Taxation hike will 'raise no money'

Date: 26th November 2008

Fiscal experts have slammed the planned rise in income taxation for top earners following the pre-budget address.

Monday's (November 24th) pre-budget report saw chancellor Alistair Darling raise the level of income taxation for those earning more than £150,000 per annum to 45 per cent.

But the Institute for Fiscal Studies - an economic think tank - believes that the rich will switch income to capital gains, work less or simply leave the country in a bid to escape taxation.

Mike Brewer, a researcher at the think tank, said: "It will raise approximately no money.

"It might raise a small amount of money; it might lose a small amount of money."

The proposed increase in income taxation will not come into force until April 2011 - after the next general election - and is designed to help finance £20 billion of cuts for low to middle earners and more government borrowing.

Other measures announced at the pre-budget statement included a temporary decrease in rate of VAT from 17.5 per cent to 15 per cent.