How ‘insignificant’ really is 50p tax revenue?

So did the 50p rate of tax - introduced by Alistair Darling in 2009 - really raise a "statistically insignificant" sum, as the Independent's editorial put it?

George Osborne got rid of the 50p top rate of tax in 2012 after claiming it ‘only’ raised £1bn.

Similar claims – that the 50p rate brings in “insignificant” revenue – have been doing the rounds today, as Ed Balls’s announcement that under a Labour government he would bring back the 50p rate has started to sink in.

City AM’s Allister Heath described the policy as a “war on the better off” that would “reduce the amount of money raised over time by HMRC”.

Mayor of London Boris Johnson has also chimed in, claiming in today’s Telegraph that “By taking it down to 45p, George Osborne has produced more tax revenue.”

So did the 50p rate of tax – introduced by Alistair Darling in 2009 – really raise a “statistically insignificant” sum, as the Independent’s editorial put it?

Hardly.

According to HMRC, the 50p rate raised an extra £10bn. But let us say, for the sake of argument, that it only raised the £1bn claimed by George Osborne. Even then, the 50p rate still raised significantly more than a number of other coalition policies – policies which have hit some of the most vulnerable members of society.

It’s a telling sign of where the coalition’s priorities lie that it is willing to raise far smaller sums in the following ways, rather than tax the rich an extra five pence in the pound on earnings above £150,000.

Cuts to legal aid – expected saving: £350m

The government is hoping to save £350m from the legal aid budget, with a focus on recouping most of the savings from civil legal aid. The legal aid bill has seen substantial areas of law cut from the scope of legal aid, including help with welfare benefits, employment and immigration. Around 650,000 people are expected to lose access to legal aid under government plans.

The Bedroom Tax – expected saving: £465m

The Bedroom Tax, which came in on 1 April 2013 as part of the 2012 Welfare Reform Act, charges people in social housing based on how many spare rooms they have. Benefits will be reduced by 14 per cent for one room and 25 per cent for two or more bedrooms. On average, an individual affected by the Bedroom Tax will lose £14-£25 a week.

Replacement of disability living allowance with personal independence payments – expected saving: £1bn

By 2016 the replacement of the disability living allowance with personal independence payments is expected to save an estimated £1bn a year as around half a million disabled people have their claim removed. Disabled charity Scope has claimed that, as a result of the changes, “thousands of people could be left with the  wrong levels of support and in some cases no support at all”.

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