Eric Pickles: 50p tax rate does more harm than good

THE 50p top rate of tax is "probably doing more damage than good", a Cabinet minister admitted today.

Communities Secretary Eric Pickles's intervention will fuel the row over the levy on incomes of £150,000 or more.

Mayor Boris Johnson earlier branded it a "jobs destroying" tax, amid fears that London is losing business and becoming less attractive to entrepreneurs and other wealth creators.

Mr Pickles said on BBC Radio's World at One: "I think there is a strong and reasonable case to say, 'Come on, this is not actually contributing very much'. On balance, it's probably doing more damage than it's doing good."

He said he did believe the top rate should be "got rid of" but stressed the timing was up to Chancellor George Osborne.

Downing Street today repeated Mr Osborne's stance that the 50p rate is "temporary". However, the Liberal Democrats are demanding another wealth tax - possibly a "mansion tax" - if the 50p levy is dropped before the Coalition pledge to lift the starting threshold for paying income tax to £10,000 is achieved.

Mr Pickles said the Government had to put economic stability ahead of tax cuts, and that the 50p tax rate was probably taking on "greater importance in people's minds" than it should given the wider financial problems.

Mr Johnson hit out after 20 high-profile economists called on Mr Osborne to axe the levy as soon as possible. "The logic of the case of removing this punitive, jobs-destroying tax is overwhelming," said his spokesman.

The Mayor accepted there were "a number of difficult considerations which the Chancellor must weigh up", including tackling the growing debt mountain, and that the timing of any changes were "for him to decide".

DeAnne Julius, chairman of the Chatham House think tank and a former member of the Bank of England's monetary policy committee, said the tax was "shooting ourselves in the foot" as Britain's recovery falters.

Ms Julius, one of the 20 economists who signed a letter to the Financial Times, said "many hedge funds have already moved to Switzerland" and warned the Government against "stepping over the cliff" by keeping the levy for so long that it drives other wealth creators out of the UK.

Government sources say the 50p rate is unlikely to fall until at least 2013 when the public-sector pay freeze ends.