This weekend two important tax changes have occurred. The personal tax allowance has been raised to £9,440, continuing a sequence that will see it hit the coalition’s target of £10,000 in a year’s time: 25m taxpayers will benefit from a tax cut that has both Liberal Democrat and Tory credentials — it was favoured by the Thatcher government in the 1980s — and has so far taken 3m lower paid people out of tax altogether.
If there is a criticism of Mr Osborne, it is the one expressed by the Institute of Economic Affairs, which is that he should have been bolder. Reducing the rate from 50% to 45% removes the tax disadvantage he inherited but does nothing to give Britain an advantage. Many countries have similar top rates. Only France stands out, with an absurd 75% top rate that François Hollande seems determined to implement, with disastrous consequences.
The chancellor probably went as far as he could, however, given the pressures of coalition politics. The drop to 45%, with a corporation tax rate of 20% in prospect in two years’ time, goes a long way to making Britain a more attractive location for the entrepreneurs we need to drive growth. The danger is that Labour’s class warriors will scare them off.
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