Lib Dems go soft on 50p tax rate

Updated: 
It will only be a matter of time before the Lib Dems give way on the 50p tax rate, a rate charged anyone who earns more than £150,000.

Lib Dem Foreign Office Minister Jeremy Browne has told the media that the Lib Dems are not "intellectually wedded" to the 50p tax rate. So how long is this rate likely to last in reality?


Dump the tax?

A Lib Dem spokesperson told AOL Money that "we don't think it's the right time to scrap it. We support it in principle, but we're not ideological attached and when the time is right, we will look at it again."

The Lib Dem spokesperson, predictably, did not specify when that time would be, though it would be linked to when the economy was healthier. "What we have made very clear is that our primary tax priority is raising the £10,000 income tax threshold. That comes first."

The issue has become hugely sensitive. Last week 500 business leaders warned, in a letter to the Telegraph, that the 50p higher rate of income tax was "damaging the economy" and even delaying recovery from recession.

Awkward

David Cameron and George Osborne have relied heavily politically on the "We're all in this together" mantra since coming to power. Were the government to make things easier for the wealthy by snipping the tax, their claims the current pain is being equally shared - which of course it's not - would be shredded.

Especially when public sector pay has been effectively frozen. At a party conference in 2009 Osborne even claimed that scrapping the tax, introduced by Labour in 2010, would be hugely unfair while public sector pay was stitched tight.

Off limits?

Previously the Lib Dems claimed they would not tolerate its removal unless it was replaced by a more focused wealth tax i.e. a tax on assets rather than income, and a deal could be still on here. (A new report from the right-wing Centre for Policy Studies claims such a 'mansion' tax would be complex, unfair and would lose more in tax than it would suck in.)

A mansion tax though would inflame much of the Tory hard-right. In other words, it's a mess. But what is 100% certain is that the 50p tax rate will not be with us by the next election. In terms of timelines, that's as definite as it gets currently.