Labour's 50p tax rate vow underlines its priorities

It was always more than about the money. Ed Balls, shadow chancellor, admitted on Sunday that he could not be sure how much money a Labour government would raise by setting the top rate of income tax at 50p, but the political signal was clear.

"It's a fair way to get the deficit down," he said of the plan to increase the top rate from 45p to 50p. "The phrase is 'we are all in this together' - that is part of the policy."

Decisions on income tax rates are the most symbolic decisions any political party can make to indicate its priorities and values. Mr Balls's intention was clear: to show that the burden of deficit reduction should fall more heavily on those "with the broadest shoulders".

In addition, the restoration of the 50p rate - introduced by Labour in 2010 and abolished by George Osborne in 2012 - gives a sense of Labour's priorities in distributing the fruits of the economic recovery.

But if Mr Balls's move sent out a signal about Labour's view of society, it also sent a powerful signal to some in the business world who felt that Ed Miliband's party was turning its back on wealth creators.

Richard Longdon, chief executive of Aveva, the Cambridge-based software company, said he needed to attract some of best talent worldwide and that "a fair tax rate" was a key component.

"The real issue with the Labour proposal is the signal it sends, in that taxing the better off is fair game and leaves people wondering what next?" Mr Longdon said.

"History has proven that high taxes don't raise more money, they simply encourage more taxpayers to relocate away from the UK and taking their wealth with them, usually forever."

Sir Stuart Rose, chairman of Ocado and former Marks and Spencer boss, said the decision would put at risk all that had been done to put the economy back on track.

And Lord Noon, a leading Labour donor, said the plan was "terrible", adding: "There are other means to augment the Treasury, not by penalising the business community, which is already hard pressed."

Mr Balls suggested the revived 50p rate would only be a temporary measure, while a Labour government "got the deficit down" but also confirmed plans for a new bank bonus tax and a so-called "mansion tax" on properties worth more than £2m.

The shadow chancellor said Labour would cut welfare and public spending to meet his promise of a current budget surplus by 2020, but he has been far more specific on the taxes he intends to raise to help close the fiscal gap.

Coupled with Ed Miliband's promise to tackle "predatory" businesses and commitment to price controls in the energy sector, Mr Balls's latest fiscal strategy has proved the final straw for some Labour figures.

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"There is a wider drive against business going on," said one Labour minister who served under Tony Blair. "It's their party now."

Mr Balls said it was important that the wealthiest in society bore the greatest burden in tackling the deficit and insisted: "We are the pro-business party. This is not an anti-business agenda; it's an anti-business-as-usual agenda," he told the BBC's Andrew Marr programme.

Indeed the shadow chancellor has succeeded in persuading Mr Miliband that the 50p top rate should only be a temporary measure while the deficit is being tackled; the Labour leader said in 2010 it should be made permanent.

However, the move further lessens the likelihood of Labour securing the support of many big business figures at the 2015 general election, even if Ed Miliband believes many smaller entrepreneurs will support his policies.

For Mr Balls, the 50p rate will provide him with some political cover in the Labour party for the welfare cuts and other public spending reductions he says will be necessary to eliminate the current deficit by 2020.

But he refused to detail those cuts on Sunday, preferring instead to claim that a growing economy would help to repair the public finances.

Mr Balls insisted the revival of the 50p band would raise "a substantial amount of revenue".

Additional reporting by Scheherazade Daneshkhu and Anne-Sylvaine Chassany

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