Simon Walker, of the Institute of Directors, said Labour needed to drop its practice of "knee-jerk reversion to the old Socialist nostrums that so damaged Britain's economy in the past".

"It was, and remains, an envy-driven political gesture designed solely to drive a wedge between voters," he added.

Free childcare

Labour has previously pledged to reintroduce the 10p lower tax band scrapped by Gordon Brown in 2009.

Other Labour pledges Mr Balls highlighted in his speech included:

• Expanding free childcare for working parents to 25 hours a week to help make work pay
• Requiring the long-term unemployed to take a compulsory job or lose their benefits
• Legislating for more competition and tougher regulation in energy and banking to make sure these markets serve the public interest
• Setting up a British investment bank to support small businesses, whose business rates will be cut and then frozen

He also announced a Labour government would balance the books and deliver a budget surplus.

His party would pass a law to ensure it adheres to "tough" and binding fiscal rules, he said.

This would mean eliminating the deficit - so the government generates more cash than it spends - and cutting debt as a share of GDP between 2015 and 2020.

Labour's commitment does not include borrowing extra money for long-term investments, such as the high speed rail link.

Chancellor George Osborne has set the Conservatives the slightly more ambitious target of an absolute budget surplus by 2020, which means generating more in revenues, including tax yields, than the entire expenditure.

The last time the government ran an absolute budget surplus was in 2001.