LONDON (Reuters) - A new top rate of income tax due to come into force in April should be reduced as soon as the budget situation improves, Business Secretary Peter Mandelson told the Daily Telegraph in an interview published on Saturday.
The 50 percent rate on those earning more than 150,000 pounds a year was announced by Chancellor Alistair Darling in last year’s budget.
“Personally, I would favour, when financial circumstances permit, for the top rate to come down, just as it has gone up when times were hard,” Mandelson said.
“If we (the Labour government) had an ideological objection to the top rate being at 40 percent, why did we keep it there for so long? It was only financial circumstances that forced us to take a different view.”
The Labour government has raised taxes on banks and the rich as part of efforts to ease the impact on the budget of huge stimulus spending and bank bailouts. The rises also appeal to its core leftist vote ahead of an election due by June.
Mandelson said Britain’s bank bonus tax had not succeeded in changing behaviour in the banking sector.
The one-off 50 percent tax for banks on any bonuses over 25,000 pounds was introduced in an effort to rein in multi-million pound payouts across an industry bailed out by taxpayer cash.
“The point was to modify banks’ behaviour,” he said. “In so far as the bonus has been maintained and banks have chosen to pay the charge out of their profits, you can argue that the immediate effect has been not to change their behaviour. That is something banks need to reflect on.”
Reporting by Kylie MacLellan; editing by Patrick Graham