A third of workers will fall into the higher tax bracket by 2033, according to Office for Budget Responsibility

A third of workers, numbering in excess of ten million, will burst through the 40p threshold by 2033, as the currently higher tax rate is normalised for a significant proportion of society, according to fresh analysis from the Office for Budget Responsibility (OBR).
Professions including teachers, many white collar managers and high-ranking nurses will comprise this ënew middle classí, changing public perception of what is required to become a high earner.
The OBR said: ìBecause earnings are expected to rise more quickly than prices in the long term (due to productivity growth), this would result in the average tax rate rising steadily over time as more income moves into higher tax bands.î
Predicting that 9.2m people would be paying the 40% tax rate, and 1.7m people would be subjected to the 45% rate, the OBR piled the pressure on David Cameron to publically commit to hiking up the tax rate. This is reflected in comments made by traditional tory, Lord Lamont of Lerwick, who described the issue of higher tax bands as ìa top objective for a Conservative governmentî.
He surmised: ìIt makes no sense that a rate that Nigel Lawson intended to be for the richest people in the country is now being paid by secretaries and middle management.î
25 years ago, when Lord Lawson spearheaded the implementation of the 40p band, only 1 in 20 people found themselves subject to the higher rate. At present, one in six face the 40p tax bracket. This worrying statistic adds weight to the ministerial concern that the tax system could be outdated. A revision of the tax system in its entirety, taking into account new averages of living circumstances, could be the most economically viable route to take.
Osborne criticised
In April, George Osborne ignored clamour from within the party to raise the limit for higher tax rates in line with rising wages, instead increasing the tax free personal allowance by £500, a measure he said would benefit the group of people paying the 40% tax.
Osborne has been criticised for the sneaky, appeasing approach he has taken on the matter, due to the treasury directly benefitting from the increased number of people paying higher tax rates. MPs from within the party have expressed disgruntlement at the prospect of families being subject to higher tax rates, whilst struggling with rising energy prices and spiralling household bills.
The OBR believe rising the top tax rate in line with earnings, over 4.5 million people would not be subjected to the higher tax rate. However, plans are underway to increase the rate by a meagre 1& until 2016. Such pre-caution seems unnecessary, and as such, government has been criticised for its trepidation.
The OBR said: ìBecause earnings are expected to rise more quickly than prices in the long term (due to productivity growth), this would result in the average tax rate rising steadily over time as more income moves into higher tax bands.î
However, fresh hope has been given to worried taxpayers, as John Redwood MP, seen as a key player in the production of the Tory manifesto next year, publically endorsed the cutting of tax rates.
ìMore and more people are being dragged into the 40p rate and they are not high earners by any stretch of the imagination.
ìThey have got reasonable incomes but they need the incomes to pay the bills.î
ìI hope a Conservative manifesto will be a tax cuttersí manifesto. That is a good Conservative message. If you have lower rates you probably collect more tax revenue.î
It is clear, much work is still needed if the British public are to be accommodated, and appeased, by governmental fiscal policy.

 

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