Bosses of some of the UKs leading SMEs from across the country have joined together to call for the scrapping of the 50p higher rate of income tax saying, In a letter to The Daily Telegraph, that the levy has meant they have not expanded their firms and taken on more workers.
They accuse Chancellor George Osborne of putting “populist politics before sound economics”. Calling for it to be scrapped, they add that the ongoing imposition of the 50p higher rate of tax has left “wealth creators” in a “very awkward position”.
This move is likely to alarm Government ministers as those who have signed today’s letter represent the “bedrock” of British industry, whose future success is key to the economic recovery. It is the first time that these ordinary business owners have set out the damage caused by the levy.
Public criticism of the 50p rate had been largely limited to the heads of multi-national businesses and international entrepreneurs.
In today’s letter, the heads of the 537 businesses say: “Given the current state of the UK economy, we urge the Chancellor to urgently consider scrapping the top rate of tax in his forthcoming budget.
“The tax, which is in effect a 58p tax after national insurance is taken into account, puts wealth creators like us in a very awkward position … penalising high earners through an unfair, politically motivated tax puts populist politics before sound economics.”
The letter adds: “The result is that the 50p tax is set to reduce government income, and damage the economy, the public services and charitable giving.”
For the first time, the business owners have also provided examples of the damage being done to the economy by the levy. They say that by taxing their personal income so highly they have less incentive to invest their own cash in their firms or try to make them more successful.
Tony Stein, the owner of Canterbury Care and Healthcare Management Solutions, which runs care homes, said the tax had meant the firm could not afford to fund a new venture, which could have employed 12 people.
“To put it bluntly, as a result of the increase in tax we can no longer help to finance this new venture,” he said. “I believe that this is the wrong outcome for the economy.”
Andrew Denny, managing director of Fix-a-Form International, a printing machinery manufacturer, said: “With the Government taking half of what I earn, I ask myself who am I working for? Why do I bother? Why don’t I just close the business and become something else instead? If you earn your money, you’re resented.”
Maurice Shearman, proprietor of Ace Moulding Services, which makes plastics, added: “This tax prevents me from expanding or investing into my business. With our expertise, the potential for growth is very good. But we are greatly hindered by the tax.”
Chris Jenkins, managing director of BWS Security Systems, which installs CCTV and burglar alarms, urged Mr Osborne to “stop killing the goose that lays the golden egg”.
Osborne and David Cameron have repeatedly stressed that they were opposed to the 50p higher rate of income tax and believed it should be “temporary”.
It had been thought that the Government would seek to remove the rate as soon as this year. However, ministers are now understood to have privately ruled out scrapping the 50p rate until at least 2015 for fear of claims they were prioritising tax cuts for the wealthy.
In today’s letter, the business owners, who each employ up to 1,400 people, say: “Repealing the 50p tax would be a good demonstration of the Chancellor’s wish to celebrate British entrepreneurialism, stimulate British industry and contribute to the Government’s growth agenda.”
The letter points out that the top one per cent of earners already pay almost 28 per cent of total tax revenues.
The Treasury is currently awaiting the results of a study from HM Revenue and Customs into the impact of the 50p tax rate during its first year of implementation. The tax was introduced by Gordon Brown in April 2010, just weeks before the general election.
The analysis is expected to show that it raises far less than the £3 billion it was hoped would be raised.
A spokesman for the Treasury said: “We have said we regard 50p as temporary and have asked HMRC to report on its effectiveness. We have not set out a timetable for any change in policy.”