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Boris: Pay Living Wage then cut tax

Published 06/07/2015

Boris Johnson has backed cutting the 45p top tax rate to 40p if firms pay staff the Living Wage
Boris Johnson has backed cutting the 45p top tax rate to 40p if firms pay staff the Living Wage
Boris Johnson has backed cutting the 45p top tax rate to 40p if firms pay staff the Living Wage

Boris Johnson has called on the Chancellor to cut the 45p top rate of tax to 40p ahead of this week's Budget.

The Tory MP said a reduced income tax rate for high earners could benefit "the millions who might be encouraged and incentivised to work harder".

But he added as a caveat that businesses should pay their workers the Living Wage before any reduction is made to the top rate.

Writing in the Daily Telegraph, the Mayor of London said: "Nigel Lawson has recently argued that the top rate should go back down to 40p, and many Conservatives agree. I am among them.

"But there is a very serious problem, and we would need to sort it out before any such top rate tax cut could go ahead. That problem is fairness, and how such a cut would be seen by the wider population."

It was "outrageous" large companies were not increasing wages, he said, accusing them of allowing the welfare system to "subsidise low pay".

He claimed £11 billion of the £76 billion paid in in-work benefits was handed out to retail workers and criticised boardrooms which paid executives "very large sums".

"Many observers would say that boardroom pay had less to do with market forces than with a racket by which a relatively small cadre of business people sit on each other's "remcoms" - remuneration committees - and engage in an orgy of mutual back-scratching," Mr Johnson added.

"And as for low pay, it isn't a function of market forces. It's being propped up by the taxpayer. That needs to end. And that means business has got to start paying people a wage they can live on."

Last week shadow chancellor Chris Leslie said it would be "an act of gross irresponsibility and unfairness" for the Government to press ahead with a rumoured cut in the 45p rate for those who earned more than £150,000.

Mr Osborne yesterday indicated he is not planning to cut the top rate in the Budget, saying his priority is reducing taxes for lower and middle income earners.

Some businesses have already adopted the Living Wage of £7.85 an hour (£9.15 in London), rather than the adult national minimum wage of £6.50.

Conservative former Cabinet minister John Redwood said cutting the rate to 40p would encourage the wealthiest to pay more tax.

He told BBC Radio 4's Today programme: "The way to get more money off the rich is to have tax rates they are prepared to pay.

"We have just seen a big surge of revenues when we cut the 50p rate to 45p and that's very encouraging. Of course, Gordon Brown knew the right answer, the right answer was a 40% rate."

Business leaders called for Mr Osborne to implement a package of proposals to help make the UK more competitive.

The Confederation of British Industry (CBI) called for action to improve productivity, including swift decisions on major infrastructure and housing schemes.

The business group also demanded a commitment to reforming the business rates system as part of a plan to make the UK the most competitive corporate tax regime in the G20.

The CBI urged the Chancellor to make an annual investment allowance of at least £250,000 permanent from 2016 to support long-term investment.

CBI director-general John Cridland said: "This is an opportunity for the Chancellor to nail down a range of issues vital to the long-term health of the UK economy.

"Top of his list should be creating stability and certainty that businesses crave. That means building on the gains made in the last parliament by locking in responsibility from the very beginning.

"We're looking for detail on the fiscal rules the Chancellor intends to live by and progress on a comprehensive business tax roadmap, to remove complexities and ensure it doesn't act as barrier to firms with ambitions to scale up.

"Incentivising firms to improve their technology will pay dividends and spur on productivity - that's why we're also calling on the Chancellor to see through his commitment on the Annual Investment Allowance, which will provide a fillip for small and medium sized firms.

"Powering ahead on productivity will provide the UK economy with a firmer foundation for future growth."

The CBI's package of proposals costs £520 million in 2015/16, rising to £1.9 billion in 2020/21 but the group claimed it could be funded through efficiency savings.

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