Robert Hutton London

UK business leaders have attacked the opposition Labour Party’s plan to raise the top rate of income tax to 50 percent as a “backward step” that would damage the economy and put jobs at risk.

In a letter to the Daily Telegraph newspaper, 24 company heads said the move, announced by the party’s treasury spokesman, Ed Balls, on Saturday, “will have the effect of discouraging business investment in the UK”. The signatories included Stuart Rose of Ocado Group, Ian Cheshire of Kingfisher and Andrew Coppel of De Vere Group.

Labour originally introduced the 50 percent rate, on earnings over £150 000 (R2.7 million) a year, in its final months in office in 2010. Finance Minister George Osborne of the Conservative Party announced in 2012 that he would cut it to 45 percent due to the extent of avoidance. He said the reduction in the top rate would cost £100m a year,

Balls declined to say on Sunday how much restoring the rate would raise. “We are a pro-business party,” Balls told BBC television. “This is not an anti-business agenda. It is an anti-business-as-usual agenda.”

With the election due in May next year, Labour is seeking to convince voters it is serious about controlling public finances after it left office in 2010 with the deficit at a record 11 percent of economic output.

Prime Minister David Cameron said Labour had “learned absolutely nothing from what went wrong with our economy”. Speaking on BBC Radio 4 yesterday, he said the party’s message was: “If you gave us the key to the car, we would drive it in exactly the same way into exactly the same wall.”

Balls ruled out further increases in the top rate under Labour on Sunday, but reiterated proposals to introduce a tax on bank bonuses to help tackle youth unemployment. With more austerity needed, Labour would make cuts to social security spending, including ending winter-fuel payments for the wealthiest pensioners as part of plans to eliminate the budget deficit “fairly”, he said.

“It’s absolutely not back to the 1980s or 1990s,” he said. “The reality is we are in very difficult circumstances and those difficult circumstances will last well into the next parliament.”

A poll for The Mail on Sunday newspaper found that 60 percent of voters backed Labour’s plan to raise the top tax rate and 40 percent disagreed it would make the rich leave Britain.

The Survation study also found that 57 percent did not believe Balls would meet his pledge to balance the books by 2020, while more people trusted Osborne than Balls to run the economy. The poll surveyed 1 064 people on Sunday afternoon.

Ball’s tax pledge is the latest in a series of announcements designed to cast Labour as the champion of ordinary voters amid what the party says is a “cost of living crisis” as inflation outpaces wage growth. – Bloomberg