Alistair Darling, chancellor, is to target the wealthy with a new top rate of tax to help pay down soaring government borrowing, as he prepares to unveil a £12.5bn VAT cut to encourage Britain to shop its way out of recession.
Darling will announce in his pre-Budget report plans for a new 45p top tax rate to be set at about £150,000 a year, to be introduced after the next election. He accepts that a tight squeeze on public spending alone will not plug the hole in the government’s finances.
Although the new tax might raise as little as £2bn a year, it breaches a central “new Labour” tenet of not putting up income tax or penalising the wealthy. It also opens up potentially sharp dividing lines between Labour and the Tories at the next general election. David Cameron, Tory leader, now faces the awkward prospect of opposing the mooted tax rise.
Darling will argue that additional tax rises will be necessary and that they should be levied on the fairest basis possible.